Empire of Deception

by Dean Jobb

  Leo had no idea how many bogus mortgages he had sold or how much investors had sunk into the imaginary timber and oil of distant Bayano. He had destroyed most of his records, including the book with the black cover that he had used to keep track of money coming in and dividends paid out. He reminded his listeners that he had tried to dissuade many people from investing, as if this somehow lessened the magnitude of his crimes. In fact, negative salesmanship had been one of his most effective marketing tools.

  He was asked why he had sent Henry Klein and his companions to Panama, when he knew they would find nothing.

  “I was disgusted at myself and disgusted at the people who had wealth and demanded something for nothing,” he replied. “And I was indifferent as to how the matter ended.”

  Then Leo paused for a moment, long enough for a smile to form on his lips and a puzzled look to take over his face.

  “It is rather hard for me to explain just how I began to believe in the thing myself,” he said, blinking as he stared into space, “but I did.” He had spun so many lies about Bayano riches to so many people for so many years that it had all begun to seem real.

  Not a single investor was in the room to hear this remarkable admission—or to challenge his claim that he was mostly guilty of being too accommodating to greedy people who demanded “something for nothing.”

  Maurice Berkson took over the questioning and zeroed in on Leo’s lack of remorse for his victims. Not all Bayano investors were wealthy, Berkson pointed out. Had he forgotten the widow and the clergyman, people of modest means, who had suffered heavy losses?

  “No, I haven’t forgotten them,” replied Leo, who seemed to have expected the question. “But they were two of the most insistent persons who besieged me with requests for stock. They wouldn’t let me alone.”

  He was asked about the tens of thousands of dollars he had distributed to his family and in-laws before skipping town. It was money his relatives had invested, he insisted, and each of them had received less than they had paid in. “On this point,” Herrick noted, “he is making a desperate fight.” The man notorious for swindling his own family was doing everything he could to relieve them of the taint of receiving stolen money. There was another reason for the payments: he had hoped members of his family would use some of the money to help Mae and the children. The expensive jewelry he had collected had been another attempt to leave her something to live on.

  “I didn’t dare leave my wife any money because I know her principles and I am positive”—he stressed these words, for emphasis—“that she would not accept a penny of that kind of money. But I knew if the family were well provided for, they would take care of her.”

  Where, he was asked, was the rest of the money?

  There was nothing left and nothing hidden, he swore, not in Canada or the United States or anywhere else. Leo was adamant: he had accounted for every cent he had obtained by theft, fraud, or swindle. The rest of the money had been spent to support his extravagant lifestyle or returned as dividends. If the lawyers for Chicago Title and Trust were right, if there had to be more money stashed somewhere, he was not about to let them in on the secret.

  The hearing dragged on into the evening. Leo became so drowsy he could barely keep his eyes open. In the glare of the room’s harsh electric lights, he looked worn out and near collapse. Parkin finally called an adjournment, ending the ordeal. Leo was slated to appear the next afternoon before Jacob Hopkins, the chief justice of the superior court’s criminal division, to follow through on his pledge to plead guilty.

  “I am indifferent to what may happen now,” Leo muttered, to no one in particular, before he was taken back to the hotel for the night.

  31

  THE RECKONING

  “LEO KORETZ, IN an indictment returned by the grand jury of November, 1923, you are charged with the crime of larceny as bailee,” the court clerk announced, reciting a much-practiced script. “How do you plead—guilty or not guilty?”

  Leo stood directly in front of the judge’s bench, in the midst of a crush of lawyers, licking his lips nervously. The wrinkled green suit he had been wearing for three days looked as worn and tired as he did, his bow tie was still askew, and his complexion was as white as chalk. Robert Crowe—chin thrust out, face expressionless—was stationed close enough to ensure he would be in photographs recording this moment.

  “Guilty,” Leo replied. His voice was surprisingly strong and clear, almost a bark. It was ten minutes past two on Wednesday, December 3.

