by Dean Jobb
Leo sent Emil on his way and hailed a taxi outside the Drake. He was heading to New York, he said, on business. He carried a briefcase stuffed with the rest of the cash he had been collecting. The driver worked his way through Michigan Avenue traffic to the Majestic Building. Leo rummaged through his desk and destroyed as much evidence as he could—Bayano stock certificates and accounts, check stubs, letters, whatever he could find. He had already cleaned out his desk at the Drake.
Charles Cohn showed up at one point, almost out of breath; he had rushed over to make sure he caught Leo before he left. Cohn, already one of Bayano’s major investors, wanted more shares. He handed over a check for $30,000.
SARAH MANDEL WAS AT home that Monday afternoon when the phone rang. An early Bayano investor along with her brother, Milton, Leo’s doctor, she had quit her job as a teacher and was living off her Bayano profits. Leo was on the line. Meet me at the Majestic, he said, and come quickly. He was taking the 5:30 train to New York with Elias B. Woolf, a friend and Bayano investor. She arrived at ten minutes to five.
“I have just sold ten shares of my stock in the project to one of my associates,” he said, handing her an envelope. “This is the dividend on it for you and your brother.”
“Don’t put it in a bank,” he added, “put it in a safety deposit box.”
She opened the envelope after he dashed off. Inside were twenty-five $1,000 bills.
NEXT, LEO GRABBED THE briefcase, a bit lighter but still crammed with $175,000 in $1,000, $500, and $100 notes. He was on his way out the door when Bertha and Pearl Mayer, Mae’s mother and sister, showed up at his office. They wanted to show him photographs taken at the family’s Thanksgiving dinner, but there was little time.
They tagged along as Leo and Woolf rushed to the LaSalle Street Station, a half-dozen blocks away. It was getting dark and a light rain shimmered on the streets and sidewalks, the overture for a rainstorm moving in from the south. Pearl Mayer saw nothing strange in her brother-in-law’s demeanor as he boarded the New York Central’s Twentieth Century Limited, an express that would whisk him to New York in less than a day. “Leo bid us good-by,” she said, “very affectionately and naturally.”
MARCY AND MARY SCHOENER were delighted when Leo accepted their invitation to dine the next day at the Ansonia. After months of refusing to let the couple invest in Bayano, he had recently made an attractive offer. The Bayano Syndicate was opening a New York office, Leo said, and he wanted Schoener to be its general manager. The salary was $25,000—$10,000 more than Schoener earned at his father’s tobacco-wholesaling firm—plus stock in the company. Schoener was elated; Bayano, he was convinced, “looked like a big thing.” He handed in his resignation and was set to start running Bayano’s local office in mid-December. He expected to sign a contract any day.
As they ate and talked, Mary thought Leo seemed “tired and discouraged.” The couple knew he was a diabetic. “He was continually on a diet,” Marcy recalled, “and had a fight for his life.” When Marcy was called away to take a telephone call, Leo leaned over and confided to Mary that he had been to see a doctor.
“I have just six months to live.”
She was too shocked to respond.
“I am going away,” he added.
“Where?”
Leo wouldn’t say. “No one will ever see me again.”
“What are you going to do about my husband’s position?” Mary asked. What about his contract with the Bayano Syndicate?
“He won’t need me; he can sign up without me.”
He had to rush off to a meeting, he said, to close a deal to buy a sugar refinery in Georgia. He jumped into a cab and disappeared.
JULIUS KORETZ WAS IN New York on business when Leo phoned his hotel on the following day, December 5. He was at the St. Regis, he said, with Woolf. Come over for the evening.
When he arrived, Leo suggested they see Stepping Stones, a musical-comedy version of “Little Red Riding Hood” that had opened on Broadway a few weeks earlier. Julius, relieved to find the rainy day had softened into a mild, foggy evening, made his way to the Globe Theater on West Forty-Sixth Street but returned with only two tickets. It was decided that Leo and Woolf would go and Julius would meet them later, back at the suite. After the show, the three men played cards until two in the morning. Pinochle was Leo’s favorite game, and when he played with Mae, the usual stakes were five dollars a game. There was no trace of the downcast, six-months-to-live man who had dined with the Schoeners the previous day.
