Excerpt from Empire of Deception

The Incredible Story of a Master Swindler Who Seduced a City and Captivated the Nation by Dean Jobb

Winner of the Chicago Writers Association 2015 Book of the Year Award for Traditionally Published Nonfiction

The bold type at the top of page one screamed for Chicago’s attention.

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

Within hours of the announcement that Cook County State’s Attorney Robert Crowe was investigating Leo Koretz’s Panamanian oil fraud – an eighteen-year Ponzi scheme that netted as much as $400 million in today’s terms – the newspapers were dissecting the brazen 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 in its December 14, 1923 edition. “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.”

A Chicago Daily Journal headline offered an eleven-word summary 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 Evanston mansion. His mother was among the hundreds of investors in his Bayano Syndicate, and the Evening American ran her photo under the headline, DUPED BY SON. Crowe and his investigators paused as they rummaged through Leo’s law offices in the Majestic Building, to make sure news photographers could get their shots.

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 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 a half-million 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 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 future Hollywood screenwriter Ben Hecht got his start in journalism, 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. His 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. Ben 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 needed 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 gain access to witnesses and 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. 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 co-write 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 Koretz, whether he liked it or not, had handed Chicago’s journalists a story worthy of their talents for ferreting out the news.

The papers rehashed every detail of a sumptuous banquet Bayano’s biggest shareholders had thrown at the Drake Hotel in 1922 in honor of their financial guru. “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 $30,000 he handed over to boost his Bayano holdings the day Leo skipped town. “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, a prominent lawyer and one of Leo’s best friends. “It was his personality, the confidence he inspired, which dispelled suspi­cion.” Sidney Kahnweiler described Leo as “undoubtedly the cleverest Jekyll-Hyde character ever uncovered.” 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.”

By 1923 Ben Hecht was publishing his own paper, the Chicago Literary Times, and he weighed in with a grandly titled piece, “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 journalists at the Post were about to discover that, like everyone else, they had misjudged Leo Koretz.