One Monday in the summer of 2008, disgraced Wall Street trader Samuel Israel decided to end it all.
Given the desperation of his circumstances, suicide seemed to be the only way out.
As the mastermind of one of the largest hedge fund frauds on Wall Street, he had been sentenced to 20 years in prison.
Teetering on the edge of a bridge over the Hudson River, he looked down at the water 156ft below.
He wouldn’t be missed, he figured – he was just another disgraced scammer who got what he deserved. Israel took a deep breath and jumped…
Passing through the revolving doors, Israel stepped into the quintessence of London sophistication and money.
His family had stayed at Claridge’s for generations, and Sam moved with ease and entitlement.
For nearly a century his family had traded in cocoa, coffee, sugar and rubber, and become fantastically wealthy along the way.
Israel had been running his own hedge fund, Bayou, since 1996. To begin with returns were good. But by the time of the first audit, Israel had been forced to start falsifying Bayou’s accounts – first in a panic to cover a single bad bet on gold, then systematically to hide regular losses.
By spring 2004, Bayou was down more than $100 million.
Israel needed a game-changing trading strategy that would make him tens of millions – and he needed it fast.
Worse still, at home his life was in crisis. He was plagued by back problems, and prescription drugs barely dulled the pain.
Vodka and cocaine were his way of coping, and he was becoming desperate.
His wife had thrown him out of the family home and he was renting a mansion owned by Donald Trump, complete with an 800-gallon saltwater fish tank and a menagerie of rare reptiles.
He’d heard about a top-secret computer programme that enabled U.S. Intelligence Services to covertly see when and where the Federal Reserve injected money into the market.
Getting his hands on the programme would allow him to stay one step ahead, Israel calculated.
And the man who could get the software was a self-professed super-spook called Robert Booth Nichols.
The pair met at Israel’s third-floor suite in Claridge’s.
Nichols was alleged to be a CIA assassin, arms dealer and mob associate, involved in almost every nefarious covert plot carried out by the U.S. government for three decades.
He said he was part of a secret organisation dubbed ‘Octopus’ because its tentacles were wrapped around every aspect of society.
In fact, Nichols was a conman, whose house of mirrors made Israel’s own Ponzi scheme – in which investors were paid returns from their own money or the money paid by subsequent investors – seem tiny in comparison.
And like an episode of Hustle, Nichols would soon spin Israel an elaborate web of lies and deceit – involving bogus banks and traders across several European cities, the Zapruder film of President Kennedy’s assassination in 1963 and even a faked death – in an attempt to swindle him out of millions of dollars.
Nichols had chosen London as their first meeting place because he knew Israel would be lulled into a false sense of security by London’s atmosphere of moneyed respectability, making it easier for him to fall into his trap.
Nichols was hardly a model of clandestine success, with his careworn appearance and unhealthy physique.
But Israel was impressed, not least when he saw that Nichols carried a gun in a shoulder holster under his frayed suit jacket.
Nichols told Israel to forget the computer software he was after – that he could get him much better returns trading bonds in a secret market Israel would never be able to gain access to unless he had $150 million in cash.
The institutions of the modern world – the U.S. government, the Federal Reserve, the International Monetary Fund, the largest banks – were all a front, Nichols said.
The margins were huge. But the public could never know about it or there would be widespread panic.
Israel was instantly hooked. He wanted in.
A whirl of meetings followed, including one at the Grosvenor House hotel, where Israel was introduced to Nigel Finch and John Cassidy.
According to Nichols, Finch, a veteran of MI6 with a refined accent, was the key to gaining entry to the secret bond market.
He ran a fine-art store and was a fellow of the Royal Society of Arts.
Cassidy, claimed Nichols, was a former CIA station chief in Hong Kong and a descendant of Butch Cassidy, the notorious outlaw of the Wild West.
Nichols, Finch and Cassidy said they had assisted wealthy people into the trades for years.
But they hadn’t been able to trade on their own account and reap the billion-dollar benefits. With Israel’s $150 million, they would at last have the chance to get into the game as principals.
They warned him, however, that simply attempting to enter the shadow market was extremely dangerous. Israel could be murdered at any moment by a rival faction.
Bayou’s millions would be placed in a joint account in Israel’s name. It was essentially used as security on the trades.
If the trade didn’t happen for any reason, he wouldn’t lose anything, but neither could he keep all the profits, some of which would be shared with an organisation called the Humanist Cooperative that Finch and Cassidy claimed had the cure for Aids.
Withdrawals from the account would not be permitted without Israel’s signature.
The following day, he wired $150 million to an account at Barclays in London.
