Empire of Deception

by Dean Jobb

  His siblings and in-laws finally understood why he had doled out so much cash just before he left for New York. And now they knew why he had urged them not to deposit their Bayano windfalls in a bank account, where it could be found and seized.

  Marie Koretz was sickened when she learned how her son had made himself—and his family—rich. “I can’t touch that money because it’s stolen,” she told Julius, who had just returned from his search for Leo in New York. Julius, Emil, Ferdinand, and their wives huddled to discuss what they should do with the $175,000 the family had been given.

  “We had a conference,” Julius explained, “and we decided to give the money back. We all felt the way mother did about it.”

  THAT AFTERNOON, WITH THE temperature well above freezing and the sky threatening rain, Matthews went to the office of the Cook County state’s attorney to file a formal complaint against his friend and business partner. Robert Crowe could scarcely believe what he was hearing. Panamanian oil fields, seven-figure buyout offers from Standard Oil, 60 percent annual dividends—and all of it an elaborate hoax that had burned hundreds of investors. And the man behind the lies? That was the most incredible thing of all. He was a half-forgotten colleague from the state’s attorney’s early days in legal practice. Leo Koretz, the wisecracking clerk who had put himself through night school to earn a law degree, was a brazen swindler accused of stealing millions of dollars and skipping town.

  Crowe assembled a team to search Leo’s offices in the Majestic Building and personally led the raid. As he looked on, his assistant Stanley Klarkowski and three detectives rummaged through the books and files Leo had left behind. They found the little bottles labeled OIL that contained whiskey and the Bible that was really a cigarette holder. They found a travel guide to South America—a clue, perhaps, to Leo’s whereabouts. They found a small safe, but it was empty. Law books, shipping registers, and magazines littered the floors. Ties and starched collars had been discarded in a corner, and the search also turned up a woman’s slipper. When Crowe’s team discovered the stash of booze, they called in Prohibition agents to seize hundreds of bottles of expensive wine and liquor. Letters, legal papers, and unpaid bills were gathered up. A truckload of documents was dispatched to the state’s attorney’s office for review.

  As the raid was in progress, Mae and Aimee showed up with Leo’s suitcase. They had contacted Matthews, and he had advised them to turn over the jewelry to the authorities. Klarkowski stopped his search long enough to examine each piece and to give each envelope an exhibit number. He arranged to have the jewelry secured in a safe-deposit box.

  Then Klarkowski and two detectives headed to suite 629 at the Drake. There, they found more illegal liquor and more documents, including what appeared to be a list of investors, and the gold-framed sign on the wall, with its all-too-true slogan, YES, WE HAVE NO BAYANO TODAY. On Leo’s desk was a book with the apt title, Bunk. They carted off three suitcases filled with records and receipts.

  Crowe assembled a group of reporters and broke the news just in time to catch the late editions of the evening papers. “It looks like a serious case,” he said. “Matthews charges that he lost $40,000 and that other friends of Koretz’ were heavily hit.” He would ask a grand jury for indictments on charges of grand larceny and operating a confidence game.

  “There are a hundred other details,” Crowe added. “It is impossible to enumerate them—almost impossible to imagine them.”

  Act 2

  Cartoon published on the front page of the Chicago Daily News, December 15, 1923.

  15

  THE SENSATION

  THE BOLD TYPE at the top of page 1 screamed for Chicago’s attention.

  OIL SWINDLE NETS MILLIONS.

  MILLION OIL BUBBLE BURSTS.

  LAUNCH WORLD-WIDE HUNT FOR KORETZ, WHO SWINDLED CHICAGO BUSINESS MEN OUT OF MILLIONS.

  Within hours of Crowe’s announcement, the newspapers were dissecting the swindle and how it unraveled. “Koretz worked almost exactly opposite from the methods used by such con experts as ‘Yellow Kid’ Weil,” the Daily Tribune explained. “He never solicited a sucker. He never urged one sucker to get another. He begged his prospective victims not to buy so much of his stock—but did it in such a way that they really were urged on. And once a sale was made the sucker was sworn to everlasting secrecy.” A Daily Journal headline offered an eleven-word précis of Leo’s methods: LAMBS SOUGHT OUT KORETZ AND BEGGED FOR A SHEARING; GOT IT.