“Leo was happy and in high spirits,” Julius recalled. “He wanted to sit up all night and play cards.”
Julius, a man with a wide smile and a full head of hair that must have been the envy of his balding brothers, crashed at the suite for the night. Leo and Julius were close; there was barely two years between them, and they had shared a bedroom when they were boys.
“I want to tell you something, but keep it under your hat,” Leo said before Julius left in the morning. “I sold one share of your Bayano oil stock for $25,000.” It was an incredible return on a share with a face value of just $1,000. “Emil has the money,” he continued. “When you get back you put that money in your safe deposit box until I tell you what to do with it.”
Julius asked when Leo was heading home.
“I may leave for Boston tonight,” he said, “and get to Chicago toward the last of the week.” Julius offered to go with him to Boston.
“No,” Leo said, “I’ve got a big deal on there and have to meet a lot of men.” He promised to phone if he changed his mind and stayed in New York.
Julius went back to the St. Regis that evening. He had not heard from Leo, and he was surprised to learn he had checked out a few hours earlier, after a hotel clerk was kind enough to cash a check for several thousand dollars. He had told the hotel staff he was headed to Boston, and had last been seen slipping through one of the gazebo-shaped revolving doors that emptied onto East Fifty-Fifth Street.
MEANWHILE, AS SANTA LUISA neared the lush green Panamanian coast on December 5, Harry Boysen scribbled a brief progress report on a postcard. “We are in sight of land and will be in Colón before long,” he advised his brother Louis, an official of Chicago’s First Trust and Savings Bank. “Very successful trip so far.”
The following morning, an American expert on tropical wood species boarded a boat in Panama City and struck out for the Bayano River. By a remarkable coincidence, Clayton Mell of Yale University was in Panama to survey the holdings of the Bayano River Lumber Company, the firm that had issued bonds in 1909, about the time Leo first envisioned his own timber empire. The company had done some cutting on its seventy-five-thousand-acre tract and had retained Mell to assess the feasibility of further logging or using the land for agriculture. He spent a week hiking the property, located about twelve miles upriver, and advised against further investment. The land was inaccessible by road and water, there was little good-quality timber left, labor was in short supply, and bananas or sugarcane could not be grown at a profit.
Mell filed a detailed report after his return to New York at the end of December. His conclusion was blunt: the information “promoters and would be experts” had disseminated about the region’s agricultural potential and the “accessibility, vastness, richness, and wealth in fine and inexhaustible supply of timber” had been “greatly exaggerated,” he wrote. It was as if he had read Leo’s overblown, decade-old prospectus for the Bayano Syndicate. The hype, Mell added, “has already led to many investments and to the formation of innumerable enterprises among which the first one has yet to prove successful.”
THE BAYANO EXECUTIVES REACHED Panama City at almost the same moment Mell was leaving the capital to begin his survey. Henry Klein and his group were about eighteen hours ahead of schedule, so no one was surprised when Mr. Espinosa or someone else connected with the syndicate was not at the dock to greet them. But as the hours passed, one of them admitted, “we began to worry a bit.” Someone checked the phone directory. There
were listings for Espinosa—the family, they discovered, was a wealthy and prominent one in Panama—but none for an A. Espinosa. Panama City was supposed to be the headquarters for the Bayano Syndicate, but they could find no trace of its offices. They went to the telegraph office and learned that the cable address Leo had given them for the Bayano Syndicate—“Koretz Panama”—did not exist.
“We were staggered … no one knew anything about a great Bayano syndicate,” said Milton Smith, the accountant. “We inquired around, but no one had ever heard of Koretz or his oil company.” They descended on the land registry office and combed through deeds but found no record of Leo’s having bought or sold anything in Panama over the previous twenty years. The group gathered in Emil Kitzinger’s room at the stately Tivoli Hotel, once the haunt of the higher-ups who built the canal, to discuss their next moves. “We began to suspect we had not inquired deeply enough,” Mayer said.
They tracked down a Chicago man, C. L. Peck, the local representative of an American firm with a modest logging operation on the Bayano. They produced a map Leo had given them, showing the syndicate’s properties and operations.