That night, in a private dining room at the Ritz casino, sitting under crystal chandeliers, Nichols told Israel how the trades worked.
Their designated trader was Emily Hardwick, a woman in her early forties who spoke with an upper-class accent and had the blotched face of a heavy drinker.
Secrecy was paramount, Israel was told, so they met Hardwick at midnight, at the City offices of Barclays.
Encouraging a sense of paranoia, Nichols impressed on Israel the need to be vigilant.
They met often in public places, the second bench south of the U.S. Embassy in Grosvenor Square being a favourite rendezvous.
Nichols told Israel he never travelled without a gun, even in London.
A Pakistani contact called Kumar, who was a cousin of President Musharraf, could supply Israel with one, Nichols said.
After one week of trading, Hardwick reported a staggering profit of $942 million.
Israel calculated with joy that after paying the shares for the Humanist Cooperative, his new partners and Hardwick, he would walk away with $450 million.
But days passed and Hardwick failed to deliver the funds – he was left only with his original $150 million. Then Hardwick disappeared.
Nichols, Cassidy and Finch were furious. Hardwick was ripping them off, Nichols told Israel. But Nichols was not to be denied.
Following other ‘leads’ to financial capitals across Europe, Nichols took Israel to Frankfurt, Zurich and Geneva to trade the mythical bonds.
Nothing happened and Israel decided it was time to force some action, so he wired his original $150 million back to the Bayou account in New York.
The gamble worked. Within days, Nichols said he’d found a tranche of bonds in Germany. Israel had to go to Hamburg immediately if he was going to cash in on the trade with Postbank.
On Nichols’ instructions, Israel took delivery, in Hamburg, of two 9mm Beretta handguns from Kumar.
Hundreds of operatives had descended on Hamburg to stop them making the trade, Nichols told Israel.
They headed to the city’s deserted financial district on a Saturday morning to meet the Postbank executive in a deserted nondescript brick building.
The deal involved $2 billion in debentures.
To perform the final step of due diligence, Nichols phoned a contact called Phil Severt.
Israel had talked to Severt before and recalled the conversation because the man said over and over that he had a ‘stupid face’, meaning one that was instantly forgettable.
All that remained was for Israel to wire $120 million to Postbank. The meeting broke up and Israel left ahead of Nichols for security reasons, walking out of the back door.
‘Across the street was a man standing next to a telephone pole,’ said Israel afterwards.
‘He was wearing a turban.
‘As I got near him, he said, “You have a really smart face.” I knew it was Severt telling me he’d sent people to watch us in Hamburg.
‘I threw the man against the wall and asked what the f*** was going on. Suddenly the man didn’t speak English, he just kept saying the same thing: “No, sahib, no, sahib.”
‘I let him go. By now Bob (Nichols) was coming out of the bank. I saw the guy reach into his jacket and pull out a gun. He was taking aim to shoot Bob. So I pulled my Beretta out and I shot at the guy. I hit him in the left hip.’
Israel then claimed that Nichols shot the man in the shoulder.
‘The guy dropped the gun and fell to the ground,’ recalls Israel.
‘I was furious. I felt like my life was in danger. So I walked over and stood over him and shot him in the head. Point blank. Killing him.’
According to Israel, the man’s turban exploded, sending blood and brains all over the pavement. But there were no witnesses and silencers on the guns meant the shots didn’t make any sound.
The pair ran for their lives. Back at the hotel, Israel threw up then started crying. Nichols hit the phones, getting rid of the body and the guns before the police were alerted.
To Israel’s amazement, Nichols was able to deftly ‘clean’ the site of the shoot-out and get rid of the body.
This was further proof of Nichols’ powers and that the shadow market was real. So was Octopus. Israel was in it up to his neck: he was now a killer. Like Bob Nichols.
The following day, Israel wired $120 million to Postbank. In the currency conversion, Bayou was short-changed by $60,000. Israel didn’t even notice.
After months flitting around Europe at Nichols’ beck and call, Israel hadn’t earned a single dollar from the secret market: worse still, because he wasn’t trading for Bayou, it was falling deeper and deeper into debt.
But Israel remained under the spell of Robert Booth Nichols.
One night over pints of Guinness in a Mayfair pub, Nichols asked Israel for a loan of $10 million.
He would give Sam in exchange collateral worth $100 million from billions in secretly issued Federal Reserve bonds.
The bonds were in a vault near Piccadilly Circus.
At the London Safe Deposit Company, Nichols passed a retina scanner and a clerk led them to a large walk-in safe.
Nichols pulled a box from the wall and removed a blue shoulder bag. Inside was a metal box, crusted with rust.