  The sixth-floor courtroom of the Criminal Court Building could accommodate three hundred, and a crowd “reminiscent of the Loeb-Leopold affair,” which it had hosted that summer, was on hand. Photographers’ flashbulbs generated so much smoke that some of the windows had to be opened to clear the air. The judge had ordered bailiffs to close the courtroom so that Leo could be brought in. Henry Klein made it inside, along with Stella Gumbiner. Somewhere in the sea of faces were Adolph and Emil Koretz and their sister Louise.

  In all, Leo pleaded guilty to charges of larceny, larceny as bailee (theft of property held for safekeeping), and operating a confidence game that related to four of his victims—Gumbiner, Samuel Richman, Francis Matthews, and Percy Simon. Chief Justice Hopkins adjourned the sentencing until the following day. Leo would spend the night next door in the Cook County Jail.

  Leo and Crowe stand before the judge’s bench in Chief Justice Jacob Hopkins’s courtroom. Leo pleaded guilty on December 3, 1924, to charges of theft and operating a confidence game.

  As Gumbiner left the courtroom, she paused and patted him on the arm. “It’s all right, Leo,” she whispered, “everything’s all right. Let’s forget it.”

  He was taken to Crowe’s office for more questioning and a brief visit with his siblings. It was the first time he had seen Louise since his return, and she greeted him with a kiss, tears streaming down her cheeks. As they left, Adolph stopped to make a statement to the press. “Just say for us that we think as much of our brother as we ever did,” he said. “We are going to stick by him. It is the only thing to do. Of course it is all a great tragedy.”

  LEO AWOKE IN CELL 13 to a hearty breakfast of ham and eggs with toast, cupcakes, and coffee. His family had it sent in from a nearby restaurant that catered to higher-class prisoners, and the owner, Joe Stein, tossed in a carton of cigarettes and a couple of fifteen-cent cigars. At noon, he was taken under guard to Stein’s to have lunch with Ferdinand, Emil, Ludwig, and Adolph. One paper described it as “a veritable family farewell banquet.”

  He was back in Hopkins’s courtroom at two o’clock and looked ill at ease as he repeatedly cleaned his glasses with a handkerchief. The weather outside was cold and drizzly, extending a rude welcome to Calvin Coolidge on his first visit to the city as president. Coolidge had just delivered a luncheon speech to business leaders at the Drake, which had been “transformed into a temporary White House for the day.” Had Leo found a legitimate outlet for his talents as a salesman, he might have been among those in the audience.

  The hearing opened with a surprise motion: Leo was allowed to withdraw his plea of guilty to the charges involving Stella Gumbiner. A flaw had been found in the wording of the allegations, Crowe explained. The indictment was stayed, but the state reserved the right to refile the allegations. Matthews, Richman, and Simon were called to testify.

  “Koretz urged me to invest in his oil lands,” Richman said, proving that Leo had persuaded at least one of his victims to buy shares. Matthews said Leo had told him in 1921 that oil had been discovered on his Bayano holdings. He had held off buying shares until shortly before the crash.

  “Do you realize now that his enterprises were pure out and out swindles?” asked George Gorman, Crowe’s chief assistant.

  “I do.”

  Joseph Connolly established that some investors had recouped money as dividends and stood to reclaim more through the bankruptcy proceedings. After the confession was read into the record, the state rested its case.r />
  The defense called two doctors to confirm Leo’s poor health. Dr. Leland Light had attended to Leo at Briggs House and declared him “a very, very sick man.” His pulse rate was high and he was running a fever. “He has a severe case of diabetes. Unless his condition improves he will die soon.”

  Milton Mandel testified that he had begun treating Leo for diabetes in 1919.

  “Do you think a prison term would shorten his life?” Connolly asked.

  “That is hard to answer. … It might if he were given hard manual labor.”

  Gorman saw an opening.

  “If this man had done a little light labor instead of swindling all these people, his health would be in better condition.” It was as much a comment as a question.

  “Emphatically, yes,” Mandel agreed.

