Leo Koretz: Prince of Fraud
Prince of Fraud: The Incredible True Story of Leo Koretz, Master of the Ponzi Scheme, and the Great Chicago Oil Swindle
Leo Koretz (Chicago History Museum photo)
HE RAN ONE OF THE LONGEST, most elaborate and most successful swindles in history. For almost twenty years a charming, smooth-talking Chicago lawyer enticed hundreds of people to invest as much as $30 million (upwards of $400 million today), most of it in phantom timberland and oil wells in Panama. His Bayano River Syndicate, he claimed, controlled millions of acres near the Canal Zone, including oilfields that produced a torrent of crude and earned investors an astounding sixty percent return. John D. Rockefeller’s Standard Oil conglomerate, he assured his grateful investors, was desperate to buy into the Bayano windfall.
His name? Leo Koretz, the Bernie Madoff of the 1920s, a con man extraordinaire posing as a financial genius. The New York Times considered him “the most resourceful confidence man in the United States.” The Chicago Daily Tribune agreed, describing him as “the most boldfaced swindler” of his time. And to Pulitzer Prize-winning author W.A. Swanberg, one of the few writers to chronicle his exploits, Koretz was “the swindler of the century,” winning his victims’ trust through “a personal magnetism that was well-nigh hypnotic.” And when his scheme collapsed in 1923, under the weight of his own dazzling success in reeling in the suckers, he almost made a clean getaway to a life of luxury in Nova Scotia, on Canada’s east coast.
Bayano River Syndicate stock certificate
His method was simple: Promise high returns and, when the money rolls in, use some to pay fat dividends to keep the stockholders happy while skimming off the rest. He robbed Peter to pay Paul, creating a giant pyramid that could only be sustained with a fresh supply of investors’ dollars. It’s the template for the scam Madoff used to rake in billions of dollars, a financial sleight of hand known as a Ponzi scheme. Charles Ponzi, a contemporary of Koretz, used it in 1920 to fleece unsuspecting immigrants, promising huge profits from the resale of postal-reply coupons.
If not for the fact Ponzi’s short-lived fraud was exposed first, the financial press and Wall Street regulators might be warning today’s investors to beware of Koretz schemes. Koretz mastered the investment scam long before Ponzi stole a dime and it took his imagination, bravado, and charm to keep it running for almost two decades. He whipped his investors into a frenzy. People camped out on his doorstep and begged him to take their money. Koretz was so slick and so convincing, nothing could shake their faith in the man they hailed as “The New Rockefeller,” not even the exposure of Ponzi’s fraud in the midst of his own. Investors simply gave Koretz a new nickname: “Our Ponzi.”
Pinehurst Lodge near Caledonia, Nova Scotia, Koretz's Canadian hideaway
His house of cards came crashing down in December 1923, when a group of eager investors boarded a steamer and headed to Panama to tour their lucrative holdings. Koretz saw them off, then scraped together as much cash as he could. By the time the investors discovered the truth – their bonanza was a swath of worthless jungle and swamp – Koretz had abandoned his wife and children and disappeared.
After laying low for a few months in New York City, he made his way east to Nova Scotia. He grew a beard to mask his identity, adopted the alias Lou Keyte, and posed as a retired financier-turned-literary critic. He became a regular at hotels and dance halls in the provincial capital, Halifax, and joined the exclusive Royal Nova Scotia Yacht Squadron. He converted a secluded hunting lodge on the province’s South Shore into a posh estate and soon attracted a new circle of friends, including the young women whose company he preferred. He bragged that bestselling author Zane Grey, who headed north to fish for tuna off Nova Scotia during the summer of 1924, would be among his many guests.
Meanwhile, back in Chicago, police and federal agents mounted a worldwide search for the missing swindler. After almost a year of chasing anonymous tips and false leads, it began to look as if Leo Koretz, master of the Ponzi scheme, might be a master escape artist as well.
Prince of Fraud: The Incredible True Story of Leo Koretz, Master of the Ponzi Scheme, and the Great Chicago Oil Swindle is the first book to chronicle the exploits of one of the slickest con men in history. It captures the intrigue and drama of Koretz’s stranger-than-fiction story while recreating an era when it seemed as if everyone was entitled to easy riches. The dot-com bubble, the stock market meltdown of 2008 and the Eurozone crisis are reminders those heady times were not so different from our own. The book establishes Leo Koretz, not Charles Ponzi, as the first to master the pay-dividends-from-capital investment scam. It dissects how con men and stock swindles operate. And it brings to life a time and place when anything – even vast oilfields in faraway Panama – seemed possible.
Inside Detective magazine from 1938, with cover story on "lover boy" Leo Koretz
The incredible-but-true saga of Leo Koretz and his spectacular oil swindle exposes the pitfalls, then and now, of too much trust, too much greed and too little common sense.
Read the announcements in the Canadian book trade magazine Quill & Quire and the “Bits & Bytes” section of BooksBeat, published by the American Society of Authors and Writers.
Algonquin Books is publishing Yoko Ono’s Acorn this fall and its stable of bestsellers includes Sara Gruen’s Water for Elephants. To learn more, check out Algonquin’s website and the feature articles “The Little Publishing Company that Could” and “A Small Press with a Big Publishing Imprint”
I am anxiously awaiting the publication of “Prince of Fraud.” My husband is a member of the Koretz family and we are aware of the years of meticulous research Mr. Jobb has done while writing this book. Can’t wait to read it!
This will be a great read, especially for those of us who have connections in the community on Nova Scotia’s South Shore.
This will be an interesting book to read and an important part of our history properly researched and told. I am looking forward to it.
I have read many of your books. I am anxious to know when “Prince of Fraud” will be available. Looking forward to a great read!
It seems Wall Street has not changed an iota. Or at least the financial wolves are wearing the same sheep’s clothing; a fashion apparently set in the 20′s. This coming book sounds like a great read and looking forward to the completed work.
I can’t wait for this book to be published … such a great present for at least five friends! Hope it is on the bookstands soon.
This story sounds like a wonderful tale of wealth and naivety; a perfect combination for a talented con-man. What a great storyline for a movie!