Bearing the Federal Reserve seal, the box was heavy, as if lined with cement. Nichols handed it to Israel.
‘It’s rigged with explosives,’ he said.
‘If it’s not opened in exactly the right way, it will blow up and you’ll be dead.’
Israel placed it gingerly in a safe box he had just rented from the clerk. Nichols then opened a smaller deposit box and handed Sam a video-cassette recorder.
Inside the VCR was a copy of the Zapruder film – the ‘real’ one, he said, which showed who killed President Kennedy.
‘That’s for your own protection,’ Nichols said. ‘Now you’re in all the way up to your ass.’
The following day, Israel transferred $10 million to Nichols. It was the beginning of the end.
His $120 million was frozen in Germany after ‘disappearing’ for a few hours, and when it was eventually wired back to the U.S. Israel lost control of the funds and fraudsters descended like rats.
Bayou investors rushed to redeem amid rumours that the hedge fund was about to collapse, and Israel pulled the plug – only hours before he knew his arrest was inevitable.
Surrounded by a crack defence team paid for by his wealthy parents, Israel sat with officials and began with the words: ‘My name is Sam Israel and I am a criminal.’
He told officers about the booby-trapped box in the vault that contained Federal Reserve bonds worth $100 million.
If the box wasn’t opened at precisely a 45-degree angle it would explode, he said, and deadly chemical agents would be released.
Prosecutors thought he was joking. But no one was prepared to run the risk, so days later the streets around Piccadilly Circus were sealed off and traffic came to a halt while the Metropolitan Police bomb squad defused the box. A robot prised open the ancient lock. Click. The seal opened.
There was no explosion.
Israel was sentenced to 20 years for the Bayou fraud – one of the longest terms ever given to a white-collar criminal.
But unusually, the judge granted him bail to regulate his medication ahead of his long incarceration.
Israel had undergone a series of major back operations, heart surgery and had been diagnosed as bipolar.
It was then that he fled – and attempted to fake his own death.
When he ‘jumped’ off the bridge he landed two feet below – as he knew he would – on builders’ scaffolding.
Taking off in a camper van he’d parked nearby, he vanished.
When police divers failed to find a body, he was placed on America’s most wanted list.
He eventually turned himself in – to save his girlfriend who had been arrested for aiding his escape – and an extra two years were added to his sentence.
They say you can never con an honest man.
Greed, cunning, and the belief that they’re smarter than everyone else are essential characteristics for victims of the long con.
Sam Israel had never been honest – not in his work or in his personal life.
But had he really killed a man? Was there really a shadow market?
Or was it all a piece of theatre choreographed by Nichols?
It seems obvious now that the whole thing was merely an elaborate sting.
The Barclays office Israel said he saw had the trappings of the real thing but in fact the bank was in the process of moving to Canary Wharf.
Nichols had probably bribed some security guards to play along; there’s no evidence to suggest it was even a Barclays building
Postbank had no knowledge of the con – it was just one rogue employee; the faked ‘murder’ was the final ruse of the grift.
In sealed testimony years later, Nichols described how he divided up Sam’s $10 million between him and his fellow con artists, who all used false names. (They would have taken Israel for the full $150 million, if only they could have accessed his investment account.
A man who had acted as an intermediary received $200,000; a lawyer used to authenticate the bond agreements was paid $50,000.
In total, Nichols spent $1.4 million on hotels, airfares, meals and drinks. He also paid Kumar and the stuntman with the exploding turban.
Nichols bought a luxury home in Hawaii and a $1.5 million property in Arizona. As a cash reserve, he kept $1 million in his HSBC account in London.
When this money was seized following Israel’s arrest, Nichols called the Serious Fraud Office. Detective Inspector Michael Manley, a savvy veteran, took the call.
Nichols told Manley that the money was legitimate, and offered to fly to London to explain how the shadow market worked.
‘If you come to London I will arrest you,’ Manley replied.
‘I will charge you with fraud and money-laundering.’
The U.S. Attorney’s Office in New York, meanwhile, sued Nichols for the return of the $10 million. Half was already gone.
Accounts of what happened next to Nichols are shrouded in mystery: some say he died from a heart attack in a Swiss hotel room, others claim he staged his own death.
Israel firmly believes Nichols is living, under a new identity, in Vietnam. Wherever he is, Nichols has taken with him the secrets of his extravagant con.
For his part, Israel – very much alive and serving out a 22-year prison sentence in the same jail as Wall Street fraudster Bernie Madoff – still believes he got away with killing a man.
Source: The Daily Mail