The Wall Street Journal-20080130-Bayou-s Ex-Finance Chief Sentenced to 20 Years

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Bayou's Ex-Finance Chief Sentenced to 20 Years

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The former chief financial officer of Bayou Management LLC was sentenced to 20 years in prison in connection with a scheme to defraud the hedge fund's investors out of more than $400 million.

U.S. District Judge Colleen McMahon in Manhattan sentenced Daniel Marino to 240 months in prison, to be followed by three years of supervised release.

"I am truly sorry," Mr. Marino said. The judge ordered him to report to prison Tuesday.

Mr. Marino and Samuel Israel III, the hedge-fund firm's former chief executive, pleaded guilty in September 2005 to conspiracy, investment adviser fraud and other charges in connection with a scheme to defraud investors through the improper inflation of the value of Bayou's funds. Mr. Israel is awaiting sentencing.

Bayou Management closed its doors in July 2005.

Prosecutors have alleged that Messrs. Israel and Marino misrepresented the value of Bayou Management's funds and their performance in order to induce new clients to invest, and to convince existing clients to keep their money with the Stamford, Conn., firm, including reporting fictitious rates of return in weekly newsletters and reporting inflated profits in annual statements to investors.

James G. Marquez, the co-founder of several of Bayou's hedge funds, was sentenced to 51 months in prison last week after pleading guilty to a conspiracy charge in December 2006. Mr. Marquez left Bayou in 2001.