TORONTO — Forty inmates lined up for the daily mail call at the Fort Dix Federal Correctional Institution, a complex of low-slung brick buildings in the middle of New Jersey.þþIt was July 2012, and one of the inmates was Philip Baker. A former hedge fund manager, he was serving a 20-year sentence for fraud. He had used bogus performance data to lure hundreds of people and institutions into his fund. His investors had lost hundreds of millions of dollars.þþMr. Baker, 46 at the time, admitted that he had committed fraud. “I’m a criminal,” he said recently. But he had convinced himself that he deserved to be free. And he was waiting for a letter that might turn his fantasy into reality.þþMonths earlier, Mr. Baker, who is Canadian, had signed a plea agreement that included an unusual caveat: Prosecutors would not object to the Justice Department’s transferring him to Canada to serve out his sentence.þþSuch transfers were rare. But Mr. Baker knew that if he could persuade the Justice Department to give him one, Canada would probably parole him after he had served only a fraction of his prison term.þþMr. Baker, a Baptist, prayed for God’s guidance. “Only he could set my direction straight,” he said during one in a series of interviews about his life and crimes.þþIn the prison’s television room, a guard dispensing the mail called out inmates’ names and numbers.þþ“Philip Baker, 22856-424.”þþMr. Baker stepped forward. The guard handed him a thin envelope with a Justice Department return address. Assuming it was more paperwork, he tore it open — and could not believe what he saw.þþHe started to tremble. He felt people staring at him.þþ“I felt like throwing up,” he said.þþPursuing the FinanciersþþAfter the financial crisis last decade, the federal government was expected to aggressively pursue criminal cases against top financiers: the fund managers, bankers, mortgage lenders and Wall Street executives who helped cause the global economy to crater. But prosecutions have been rare. The exceptions have been obscure or relatively junior industry players against whom it was easy to build cases but who did not bear primary responsibility for the crisis.þþOne reason: Prosecutors were under pressure to move quickly and to not lose trials. They preferred to take the safest, simplest routes to win convictions, and to then move on to new cases.þþThat is what happened with Mr. Baker, who became a top target. The government labeled him a fugitive, made him the subject of an international manhunt and, eventually, extradited him from Germany, where he had been living with his wife.þþMr. Baker was not a big fish; his hedge fund had under $1 billion in assets. And even when he was apprehended, a desire to resolve the case swiftly led a powerful United States attorney to insert the transfer-to-Canada clause into an otherwise airtight plea agreement.þþHis experience highlights one of the primary critiques of the Obama administration’s efforts to clean up Wall Street: Bankers nearly destroyed the global economy, but few went to jail.þþThis account of Mr. Baker’s long-shot effort to escape to Canada, which has not previously been reported, is based on interviews with him and his family, and with his lawyers, former colleagues and current and former government officials, as well as on thousands of pages of legal documents, internal emails and other records from Mr. Baker’s defunct hedge fund.þþA Childhood MemoryþþPhilip Baker was raised in a middle-class family in Toronto. One of his earliest memories took place in the hospital. Born with a heart defect, he needed surgery when he was 7. When it was time for the procedure, his parents walked out of his hospital room.þþ“I thought they were abandoning me,” he said. That fear stayed with him, fostering a desire to please his parents and other authority figures.þþAs a boy, he showed an affinity for finance. While his friends played with toy soldiers, he toted a leather briefcase and pretended to be a stockbroker.þþBut his early years in the financial industry were rocky. After dropping out of Liberty University in Lynchburg, Va., he eventually landed at the brokerage Refco. Colleagues remember an insecure man whose nickname was “Philipbuster,” because of his tendency to talk endlessly.þþHe married a woman from a wealthy Canadian family, heirs to the Hollinger media fortune. The couple had five children in Windsor, Ontario.þþ“I was always trying to impress that family,” Mr. Baker said. Hoping to prove that he could succeed as an entrepreneur, he quit Refco to start his own hedge fund.þþThe fund failed.þþMr. Baker lied to his wife and in-laws that he had found a new job at a big Detroit bank. For several months, he put on a suit and pretended to cross the Detroit River and go to work.þþOne day, he said, his wife tried to call him at the office. The bank told her that nobody named Philip Baker worked there.þþMr. Baker recalls her words to him that evening, when he came home: “Get out.” The marriage was over. (She declined to be interviewed.)þþHe holed up in a friend’s basement. One morning, he grabbed a .22-caliber rifle and drove to a forest outside town. He called a former Refco colleague, John Kurgan, and said he was preparing to kill himself.þþ“Slow down a minute, cowboy,” Mr. Kurgan responded. He told Mr. Baker he had a job prospect for him in Toronto. Then, noting that Mr. Baker had called in on a recorded Refco line, Mr. Kurgan jokingly asked if he could sell the audio of his suicide.þþMr. Baker was infuriated by the comment. But it snapped him out of his suicidal stupor.þþWhat happened next set the stage for Mr. Baker’s later downfall.þþAccording to Mr. Baker and to his plea agreement, he and Mr. Kurgan went into business together. They formed a new commodities-trading hedge fund, Lake Shore Asset Management. Mr. Baker lined up clients, and Mr. Kurgan did much of the trading.þþMr. Kurgan was not charged with wrongdoing. In an interview, he declined to describe his role in the business. “This is something that happened many years ago,” he said.
Source: NY Times