  Leo’s photograph and description were plastered over the papers. So were photos of his abandoned wife and children and his mansion. The Evening American ran his mother’s photo under the headline, DUPED BY SON. Crowe and his investigators paused as they rummaged through his office in the Majestic Building so that photographers could get their shots. Prohibition agents posed with the liquor cache.

  The Bayano swindle was the big story in a town where every newspaper chased the big story. Chicagoans had their pick of six dailies. The largest, the Tribune, touted itself on its front page as the “World’s Greatest Newspaper,” and it was Chicago’s greatest newspaper, in terms of circulation at least. In the early 1920s it was selling 500,000 copies on weekdays and more than 800,000 Sunday editions. The Trib’s only morning rival, William Randolph Hearst’s Herald and Examiner, trailed by about 100,000 copies on both weekdays and Sundays but was keeping pace. The other papers—the Daily News, Hearst’s Evening American, the Daily Journal, and the Evening Post—were vying for the attention of commuters heading home from work on trams and trains.

  The Chicago Daily Tribune’s front-page coverage of the Bayano swindle and Leo’s disappearance, December 13, 1923.

  The Tribune was as powerful as it was immodest. It had campaigned to abolish slavery and had helped to put Lincoln in the White House. Its archrival, the Daily News, was one of the first papers in America to target female readers and carried the most advertising of any of the six, making it immensely profitable. The Journal, the paper where a teenage Ben Hecht got his start, had been publishing since the 1840s. The veteran Chicago newsman John McPhaul remembered it as “wily, bold and imaginative in gathering and displaying the news.” The Post billed itself as “the paper read by thinking people,” but its shrinking circulation suggested that most thinking Chicagoans preferred to get their evening news from its competitors.

  Hearst, the most powerful press mogul in America, had brought his brand of crime-and-scandal journalism to Chicago early in the century. While a Hearst paper should avoid “coarseness and slang and a low tone,” he once instructed his editors, even the “most sensational news can be told if it is written properly.” Professing the high road, he took the low one. His papers “‘plugged’ crime and scandal for circulation,” observed W. A. Swanberg, Hearst’s biographer. The Evening American proclaimed itself “A GOOD Newspaper … Clean and Wholesome” and “A Paper for the Family” above stories with lurid headlines such as KILLS MOTHER IN ROW OVER WIFE and HUNTS MATE WITH DEATH PISTOL. A photograph of a woman who was slugged by her husband and lost two teeth appeared with the caption, “Fist was her dentist.” A Hearst newspaper, confessed Arthur Pegler, one of the chain’s top Chicago journalists, was like “a screaming woman running down the street with her throat cut.” Hearst could claim he was giving people what they wanted, and H. L. Mencken, the leading press critic of the day, was inclined to agree. Readers were only interested in “cheap, trashy and senseless stuff,” he complained in 1924, “in bad English and with plenty of pictures.”

  Chicago’s newsmen went to extraordinary lengths to scoop their rivals and score a “beat.” With few of the ethical standards of today’s journalists to rein them in, they thought nothing of breaking the law. Hecht’s job title when he started at the Journal was “picture chaser,” and his sole mission, he recalled, was “to unearth, snatch or wangle” photographs of people who had been murdered, committed suicide, or died in some other newsworthy fashion. He carried a pry bar, a file, and a pair of pliers in his pockets in case he nee
ded to resort to burglary in his quest.

  Legmen—frontline reporters who phoned in their findings to deskbound rewrite men, who then wrote and filed the finished story—impersonated police officers, coroners, gas-main inspectors, and other officials to pry information out of witnesses and gain access to crime scenes. They scooped up the letters and diaries of murder victims in search of anything incriminating or salacious. Police officers were bribed to look the other way or to tip off newsrooms before detectives carted off the goods as evidence. Some reporters—Hecht admitted he was one of them—resorted to making up names and quotes when sources could not be pressured or tricked into divulging information. Sob sisters—female reporters who could commiserate with widows, wronged wives, and spurned mistresses and loosen tongues in the process—were prized in Chicago newsrooms.