“The blueprint is a big fake,” Peck exclaimed. “That land is ours.” His company owned part of the syndicate’s purported five million acres, and he assured them that other companies owned or controlled the rest. “Gentlemen,” he announced, “I am of the opinion that you have been duped.”
The group had come too far to take Peck’s word for it. They hired a boat to take them to the Bayano River but abandoned the idea when port officials and other locals confirmed that Peck was right: they would find no oil fields. “Why,” they were told, “that is where we go alligator hunting. There’s nothing there but alligators and swamps—and plenty of each.”
Urgent cables were sent to Chicago. The first was addressed to Leo: NO TRACE OF THE LAND OR THE COMPANY HERE.
Shandor Zinner directed the next message to Francis Matthews: CABLED LEO AT DRAKE HOTEL. CANNOT LOCATE PARTY OR PROPERTY HERE. NO ANSWER RECEIVED. WIRE ADVICE. There was no response.
The following day they tried again to reach Matthews: IS LEO AWAY? MADE INVESTIGATION AND PARTY AND COMPANY ARE NOT KNOWN HERE. Matthews was in New York, looking for Leo, as the messages piled up in Chicago. Harry Boysen finally got through to his brother Louis, the Chicago banker, with a terse summary of their findings: NO OIL, NO WELLS, NO PIPELINES, NO ORGANIZATION.
Louis Boysen finally tracked down Matthews in New York: NOTIFY KORETZ, he said, THAT THE PARTY HE HAD SENT TO LOOK OVER THE PROPERTY WAS RETURNING.
On December 10 the Bayano fact-finding team boarded SS Santa Ana for the return trip to New York. A last-minute decision was made to leave Harry Boysen behind to try to track down someone in the wealthy Espinosa clan, on the slim chance they had missed something. Henry Klein, Kitzinger, and the others passed the hat to cover Boysen’s expenses, wished him well, and set off.
They knew what Boysen would find, though—another dead end. After five days of inquiries and poring over property records and phone books, “we were convinced there was nothing there and never had been,” Klein acknowledged. The Bayano Syndicate, their investments, their new jobs as oil executives, their dreams of wealth—it was all a sham. The truth was perhaps most devastating for Klein, who had hundreds of thousands of dollars tied up in his good friend’s investment schemes. He had been lied to. Used. They all had.
Klein remembered Leo’s prediction that they would be surprised at what they found in Panama. They certainly were. Then he had a more sickening thought. What dollar figure did Leo write on that blank check?
LEO ASKED A LONG-DISTANCE operator to place two calls from New York to Chicago. One was to his wife. He said “nothing of importance,” Mae recalled, other than mentioning he was making a side trip to Boston before heading home. The other call was to a Bayano investor, Sam Cohen. It was December 6, and he wondered whether Cohen had any news of the inspection group. Had they reached Panama City?
Yes, Cohen replied, they had.
Their early arrival seemed to catch Leo by surprise. He sounded “greatly upset,” Cohen recalled, to learn they were on the ground in Panama.
14
THE SMASH
THE TWENTIETH CENTURY Limited hurtled westward at a mile a minute, charging into inky blackness. Fog and heavy drizzle clouded the locomotive’s window and blinded the engineer, Charles Patterson, when he poked his head out to check the track ahead. A mile and a quarter outside Forsythe, New York, just shy of the Pennsylvania state line, a signal glowed red, warning Patterson to stop. A mile out, a second issued the same mute warning. Not far ahead, at the rear of a stopped passenger train, a brakeman’s flare sent out a pinpoint of light.
Patterson hit the brakes; the locked wheels squealed. He hit the whistle; it let out a piercing shriek. To Robert Morton Lee, city editor of the Chicago Daily Tribune and a passenger on the train in Patterson’s path, the oncoming locomotive emerged from the fog “like some horrifying monster of the fairy tales.” It slammed into the rear observation car and “tore its way through wood and steel as if they had been paper and toothpicks.” The car telescoped beneath the one ahead of it “with the swiftness of a rifle bullet,” crushing nine sleeping compartments—all of them occupied—into a twisted mass. It lurched into the air and toppled onto its side. The next car was flipped from the tracks “as neatly as if a gigantic thumb and forefinger had plucked it out,” Lee reported from the scene. Steel buckled with a throaty groan and windows exploded. Dazed passengers, half-dressed and badly banged up, stumbled into the fog. Porters struggled to pull the dead and injured from the wreckage.
