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
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.
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.”Koretz lived well on the backs of his Bayano investors, splurging on a twenty-room mansion overlooking Lake Michigan, two Rolls-Royce limousines, suites at the finest hotels in Chicago and New York, a cache of bootlegged booze, and a string of mistresses. “I don’t see why these women won’t leave me alone,” he once complained in jest, knowing full well the answer was the charm and money he used to win their affections.
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.Koretz’s brazen fraud is a compelling story that combines drama and dark humor. It is a cautionary tale that will resonate with readers who are curious about how con men such as Bernie Madoff operate and how they prey on the trust of others. It is a rollicking tale of greed and gullibility, lies and betrayal and grandeur and delusion that could have been ripped from today’s headlines. It is a story played out against a Jazz Age backdrop that reaches from the tough streets of Chicago to the remote jungles of Panama, from the glitter of Manhattan’s finest hotels to the backwoods of Nova Scotia.
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.
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”