"I cheated my investors because I was afraid to admit my failure. I did not want the world to think I was not good enough and I did not want my family to see me as a failure."

Those are some of the choice, cowardly words from Samuel Israel III, the erstwhile Bayou Capital hedge fund manager who cheated investors out of $450 million, when begging the sentencing judge for leniency. Apparently, Israel believes he was justified in, and can earn sympathy for, ripping off his clients because he couldn't measure up to his prominent New Orleans family. His lawyer also pled on Israel's behalf, noting the swindler's pacemaker, back trouble and addiction to pain killers.

Now Israel is on the lam, believed to have used a phony passport and be possibly anywhere in the world, where he's reportedly stashed millions in various locations. Why the government permitted a con artist to roam about before turning himself in to a 20-year federal prison sentence, is anyone's guess. The fear of being locked up is precisely why Israel faked suicide on June 10 by quoting a line from the "M*A*S*H" TV theme song, "Suicide is Painless," etched in dust on the hood of his car parked near Bear Mountain Bridge with the keys still inside.

You truly can't make this stuff up. The story even involves Donald Trump, from whom Israel was renting a $384,000-a-year mansion in Mt. Kisco, N.Y. When Israel's payments were in arrears and the FBI was beating down the door, he holed up inside for several weeks.

Then there was the original "suicide note" by Bayou's former chief financial officer, Daniel Marino. A concerned investor who flew in from Washington state, found the rambling missive in the firm's Stamford, Conn., offices. But that, too, proved to be nothing more than a sham. Marino is now serving his own 20-year prison term.

Unfortunately, this is only one of many cases of hedge fund fraud. These peculiar, often hair-raising, cases have been on the rise.

Last week, for instance, Raffaello Follieri, who raised millions from private equity investors on the pretense that he had ties to the Vatican and who was dating movie star Anne Hathway, was arrested on charges of wire fraud and money laundering.

If the government needed any further proof of the need for hedge fund regulation, they need go no farther than Israel's trail.

(c) 2008 Money Management Executive and SourceMedia, Inc. All Rights Reserved.

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