  Hecht and a rival newspaperman, Charlie MacArthur, went on to cowrite a play based on their experiences as young reporters. When The Front Page was first staged in 1928, some critics dismissed the central characters—a loathsome band of unscrupulous, cynical, hard-drinking, poker-playing reporters—as too over-the-top to be real. Hecht and MacArthur, however, insisted they had toned down their portrayal of 1920s journalism, Chicago-style, for fear no one would believe the truth.

  Leo, whether he liked it or not, had handed Chicago’s journalists a story worthy of their talents for ferreting out the news.

  FOUR OF THE KORETZ brothers—Emil, Julius, Ferdinand, and Ludwig—showed up at Robert Crowe’s office on the morning of Friday, December 14. The family’s lawyer, Leo Le Bosky, accompanied them, carrying a black briefcase. As detectives looked on, Le Bosky reached into the case and counted out $175,000, stacking the bills on Crowe’s desk.

  Newsmen were ushered in, and the brothers dutifully posed for photographs with Crowe’s assistant Stanley Klarkowski. Emil did the talking, explaining the decision to hand over the money Leo had distributed before absconding, “so that the family would get nothing in excess of what any other creditor might get.” Other relatives and friends who were reimbursed were expected to follow suit, and most did, bringing the amount recovered to more than $300,000. Crowe issued a statement praising Leo’s relatives as “unusually honest.” Chicago’s press dropped its cynicism long enough to give credit where credit was due. The Evening American ran a photo lineup of eleven of Leo’s siblings and in-laws—some gathered, no doubt, by intrepid picture chasers—below the headline KORETZ KIN WHO SCORNED TO TAKE “FAREWELL FORTUNE.”

  Emil had retired early from his property management firm, confident he could live off his Bayano dividends. “I thought I was rich,” he told the reporters. “He took everything I had.”

  “Leo,” he added, “is still our brother.”

  “You are not ‘through with him’—disgusted, angry?” a newsman prodded.

  Tears welled up in Emil’s eyes. “No matter what has happened, and no matter what happens, we shall never forget that he tried to take care of us. … He has always been good to us. I assure you,” he continued, “that none of us—no, not even his own wife—ever suspected his wealth was false.”

  The papers sought out other relatives. Julius’s wife, Blanche, told one newsman that the Koretz brothers would be hard pressed to scrape together enough money to buy a postage stamp. “This—this isn’t our shame,” she said, sobbing as she spoke, “but our sorrow. We trusted Leo, we trusted him implicitly, for one doesn’t—one doesn’t suspect a brother. Every cent his brothers saved is gone with him. We are penniless.” Adolph Koretz, eight years older than Leo and out $6,500, seemed to speak for the entire family when he told a reporter, “I was never so disappointed in my life.”

  The shock and scandal were almost too much for their seventy-six-year-old mother. It was widely reported that Marie was critically ill or near death. The family received another blow within days when a taxicab struck Ludwig as he crossed the street on his way home from a family gathering, no doubt convened to discuss the swindle. He escaped with a banged-up leg and bruises to his face and body.

  Newsmen rehashed every detail of the sumptuous banquet Bayano’s biggest shareholders had thrown in honor of their “Ponzi” at the Drake. “I cannot understand,” Charles Cohn, one of the dinner’s organizers, told the Daily Tribune, “how that man could have sat there and accepted the wholehearted hospitality of his lifelong friends and known all the time, as it would appear, that he was but a sham.” Cohn lost big in the swindle—$55,000, including the $30,000 he handed over to boost his Bayano holdings the day Leo left Chicago. “That,” Cohn said of the last-minute payment, “tells the story. … I had every confidence in the world.”

  Bayano investors were tracked down for comment. “It is amazing how he got by as long as he did,” said a shaken Francis Matthews. “It was his personality, the confidence he inspired, which dispelled suspicion.” Sidney Kahnweiler described Leo as “undoubtedly the cleverest Jeckyll-Hyde character ever uncovered.” Clara Philipsborn suggested he “suffered from a sort of money mania.” Another investor, who had retained Leo to draw up his will, managed to crack a joke despite his losses. “I am having the will changed today,” he told the Evening American, “although I don’t need a will so much anymore.”

