White-Collar Fugitives Foiled by Bad Plans, Weakness (Update2)
By Laurence Viele Davidson
June 5 (Bloomberg) — White-collar fugitives such as Sam Israel and Marcus Schrenker often fail to escape the law because of what prosecutors and bounty hunters say is a lack of preparation for the rigors of life on the lam.
Israel, 49, convicted of running a $400 million Ponzi scheme at hedge-fund firm Bayou Group LLC, and Schrenker, 38, accused of fraud as president of Heritage Wealth Management Inc., were captured within a month of fleeing. White-collar fugitives often run out of money or lack the mental sturdiness to elude police, said Duane Chapman, star of the television program “Dog the Bounty Hunter.”
“There are different qualities in white-collar guys than street thugs,” Chapman said. “A criminal’s life has nothing but ups and downs, whereas a white-collar criminal has never seen the dark side, so when he enters that realm, he is lost.”
Schrenker, who faced trial next week on charges related to his flight, including allowing his plane to crash after he jumped out of it, pleaded guilty today in Pensacola, Florida. Israel is to be sentenced July 15 for bail-jumping. He is already serving a 20-year sentence for the underlying fraud.
U.S. law-enforcement agencies captured 110,000 fugitives last year, according to David Turner, a spokesman for the U.S. Marshals Service. Some 3,300 warrants are outstanding for white- collar crimes, according to William Sorukas, chief inspector for domestic investigations for the service.
Federal authorities today added another name to the list. Julian Tzolov, an ex-Credit Suisse Group AG broker awaiting trial for fraud, violated his bail terms May 9 by leaving home without permission, prosecutors in Brooklyn, New York, said.
Once someone has fled, a supply of cash is important to having “a fighting chance” of staying free, said Michael Seigel, a former federal prosecutor who teaches law at the University of Florida in Gainesville. The hunters’ priorities can also determine whether someone is caught, he said.
“A lot of whether they are captured depends on the continued interest of law enforcement,” Seigel said. “If leads dry up, it may be back-burnered.”
Israel, after pleading guilty to perpetrating a massive fraud at his now-bankrupt Stamford, Connecticut-based company, was to report to a federal prison in Massachusetts in June 2008 to begin his sentence.
Instead, the money manager left his car on a bridge over the Hudson River in New York with “suicide is painless” written in dust on the hood, suggesting he may have jumped.
Faking death rarely throws off investigators, who grow suspicious if there’s no body, Chapman said.
Three weeks later, investigators persuaded family members to have him surrender. After hiding in a campground near Springfield, Massachusetts, Israel rode a motor scooter to a local police station, found it closed and went on to another that was open.
A self-described methadone addict, Israel was allowed to plead guilty to bail-jumping only after four delays, since the federal judge in White Plains, New York, wasn’t certain Israel understood the proceedings, given his drug use.
Schrenker, the Indiana money manager, was charged with letting his airplane crash after radioing a distress call and bailing out. He used the plane “to fake his own death,” the insurer of the aircraft said in a lawsuit denying coverage.
Once on the ground, like Israel, he rode a motorcycle to a campground, authorities said. Unlike Israel, he didn’t surrender voluntarily.
Hiding in campgrounds where they didn’t need identification was the only thing Schrenker and Israel did right, Chapman said.
Schrenker ran in January after being beset by complaints and lawsuits, including one in which Creative Marketing International Corp. demanded $1.4 million. He took off from his Indianapolis-based company less than two weeks after state officials seized financial records and computers from his home.
An amateur pilot, Schrenker flew his Piper six-seater toward Florida, reporting on the way that a windshield had imploded and he was bleeding.
Pilots of two U.S. military jets who intercepted the plane saw an open door, no one aboard and no broken window, they said. The aircraft appeared to be on automatic pilot, authorities said. It crashed near Milton, Florida.
According to a U.S. Coast Guard investigator’s affidavit, after Schrenker parachuted to earth, he got a ride to a hotel from a passing police officer.
He told the officer that he’d been in a canoeing accident, and eventually walked to a storage facility where he had left a motorcycle.
Schrenker left clues in the plane, including maps and campground guides with the Alabama and Florida pages torn out, the investigator said.
Officers said they found him two days later in a campground northwest of Tallahassee, with cuts on his arms that required hospitalization.
Schrenker had an untreated nervous breakdown and an addiction to drugs, he wrote to the court. His decision to plead guilty was disclosed yesterday in court papers, the day before a trial was to start.
After admitting both charges against him, destroying an aircraft and sending false distress signals, Schrenker could be sentenced to as much as 26 years in prison on Aug. 19, and he still faces a state charge in Indiana of working as an unregistered investment adviser.
Need to Change
Success on the run means changing everything, including your looks, taste in clothing and social set, Chapman, the bounty hunter, said.
White-collar criminals are generally narcissistic and “begin to believe their own mythology,” said Donald Davidoff, a Harvard University neuropsychologist.
When someone whose personality is tied to wealth and power is disgraced, the experience produces “dissolution of their personality,” Davidoff said. “They run not because of the threat of arrest but a loss of self.”
Swindlers who are found out often panic and flee when the crime is revealed or about to become public, Davidoff said. Later, when the suspect realizes life on the run will strip him of a sense of who he is, “tremendous remorse” and surrender may follow, he said.
