SEC, Connecticut probing Bayou Securities - WSJ

Reuters ^ | August 25, 2005

[HAL9000]

NEW YORK (Reuters) - Law-enforcement authorities are investigating whether funds are missing from a money-management firm, Bayou Securities LLC, that claimed to be overseeing $440 million in investments, the Wall Street Journal reported on Thursday.

The newspaper, citing people familiar with the matter, said the Connecticut Department of Banking is looking into the company, which is based in Stamford, Connecticut.

Federal prosecutors also are investigating, a person familiar with the matter said. A spokesman for the Securities and Exchange Commission declined to comment to the newspaper.

The Journal said red flags went up in recent weeks when some investors had difficulty getting their money from the firm, a person who did business with the firm said. This person said the firm recently told its customers that it was planning on winding down some of its hedge-fund investments and returning their cash after several good years.

Bayou was co-founded in 1996 by Samuel Israel III, who was a defendant in a 2003 federal lawsuit in Louisiana filed by a father and son he had hired to help run the firm. They claimed in the suit that there had been unexplained withdrawals from the firm's accounts and evidence of "possible violations" of federal securities regulations. A federal judge ordered the plaintiffs to pursue their claims in an arbitration proceeding and dismissed the suit.

The Journal said the voice-mail box at Bayou's offices wasn't accepting new messages and calls to numbers believed to be Israel's home weren't returned, nor was an email from the newspaper.

[Choose Ye This Day]

I hate crooked people. Especially in my industry. And especially in my party:

MR. SAMUEL ISRAEL, III
PRESIDENT
BAYOU SECURITIES, L.L.C George W. Bush
$2,000
(political donation)