by Dean Jobb
The 19,000-ton Caronia could carry more than fifteen hundred and offered a dance hall, a gymnasium, and a plant-filled conservatory as diversions. With no way to escape, Leo was allowed to roam the vessel and took his meals in the dining room. It was a rough, thirty-four-hour voyage; the Caronia pitched and rolled in heavy seas whipped up by a blizzard that paralyzed New England that weekend. He found the trip more enjoyable than Sbarbaro, Marshall, and Scriven, all of whom were seasick.
The liner docked at the Cunard piers on the Hudson River, opposite West Fourteenth Street, late on a clear and chilly Sunday morning. The train to Chicago did not leave Pennsylvania Station until 2:55. Leo, it was said, suggested lunch at the Commodore, next door to Grand Central Terminal. It was not clear whether he knew the ritzy hotel from his days of masquerading as Lou Keyte—it was a short walk from his old East Forty-Eighth Street apartment—or as the millionaire promoter of oil stocks. The maître d’ recognized him and ushered the group to Leo’s favorite table by a window. Leo ordered sirloin steak smothered in hearts of guinea hens and, when not eating, puffed on cigars. All Scriven remembered of the meal was how fastidious Leo was, wiping each piece of cutlery with his napkin before he used it.
A crowd gathered outside the hotel entrance as word spread about the identity of the man enjoying steak and cigars. Leo was hustled through the kitchen and out a back door. At the station the group posed for photographers before boarding the Broadway Limited for the overnight ride to Chicago. Leo stood glumly, the brim of a cap almost covering his eyes.
Ducking inside a Pullman sleeper car, Leo settled into the comfort of a private compartment with its own drawing room and individual sleeping berths. He spent much of the trip gazing out the window as snow-covered towns and farmers’ fields whizzed past. He played solitaire. He smoked cigars.
He had taken a liking to Scriven and began introducing him as “my guardian angel.” At some point on the journey, he confided to the sheriff’s deputy why he had lived such a fast-paced lifestyle in Nova Scotia. “Every fugitive from justice lives in dread of the arm of the law,” he explained, “and they have to keep their minds occupied or they would go crazy. Some lead the gay life, others take to drink. I preferred the gay life.”
Reporters along for the final leg of the journey were desperate to get Leo to speak with such headline-worthy candor. Only Harry Reutlinger of the Evening American managed to get him to open up. Described as an “ingratiating chap,” Reutlinger had convinced Oscar Felsch, one of the Chicago White Sox players paid to throw the 1919 World Series, to tell his story to the American. He tried to work his magic on the architect of Chicago’s latest scandal.
“I knew you before,” Leo said when Reutlinger approached, “but I can’t think where we met.” He probably remembered the World Series scandal scoop.
“Probably tried to sell me some stock,” the reporter wisecracked.
“Nope, guess not,” he replied, as playfully as the Leo of old, “for had I tried I would have succeeded.” But he looked tired and nervous. Reutlinger asked about his health. Leo would only say that his condition was “very grave” and getting worse. Diabetes, Reutlinger predicted when his story appeared, “may cheat the state courts.” If he was convicted and sent to prison, “he will never come out alive.”
They played cards. Leo lost. “Can’t even have any luck in cards,” he said. He went back to smoking and contemplating the scenery. The combative Leo of the past few days, the man in the Halifax County Jail who denied swindling anyone, was gone.
They were somewhere in Indiana when he turned to Reutlinger. “I’m going back to Chicago,” he said at last, “and try and rectify matters.”
State’s Attorney Robert Crowe and his prosecutors pose with Leo. Behind them are John Sbarbaro, left, and William McSwiggin, second from right, who had raced to Halifax to oversee Leo’s arrest.
30
THE CONFESSION
“SAY,” ASKED THE slim woman wrapped in fur, tapping a policeman on the arm, “who’s coming in?”
“Oh, a hypnotist, lady,” was the straight-faced reply. “He used to make people think they got what they didn’t.”
“You’re kidding me. Honest, who’s coming in?”
“Why, lady, he’s a kind of banker. People gave him lots of money.”