The Tribune’s initial report pegged the death toll at fifteen, with eight more injured. Mae and the Koretz brothers began to worry. Leo should have been back from Boston via New York days ago. Had he been on the wrecked train? Emil feared the worst. “We thought he had been killed.”
The Twentieth Century consisted of three separate trains, and the first two pulled into LaSalle Street Station by midday Sunday, after dropping off injured passengers at hospitals in Pennsylvania. The third section arrived five hours late with the bodies of the victims. “We met every section,” Emil said, “thinking he might be on it.”
The night before, as it turned out, a top executive of the Hearst newspaper chain had stood on the same platform, and he, too, had expected Leo to be on the ill-fated train. Victor Polachek, a former managing editor of the Chicago Examiner, held about $22,000 worth of Bayano stock and had been desperate to confront Leo. He had received a tip from federal agents that the scheme was about to collapse, and he hoped to get his money back before the swindle was exposed. Polachek had waited in vain and, to add professional insult to his financial injury, learned of the wreck when newsboys for the rival Tribune showed up, touting their scoop of every other paper in town.
When a list of victims was published on December 10, the death toll had been reduced to nine. More than twenty Chicagoans were injured, including Milton Cohn of the clothing firm Alfred Decker and Cohn, proud holder of $7,500 worth of Bayano stock. To the relief of Mae, Emil, Julius, and everyone else in the Koretz family, Leo’s name was nowhere to be seen. Arrangements were made for a family member to view the victims’ bodies, in case he had been misidentified. Still no Leo.
Where was he? Why did he not call?
Mae knew Leo often carried large sums of money. Had he been robbed? Was he just too busy with business to let her know where he was and when he would be home? She made frantic long-distance calls—eight of them—to New York. No luck. Julius and Milton Simon, the husband of Mae’s sister Aimee, boarded a train for New York to see if they could track him down, thinking he must still be in that city. Aimee stayed with Mae in Evanston, offering what support she could. On December 11 a letter arrived for Milton Simon. It was from Leo. Inside were keys and a claim for baggage he had sent home from New York by train.
“Please go to the station and get the suit case,” the letter said.
; Aimee fetched the bag from Chicago’s Union Station and took it to Mae’s home. They opened it and found Leo’s overcoat and a smaller case, which contained nine white envelopes. A jeweler’s name was written on each one—Lewy Brothers and Tiffany and Company of Fifth Avenue, New York, were among those that stood out. The Lewy Brothers envelopes contained the diamond bracelets he had picked out for Mae. Another held a diamond ring worth $4,000; the various pieces in a third envelope were priced at $11,000. Each piece was accompanied by paperwork that confirmed the cache was worth about $75,000.
Leo knew his wife. Once she learned the truth, she would never keep his tainted money. The rest of his family and his in-laws had been reimbursed, and he hoped this would encourage them to help her. Selling the jewelry would provide something more for her and the children to live on.
Milton Mandel called on Mae that day. He had received an envelope from Leo, mailed in New York the previous day, with a letter inside addressed to Mentor. “If you think my son should have this letter,” Leo had written in a covering note, “give it to him.” Mandel thought Mae should decide.
“Dear son,” she read:
This is probably the last communication you will have from me. I am a fugitive from justice, family and friends. I am a victim of idleness, selfishness and a desire for the acclaim of friends. You have a wonderful mother and a fine sister. Be a good boy, be straightforward and be honest. If you are ever tempted, think of the fate that awaits me.
Your loving father.
The fortune in jewelry, the returned overcoat, the line about being “a fugitive from justice”—it was all starting to make sense. Horrible, unthinkable sense. Mae ripped the letter to shreds. She did not want Mentor to see it, she told Mandel. It “might put bad thoughts into her boy’s head.”
Events were moving fast. Harry Boysen’s damning, eight-word cable—NO OIL, NO WELLS, NO PIPELINES, NO ORGANIZATION—had reached Chicago. Francis Matthews, back from New York, finally knew what Henry Klein and the rest of the Bayano executive team had suspected for days: Their good friend had absconded, taking their money with him. Leo Koretz, the Oil King, was a fraud.
