Missing U.S. fund manager Israel not dead

By Svea Herbst-Bayliss

BOSTON (Reuters) - A former hedge fund manager convicted of fraud is alive and on the run a week after staging a suicide on a bridge above New York's Hudson River, U.S. authorities said on Monday.

The U.S. Marshals Service confirmed that Samuel Israel III, who engineered the $2 trillion (1 trillion pound) hedge fund industry's most brazen and long-running fraud, did not leap to his death last Monday when his GMC Envoy was found on a bridge above the Hudson River, its engine idling and the words "suicide is painless" etched in dust on its hood.

"Suicide has been ruled out," William Dundon, a spokesman for the U.S. Marshals Service, said in an e-mail to Reuters.

Another law enforcement official who is familiar with the investigation, but not authorized to speak publicly on the matter said "the investigation is solely a fugitive investigation now."

Israel, 48, had been due to begin serving a 20-year prison term in Ayer, Massachusetts a week ago.

Officials would not say how authorities had learned that Israel, who suffers back and heart problems, was alive. But after no body washed up on the Hudson's shores for days, police became skeptical he was dead.

In April, Israel was sentenced for fabricating investment returns, making up an accounting firm to sign off on documents and ultimately stealing $450 million from investors, including Indiana's DePauw University.

He was out on bail to allow time for prison officials to prepare his medication, court documents show.