As many as two thousand people jammed the platform of Union Station for a glimpse of the banker-hypnotist, “the money magician,” as one paper put it, “who made millions disappear.” Not even a blast of winter weather over the weekend could keep them away. It was the kind of welcome “usually accorded a President or foreign potentate,” the Evening Post noted, “so dense was the crowd of curiosity seekers in all ranks of life.”
The focus of all the attention, clad in a suit the unseasonable color of summer grass, arrived at half past ten. Leo had been awake since seven and looked tired, even though he had slept well. He pocketed his last box of cigars.
He emerged from the Pullman and hesitated for a moment, taken aback at the size of the crowd. His face broke into a crooked smile. He looked “half-bitter, half-glad, half-amused,” in the opinion of a reporter who was better at description than math, “and wholly cynical.” He walked head-down and with a slight limp, his shoulders stooped beneath his brown overcoat, his cap again pulled down almost over his eyes. An explosion of flashbulbs confirmed the magician’s arrival.
“There he is,” someone cried.
“He got away with $7,000,000,” another voice confirmed.
Twenty policemen in blue uniforms and a squad of detectives elbowed their way into the crowd, some threatening to use their clubs as they struggled to clear a path. Reporters followed, shouting questions no one answered. A line of cars was waiting at the Canal Street entrance to ferry Leo and his entourage to the state’s attorney’s office.
WHEN THEY WERE FIRST introduced, both were fresh out of law school and trying to make their mark. Two decades later, they were meeting again as accused and prosecutor. They greeted each other by their first names, as if they had never lost touch. Leo called the state’s attorney Bob.
A reporter asked Crowe about their shared past. “Didn’t buy any Bayano stock, did you?”
“No, I didn’t. But I didn’t know about it,” he joked, “or I might have.”
It was about noon when Leo arrived at Crowe’s offices in the Criminal Court Building on West Hubbard Street, an imposing, Romanesque-style tower just north of the Loop where Cook County had been dispensing justice since the 1890s. The Leopold and Loeb trial had played out within its white granite walls; Ben Hecht and Charlie MacArthur used its fourth-floor press room as the setting for the antics portrayed in their play The Front Page.
A platoon of reporters and photographers had trailed Leo across town and was waiting in an outer office. They were ushered in and given ten minutes to snap photographs and ask questions. Leo shook hands with the reporters he recognized and posed for photos without complaint. His face would be plastered over the next edition of every Chicago paper. Crowe posed with him as well, to make sure everyone knew it was the state’s attorney, not the feds, who was determined to put America’s most notorious swindler behind bars.
When the photographers were done, Leo stood to one side of the office. He did not look the part of a man ready to put up a fight in court. His green suit was baggy and wrinkled. A grease stain was visible on the front of his jacket, and a soiled handkerchief drooped from the breast pocket. His blue polka-dot bow tie was askew; his thinning hair needed to be reunited with a comb. A man known for flaunting expensive rings and cuff links was down to his last piece of jewelry, a gold wristwatch.
He twirled his eyeglasses on the forefinger of his right hand as he was machine-gunned with questions.
“How did you keep out of the clutches of the law?”
“What are your plans for defense?”
Leo ignored some questions and deflected others.
“Have you noticed any of your investors in the crowds here?” No
ne appeared to have shown up at Union Station to witness his return.
He smiled. The question broke the ice. “You are kind to me and them to refer to them as investors.”
“Well, is there anything you do want to talk about?” one of the reporters asked.
He produced a cigarette and asked for a light. “Oh, I might say that matches are rather expensive in Halifax,” he said, as playful for a moment as he had been when he joked about having no Bayanoes. “Two boxes for 5 cents.”
The newsmen were banished to the outer office, and Crowe, Sbarbaro, and Marshall began questioning Leo. Half an hour later, Crowe asked Leo’s lawyer, Connolly, to join them. Midway through the afternoon, a stenographer was summoned.
Crowe emerged with an update. “Koretz,” he announced, “is talking freely.” There would be no courtroom battle, no defense claim that Leo was the hapless victim of greedy investors who had forced him to take their money. The creator of the Bayano Syndicate was dictating his confession.