  Some found it hard to accept the truth—that the kind, generous man they thought they knew was a liar and a thief. “It is like a nightmare,” said John Irrmann, who had been friends with Leo for more than twenty-five years. “I can’t understand it at all. In fact, I don’t believe it yet.” The president of Emanuel Congregation, Leo’s synagogue, was also mystified. “It seems astounding,” Samuel Weisberg said, “that a man of such charming personality as Leo Koretz should have done the things the newspapers say he did.”

  For a day or so, Harry Rosenhaupt of Spokane—a Washington state senator and Bayano investor and the husband of Mae’s sister Estelle—clung to the possibility that Leo had been the victim of foul play or had succumbed to a mental disorder. “There are so many inexplicable circumstances in this case that I am not certain that I am going to lose any money at all.” Judge Harry Fisher, who confirmed rumors of Leo’s lucrative job offer, was prepared to give the benefit of the doubt. “I am still unable to decide whether the man was crooked or merely misled,” he told the Evening American. Leo had not been to Panama in many years, he pointed out, and perhaps someone had played him as well.

  Reporters surrounded the Evanston mansion, clamoring to interview Mae. A houseful of supportive relatives, friends, and neighbors kept them at bay. Mae sought refuge in a rocking chair in the butler’s pantry. Beyond the kitchen’s swinging door, wives chatted in one of the richly furnished rooms, husbands in another. Every few minutes, the phone in the kitchen rang.

  “Everything is fine, just fine,” Mae assured one caller who offered support, her voice breaking.

  Nothing was fine. Her photo was in all the papers. The Evening American got its hands on a studio portrait—Mae, elegantly gowned, hair pulled back, a Mona Lisa smile on her lips—and ran it on the front page, under the headline WIFE SUFFERS, TOO. Other papers got plenty of mileage out of an old photo of her, beaming proudly as she clutched her children, taken when Mari, now ten, was a baby. LEFT DESTITUTE BY KORETZ was the Herald and Examiner’s caption.

  The children were suffering, too. Mentor would have to quit school to find a job. Mari, too young to be told the truth, was upset that her father had not written to her. Someone offered to take the child to a vaudeville show, to get her out of the house, but one of the performers cracked a joke about Leo.

  “Why,” Mari asked, “are they talking about my daddy?”

  Mae suffered a nervous breakdown, and there was a day when she was not up to seeing anyone, not even members of her family. A doctor was summoned to 2715 Sheridan Road. “She is a very sick woman,” he told a reporter as he left, “but she is making a splendid battle.”

  When the fraud was exposed, Ben Hecht was publishing his own paper, the Chicago Literary Times, and he weighed in with a grandly titled pie
ce, “An Investigation into the Inner Psychological Life of Leo Koretz, Swindler.” Hecht considered Leo the “greatest rogue of modern times” and argued that, on some level, he had longed to be found out for all those years so that his victims and everyone else would appreciate his genius. An explanation for Leo’s insatiable need for money, though, remained elusive. What had compelled him to steal from his family and friends, and even from his own mother? The Evening Post thought one possible explanation could be ruled out. “There was no other woman in his life, it is believed, nor was there any of the other reasons that ordinarily impel men to take money by hook or crook.”

  The Evening Post was about to discover that, like everyone else, it had misjudged Leo Koretz.

  16

  THE DOUBLE LIFE

  ON THE OTHER side of town, south of the Loop, the staff and tenants of the Shirley Apartments on Drexel Boulevard were surprised to see the face of a man they knew well on the front pages. Funny thing was, the captions all said he was a missing lawyer who had bilked his friends in a massive con game.

  “Koretz? Where do they get that name?” Charles Davidson, the janitor at the four-story apartment complex, wondered when he saw the photos. “Why, that’s Al Bronson.”

  The Shirley’s maid thought the same thing when she saw the photos. So did the woman who operated the switchboard. Someone tipped off the authorities, and Davidson was brought to the state’s attorney’s office in the middle of the night for questioning. Did he really know the man in the photos?