Robert B. Nichols and his wife were the owners of a US dollar bank account in London, England that was seized in the Bayou bankruptcy case. Nichols sued trying to get the money back. The United States government contended that the funds in the account belong to Samuel Israel III.
April 2004 Nichols met Israel and discussed investment opportunities. Nichols became his financial advisor and was paid $10 million by Israel for his services. A portion of that fee was deposited into the account in question in London, England.
Nichols claimed his services were separate from Bayou Management Ltd. The financial press published Israel’s success with the Bayou Group. Nichols claimed that he was not aware that Israel breached any obligation to the Bayou Group and owed them any money.
Confirmation of the governments sanction and legitimacy of the project was communicated to Nichols by John P. Ellis who at the time was affiliated with GH Venture Partners of New York. Mr. Ellis is the first cousin of George W. Bush and his material involvement with President Bush’s political campaign (particularly in Florida) was reported in the general press.
Nichols relied on statements made by Ellis with regards to the legitimacy of the project and of Israel. He claims he only became aware of the criminal allegations against Israel after they became public in September 2005.
However, the lawyers claim it was a fraudulent transfer from Bayou Management before it went bankrupt with the actual intent to hinder, delay, or defraud the Bayou creditors. They contend that Robert B. Nichols did not receive the fraudulent transfer in good faith and or knew it was a fraudulent transfer.
In 2004 Israel sought to invest in a series of prime bank instrument trading banks in Europe. He hired Robert B. Nichols to find financial instruments that were bone fide obligations of the Department of Treasury of the United States of America.
The Bayou Entities turned into a massive fraudulent investment scheme which created and controlled private pooled investment funds. During the course of the fraud, the Bayou Entities attracted more than $450 million in investments for their Hedge Funds.
After suffering millions of dollars in losses, the Bayou Entities attempted to stay afloat and prolong the scheme by disclosing false investment performance and creating false financial statements. The Bayou Entities also attempted to conceal their losses through a series of fraudulent transfers. After the Bayou Entities fraudulent investment scheme collapsed, there was $250 million in principle unpaid to hundreds of creditors.
Three days after the fraudulent transfer which was the subject of the court case, Israel transferred $10 million to Nichols. The $10 million was not from Israel’s personal funds. It was from the fraudulent transfer from Bayou Management before it went bankrupt.
The Bayou entities were involved in a series of fraudulent actions and transactions in furtherance of a criminal investment scheme. Israel and Daniel E. Marino directed and controlled the business of Bayou Entities from their inception through August 2005. Both have plead guilty and have been sentenced to federal counts of mail and wire fraud, investment advisor fraud, and conspiracy to commit fraud relating to their operation of the Bayou Hedge Funds.
On or about April 2004, virtually all of the contents of the Bayou Hedge Funds’ brokerage accounts were wired to a bank account titled “Bayou Management LLC Special Account.” On or about July 8 2004, Israel caused $120 million be transferred from Bayou Management to a bank account in Israel’s name at Deutsche Postbank in Hamburg, Germany. (What the courts referred to as The Fraudulent Transfer) Israel and the Bayou entities failed to disclose the Fraudulent Transfer to the Bayou Hedge Funds investor creditors. Gee that sounds very similar to what CONrad Black did in his case. Turns out Guy Lawson has just written a book about Samuel Israel's involvement in the Bayou Hedge Fund fraud.
AK: "Turns out Guy Lawson has just written a book about Samuel Israel's involvement in the Bayou Hedge Fund fraud."
ReplyDeleteI've read the above story. Geez, there are so many different un-known names here; I wonder why you think this one-out-of-a-hundred scheme, was more important than all the other USA financial scams.
I mean, for most folks, the above sentence of yours, could as easily read: "John Doe has just written a book about Jane Smith's involvement in the ABC Fund fraud."
It's a criminalized case, judgements have been rendered. That's about its newsworthy value, to those affected, and the locals. You've roped in the Bush family, which is why it's here, I guess. But no impropriety seems to be alleged by the Bush family.
In comparison to the multi-billion dollar losses inflicted by the illegal actions of rogue traders, @ Barings Bank & others, it doesn't seem a large amount...Huge, historic Banks have been threatened by the actions of one single person...
It's here because I talk quite a bit about investment fraud as that is another huge concern I have. Being tied to the Bush family and Robert Booth Nichols makes it relevant. I find all banking fraud relevant, whether it's tied to Goldman Sachs in Greece or the CIA in Canada. Investment fraud was a way of fundraise for Iran contra. If we are going to stabilize the market we are going to have to address the investment fraud the agency is still actively involved with.
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