On the day after Schrenker was arrested, Arthur Nadel, president of Scoop Management Inc. in Sarasota, Florida, was reported missing.
Weeks of Planning
Prosecutors later said the 76-year-old money manager planned his escape for “weeks if not months,” wrote checks to himself for more than $166,000 and wired more than $20 million to an unknown location in the year before disappearing.
Nadel left a note the government said suggested he was going to commit suicide, became the object of a manhunt and turned himself in — all within two weeks. In the interim, he was charged with mail fraud and accused in a lawsuit by the U.S. Securities and Exchange Commission of overstating his company’s investments by $300 million.
He “went away for a while just to be alone,” Nadel’s lawyer Barry Cohen said after he turned himself in Jan. 27.
Nadel was placed under psychiatric care, his former lawyer Todd Foster said, and is now jailed in New York, awaiting trial.
Nadel left his wife a letter of advice — “sell the Subaru” for needed cash — and paid $50,000 in advance on her credit card before departing, his attorney said in court.
Thomas Qualls, a Garden City, New York, currency trader convicted of bilking investors of $922,382 at his International Foreign Currency Inc., showed less regard for his family.
Qualls was free on $250,000 bail backed by his parents’ home in Spring Hill, Florida, when he ran last November. The bail was forfeited.
The government seized the house and evicted the parents, said Robert Nardoza, a Justice Department spokesman in Brooklyn, New York. They’ll get any excess money after the home is sold and the bail paid.
Qualls ran just before he was convicted. He was at his trial in Brooklyn federal court until closing arguments, then stopped attending. He was arrested four months later as he tried to board a subway train in Montreal, where he had been living under a false name, prosecutors said.
Already facing 17 years in prison, he faces as much as 10 additional years for attempting to flee.
Qualls’s attorney, Martin Gedulgig, didn’t respond to a call seeking comment.
‘America’s Most Wanted’
Television is useful to authorities when it turns a spotlight on a white-collar criminal, said Turner, the Marshals Service spokesman.
“‘America’s Most Wanted’ is a phenomenal ally,” Turner said, referring to the weekly program that features fugitives.
Qualls was featured on the show’s site Jan. 29. He was captured March 17.
Featured fugitives don’t always get caught, at least not immediately.
Rebecca Parrett, 58, a former executive of National Century Financial Enterprises Inc. in Columbus, Ohio, was sentenced in March to 25 years in prison after being convicted in a $2.9 billion fraud at the company, which bought medical bills and packaged them into bonds.
The former executive wasn’t in court when sentence was pronounced. She had been missing for a year and was included in a “America’s Most Wanted” segment. She has yet to be caught.
Some alleged white collar criminals have managed to live openly abroad for years — usually in countries with no U.S. extradition treaties.
Living in Namibia
Jacob “Kobi” Alexander, former chief executive officer of Comverse Technology Inc., has avoided extradition from Namibia since 2006, when he was charged in a stock-option backdating case at the New York-based voice-mail software company.
Tomo Razmilovic, the ex-CEO accused of accounting fraud at the barcode-scanner concern Symbol Technologies Inc., was indicted and fled to his native Sweden in 2004.
On June 1, when an alleged co-conspirator in the bribery of officials of Azerbaijan went on trial in New York, Viktor Kozeny, the Czech expatriate accused of organizing the scheme, remained safe from extradition in the Bahamas, where he said he would monitor the case. The island country refused to send him to the U.S. because his actions weren’t criminal under Bahamian law.
Sometimes a fugitive’s face is his misfortune.
Found in Bali
Lou Pearlman, the former impresario who started the Backstreet Boys band, was captured without ever having been featured on “America’s Most Wanted.” Pearlman fled to Bali in January 2007 ahead of U.S. charges he ran a $300 million investment fraud.
A German tourist recognized him and called a newspaper covering the case, Assistant U.S. Attorney Roger Handberg said. Expelled from Indonesia and arrested, Pearlman pleaded guilty and is serving a 25-year term in a federal prison in Atlanta.
Runners often “have a plan to get from point A to point B,” said Sorukas of the Marshals Service. “They usually don’t have a plan to get from point C to point D.”
The cases are U.S. v. Israel, 08-cr-00723, U.S. District Court, Southern District of New York (White Plains); U.S. v. Schrenker, 09-cr-00011, U.S. District Court, Northern District of Florida (Pensacola); U.S. v. Nadel, 09-mj-00169, U.S. District Court, Southern District of New York (Manhattan); U.S. v. Qualls, 07-cr-00014, U.S. District Court, Eastern District of New York (Brooklyn); U.S. v. Poulsen, 06-cr-00219, U.S. District Court, Southern District of Ohio (Columbus); U.S. v. Alexander, 06-cr-00628, U.S. District Court, Eastern District of New York (Brooklyn); U.S. v. Razmilovic, 04-cr-00519, U.S. District Court, Eastern District of New York (Central Islip); U.S. v. Kozeny, 05-cr-00518, U.S. District Court, Southern District of New York (Manhattan); and U.S. v. Pearlman, 07-cr-00097, U.S. District Court, Middle District of Florida (Orlando).
To contact the reporter on this story: Laurence Viele Davidson in Atlanta at email@example.com.
Last Updated: June 5, 2009 15:06 EDT