  Hopkins looked down from the bench, his face stern and his double chin spilling over his collar. Confronted with the pale, weary figure before him and the medical evidence confirming the seriousness of his illness, Hopkins opted for mercy. The minimum sentence on each of the three counts was one to ten years in prison. If Hopkins ordered the sentences to run consecutively, Leo faced a term of from three to thirty years. In this case, he said, “the ends of justice will be met” if the sentences were served concurrently, telescoping them into a single term of one to ten years.

  “This defendant freely admits his guilt,” he said, “and in view of his poor health I believe the minimum sentence is proper.” Leo would be eligible to apply for parole after serving a mere eleven months. At worst, if every application for early release was turned down, he would be out in a little more than six years.

  Reporters studied his face to gauge his reaction. He heaved a sigh, and a smile slowly took shape on his lips. It was not clear whether he was pleased or simply resigned to his fate.

  “That means death,” he said. “I’ll never come out alive.”

  THE PRESS WAS OUTRAGED at the sentence. “Koretz, who has never shown even the faintest glimmer of sympathy for relatives and friends who were his victims,” the Herald and Examiner complained, “found sympathy in the most unexpected place of all—the courtroom.” One of the paper’s readers was upset enough to fire off a letter to the editor. “Steal two million dollars, more or less, and get wide world publicity and a year punishment,” Joseph Delehanty wrote. “But if you steal a dollar or less to save yourself or someone else from starvation you get ten to twenty years—that’s what you call law!”

  The Daily Tribune held its tongue but republished—and appeared to endorse—a scathing editorial from a paper in Wisconsin that condemned the sentence as a “farce” and a miscarriage of justice. “We frequently hear it said that the courts are for the rich, and when we see a criminal like Leo Koretz, one of the most notorious swindlers of our time, get off with the lightest punishment possible, we are forced to admit that there are some grounds for the statement that courts show favors,” complained the editor of the Sheboygan Press-Telegram. Leopold and Loeb had callously murdered a child and escaped the death penalty, “and now a brazen faced swindler, who cleaned up millions through fraud, gains sympathy at the hands of the court.” In Nova Scotia, where the case remained big news, one editor found it hard to believe that Leo could be back on the street in less than a year. “The criminal of today, particularly in Uncle Sam’s country, if he has money or influence behind him, fares not so badly.”

  Crowe was determined that Leo would serve the full six years and two months. The state’s attorney had stood before the public as the man who would bring Leo to justice, and it now appeared as if the Bayano wizard had managed to swindle the entire Chicago justice system. Crowe’s office dispatched a letter to the state board responsible for pardons and parole, asking it to reject any application for early release. The judge, who was taking the brunt of the criticism, sent a letter of his own. “I have shown the defendant every consideration he is humanely entitled to,” wrote Hopkins. “He should be required to serve the maximum penalty and I sincerely trust he will be required to do so.”

  Leo might have had another ticket to freedom. As the judge and state’s attorney were drafting their letters, the Evening Post was reporting that some of his victims might petition the governor to grant a pardon. “All these investors were his friends and still are,” one of them, a man identified only as Lou, told the paper. Crowe had watched too many crooks go free to ignore such talk. He knew better than anyone that the doors to the state’s prisons were revolving ones. The governor, Lennington Small, was making a mockery of justice in Illinois by pardoning or commuting the sentences of hundreds of prisoners. There were allegations that influence and money could buy pardons, and convicts were being put back on the streets without warning or official explanation. Many had been sent there by Crowe, and for all he knew, the governor could be one of the Bayano investors who had swallowed their losses in silence.

  But the state’s attorney had an ace to play. There had been no flaw in the indictment withdrawn just before Hopkins imposed the minimum sentence. Crowe had held it back on purpose, in case Leo or those still loyal to their onetime benefactor applied for and won a pardon or early release. The charges of swindling Stella Gumbiner could be reinstated until the last month of 1927, to put him on trial—and back in prison.

  PAVEMENT SLICK WITH DRIZZLE glistened beneath bug-eyed headlights as the car carrying Leo, his guards, and his lawyer, Joseph Connolly, made the forty-mile journey from downtown Chicago to Joliet. Leo stared out the window, the tip of a cigar glowing beneath the brim of his newsboy’s cap, his bow tie stuck at two o’clock. The cars that followed carried the reporters who would document the last moments before he was locked away inside the Illinois state prison.