Deadlines loomed for the evening editions. Crowe ducked out now and then with the highlights, to ensure his name was attached to the revelations when they appeared in print. Leo admitted he had netted at least $2 million over the course of almost two decades. He was fuzzy on the details but acknowledged he had used money from new investors to pay dividends to those who already held shares.
“The losses had become so heavy that I saw there wasn’t a chance for me ever to get straight again,” he told Crowe.
Now, with no way out, he mustered the courage he had lacked a year earlier, when he fled. “I have done wrong. I want to be punished. I am going to plead guilty and take my punishment.” He said he wanted to set an example for Mentor. “I want my son … to know, absolutely, that wrongdoing is wrong; that it means punishment as well as unhappiness. By pleading guilty and going to the penitentiary, I hope to be able to teach my son, beyond a doubt, that he must never do wrong.”
Adolph and Emil Koretz had warmed a waiting-room bench for much of the afternoon, hoping for a chance to see their brother. Crowe allowed them in. They shook hands with Leo and huddled in a corner, speaking in whispers.
“Forget that I have ever lived,” Leo said. “The crime is mine and I will not share my penalty with you. I don’t want to see you; I don’t want to see anybody.”
He asked about his mother, how she was taking the news. Not well, he learned. She had been told of his capture and was confined to bed, refusing to eat or speak. He asked them to relay a message: The only women who had lived with him at Pinehurst, he lied, were the housekeeper and servants. Tell her, he pleaded, that his friendships with women during his sojourn in Nova Scotia “were only platonic.”
Crowe held a final press briefing. While Leo insisted he had handed over every cent that was left, Crowe was not so sure. “I believe he is holding something back. He spent a lot of money in recent years, but he had an enormous amount.”
A reporter wondered what had most surprised the state’s attorney as he listened to the confession. It was the fact “that people seemed to throw their money at him,” he replied. “Koretz is not what one might call a brilliant man. … He is not fascinating or particularly impressive. But people threw their money at him! That’s what astounds me.”
MAE DROPPED OUT OF sight, leaving her Winnetka home early on the day of Leo’s return to avoid the press. After everything he had done, after all the women he had chased and charmed, should she swallow her pride? Should she go to him? “She is pathetically eager for news of her husband,” admitted a relative. “But she does not know what to do, whether she should seek to see him or not.”
She would have to make the first move. “I’ve hurt her enough,” Leo said when asked if he hoped to see her again. “No matter how much I want to see her, I will not ask her to come to me. She knows where I am.”
“I don’t think I’ve got the right to inquire about her,” he added, “or the children.”
Leola Allard, a Herald and Examiner reporter, turned up at Mentor’s hospital room, where he was still recovering from hernia surgery. He was sitting in a rocking chair and smoking a cigarette.
“Your father says he is very sorry he has hurt your mother so much,” Allard told him. Leo hoped his guilty plea would teach his son a lesson. Mentor did not seem to care what his father thought.
“Is that so? Well, I don’t think mother will be interested,” he replied. “She wants to be let alone.”
LEO SPENT HIS FIRST night back in Chicago in a room at Briggs House, a Loop hotel rebuilt after the Great Fire. Three detectives stood guard. The hotel doctor was called in to lance a painful boil on his leg, an ailment that commonly plagued diabetics. Leo, the doctor noticed, did not wince as the needle was inserted; perhaps he was too worn out to feel the pain.
The next afternoon, the second of December, he was escorted back to the Criminal Court Building to testify before Harry Parkin, the referee overseeing Leo’s bankrupt estate. Lawyers for Chicago Title and Trust wanted to question him under oath as they pursued the money trail. The figures were not adding up: Leo claimed to have collected some $2 million from investors, but an audit showed he had taken in that much—$2,164,975.73, to be exact—selling Bayano stock and rice farm mortgages from the first day of January 1922 until he fled to New York. Over that period he had paid out a little more than $233,000 in dividends, leaving more than $1.9 million in his pockets. And that was for just shy of two years. He had been up to his neck in some form of swindle or fraud for close to two decades. Where was the rest of his loot?