  They were almost there when he began to speak. “This seems to be my last chance to get a word before the public,” Leo said. He had a statement to make, and he wanted his companions to pass it along to the reporters once he was behind bars.

  “If I get out alive I will devote the rest of my days to restore the money of those who lost,” he said. “I’m going to start making a clean living the first day I’m out and make thorough restitution.”

  The walls and watchtowers of the prison emerged from the fog, a nightmarish mass of sand-yellow limestone. The car jerked to a stop in front of the main administration building, a castle keep of a structure with pencil-thin turrets pointing into the black sky. It was a quarter past nine.

  “Well,” he said to the man seated next to him, “this is the end of the rainbow—it’s up to me to pay for chasing it now.”

  Leo and his guards got out and headed to the iron-plated main door.

  “So long, Leo,” someone, Connolly perhaps, called from inside the car. “You’ll be out in eleven months, unless you get foolish and try to jump the prison wall.”

  The thought made Leo laugh.

  “Stranger things than that have happened,” he replied.

  32

  THE FINAL SWINDLE

  “BARS, GUARDS, SOBER faces, hard labor, coarse food, no pleasure, no liberty, few comforts.”

  This was the Daily Tribune’s grim description of life in Joliet in 1924. The prison had been built before the Civil War, in an era when penitentiaries were designed to punish, not to reform. “The cells are small and dark,” the newspaper noted, “relics of the old prison days.” Two men shared a space four and a half feet wide, eight feet deep, and seven feet high, sleeping on iron bunks bolted to the wall, one above the other. Eleven hundred men convicted of the most serious crimes on the books—murderers, armed robbers, rapists, burglars, and gangsters, along with the occasional con man—were paying their debt to society within Joliet’s fortress walls.

  Leo’s rumpled green suit was finally retired from service, and he was issued a prison uniform: a coat and a pair of baggy trousers made of dark blue denim, with a matching cap; wool shirt and socks; flannel underwear; a pair of heavy, blunt-toed shoes. The days of tailored suits and silk pajamas—let alone fur-trimmed ones—wer
e over. He was taken to the prison barbershop and emerged with his head shaved. He was fingerprinted, mug shots were taken, and his measurements and educational and work history were recorded. Leopold Koretz was now convict no. 9463.

  Leo had asked to be punished, and the State of Illinois was pleased to oblige. There were no toilets in the cells; he relieved himself in a bucket and dumped the contents at a trough in the prison yard each morning before breakfast. The cell blocks reeked of urine and excrement. He took a three-minute shower once a week, and the lights were turned out every night at nine o’clock. Every man was counting the days until he was sent to a new prison, Stateville, just opened nearby, where each cell had a toilet, hot and cold running water, a radiator, and a window that allowed sunlight to flood in. Inmates were being transferred at a rate of about a hundred a month, but it could be a year or more before Leo, the thrill killers Leopold and Loeb—who were serving their life sentences in Joliet—and other wealthy or famous prisoners enjoyed such comforts. They would be among the last to be moved, to ensure the staff was not accused of favoritism.

  The prison doctor, W. R. Fletcher, examined no. 9463 on his second full day in Joliet. The register of prisoners, the only surviving record of his medical condition upon arrival, listed his heart and lungs as being in good shape. “He is very ill from diabetes,” Fletcher announced to the press, “but he is not more so than other men who are performing regular duties.” His poor health earned him two concessions: he was given a cell to himself and one of the cushiest jobs in the prison. Richard Loeb was in the furniture factory, assembling chairs; Nathan Leopold was spending his days winding rattan to make lamps and rockers. But such entry-level tasks were considered too strenuous for Leo, who was handed a stick with a nail protruding from one end and sent into the prison yard. He would spend his days collecting litter—fitting punishment for a man who had spent much of his life creating worthless scraps of paper.