The lawyers for Chicago Title and Trust, Maurice Berkson and Joseph Fleming, were convinced more money, perhaps another $500,000, was stashed somewhere. Crowe agreed to make Leo available for questioning, even though it was hard to argue with the Evening Post’s contention that it was “probably constitutionally impossible for the gentleman to tell the truth.” There was one condition: he would have to stay on the state’s attorney’s turf, and in his custody, in case federal agents were tempted to scoop him up on the mail-fraud charges.
Harry Parkin set up temporary shop in the grand jury room of the Criminal Court Building. The Daily Tribune sent one of its best reporters, Genevieve Forbes Herrick, to cover the closing acts of the Bayano saga. Herrick’s tenacity and flair for description had earned her plum assignments such as this. She had once posed as an Irish immigrant and crossed the Atlantic in steerage to expose the mistreatment of newcomers at Ellis Island. And not only had she covered the blockbuster Leopold and Loeb trial, but she had altered the timing of its outcome: she had convinced the judge to delay his ruling on whether to impose the death sentence so that it would not interfere with her wedding to her colleague John Herrick.
The hearing, Herrick informed Tribune readers, ranked as “one of the strangest bankruptcy proceedings ever held.” For the rest of the afternoon and much of the evening, Leo sat in the witness box and explained how he had teased millions of dollars from the pocketbooks of hundreds of people—his extended family, his closest friends, and some of Chicago’s leading businessmen and professionals. He spoke almost in a monotone as he described the inner workings of the great Bayano swindle. Herrick began to think she was back in the classroom. “He might have been a wise old professor of economics, explaining a short cut to a difficult problem,” she later wrote, only this professor was describing “how he paid dividends with capital and made capital of dividends.” It was like the introductory lecture of a course in Swindling 101.
After making a career out of lying, Leo discovered, the truth came easily. The Arkansas rice farms had started out as legitimate investments, he said, then ballooned into a labyrinth of worthless paper. “The majority of the mortgages did not exist.” Bayano, he admitted, was a sham from the start. “There never was any such syndicate. There never was any land as I described. There is no Panama Trust company.”
“Was there any oil on your property?” Joseph Fleming asked.
No, he said.
He was asked
to describe his operations in detail.
“How far back do you want me to go?”
“About nineteen or twenty years,” said Crowe, who was monitoring the proceedings and knew, after having heard Leo’s confession the evening before, how the story began.
He talked about how, as a newly married and struggling lawyer, he had sold fake mortgages. The fraud snowballed as he stole more money to cover his earlier crimes. The Arkansas farmland followed the same pattern.
He told how David Nieto had swindled him and inspired him to create his Bayano masterpiece. He told how people had clamored to invest as word spread of his lucrative timber holdings in Panama. Then, he said, his mouth twisting into a wry smile, “I mentioned to a friend that oil had been discovered on the land. Yes, the news spread rapidly. They began to besiege me with money for certificates.”
There were bursts of laughter as he described how easy it had been to dupe his victims. He began to tell of a prominent Chicago businessman who had hounded him for stock, then stopped. “I won’t give you his name, or any name if you are going to use them,” he said. Leo did not mind taking people’s money, it seemed, but drew the line at holding them up to ridicule.
Fleming asked him to continue, saying, “Well, we’re only interested in the assets.”
It was the businessman, outraged to discover that Leo had sold more shares to his partner than to him, who had demanded more.
“And that is not an isolated case, is it?” asked Joseph Connolly, Leo’s lawyer, to underscore how much money poured in without solicitation.
“That is certainly not an isolated case.”
At times, Leo struggled to remember the details. Did he start out claiming to own one million acres in Panama, or five million? He could not recall the year he met Nieto, or when he first journeyed to Panama. He was not even sure how old he was. “Forty-five or 46,” he said. “I think I am 45.” He had turned forty-five the previous summer, when he was still Lou Keyte, master of Pinehurst Lodge.
