Leo Koretz: Colossal Swindler of Tycoons

by Jay Robert Nash

Leo Koretz (1881-1925) was a successful stockbroker working in Chicago. He had a comfortable, if not luxurious, home and a wife and child. He was a respected and well-known businessman, who represented some of the wealthiest families in the Midwest. Over the years, his stock purchases on behalf of these millionaires proved to be sound and profitable, but he harbored the secret dream of becoming a multi-millionaire like his clients. A scheme slowly took shape in his conniving brain. He would swindle his own clients out of their inherited millions.

In 1916, Koretz began telling confidentially to a few intimate friends, some of his best investors, that he had taken a bit of a gamble and bought more than five million acres of land in Panama, which encompassed the Bayano River. He had followed a wild impulse, he said, and bought the land "blind" because he was able to buy it at a bargain basement price. A few months later, he informed a few people that he was leaving for Panama to inspect his holdings. With that, Leo Koretz went on a three-month vacation. He visited New York, New Orleans, and other cities where he was not known. He never went near Panama.

Leo Koretz, a mild-mannered Chicago stock broker
Leo Koretz, a mild-mannered Chicago stock broker, who swindled a fortune from his millionaire clients, but never served a day in prison. (image from the Jay Robert Nash Collection)

When Koretz returned to Chicago, his lifestyle improved dramatically. He bought a 21-room mansion, then purchased a lavish summer place on Lake Michigan. He suddenly appeared at his office in a chauffeur-driven Rolls Royce. To inquiring friends, Koretz merely shrugged and said that he had "a bit of good luck, that's all, nothing to talk about." The more Koretz refused to talk about his Panamanian investment, the more his investors insisted knowing about it. Finally, Koretz visited his club, pretended to get a bit tipsy, and then grew uncharacteristically chatty, gushing forth the story of the Bayano lands.

"The mahogany trees are thick as wheat fields," he revealed. "I've got six hundred men cutting them down in three shifts. They work at night, even, by torchlight. We are shipping so many tons of mahogany out of the jungles there that we cannot find enough boats to take them to the major ports. And now my manager down there, Arthur Gibson, an oil expert, tells me there's black crude bubbling out of the holes left by the trees we're uprooting. He's never seen so much oil!" With that he showed a cable from Panama, signed by an Arthur Gibson, which read: "700 tons of Mahogany shipments stored along riverbank. Need more tree-cutting crews for mahogany and new rigging for oil derricks. Return on mahogany and oil easily twenty-to-one."

So this then, Koretz's friends and investors quickly concluded, was the source of his new wealth. They clamored to invest in his properties, practically fighting to have him take their money to further develop the mahogany forests and establish the Panamanian oil fields on Koretz's fabulous Bayano real estate. He permitted a few close friends to participate, then a few more, until dozens of the tycoons he brokered stock for over the years were investing in his firm, the Bayano Timber & Oil Company.

Investors were more than pleased with their returns. They did get as much as fifty percent on their money almost every year. Koretz was hailed as a financial genius. He returned huge profits to his investors by employing the old Peter-to-Paul scam, paying earlier investors with the money later investors made in his firm, while retaining enormous amounts for his own use. (Bernard Madoff would do the same thing seven decades later to glean billions.)

It was rumored that even the redoubtable William Randolph Hearst was an investor in Koretz's fabulous enterprises. This, no doubt, came about when Hearst's right-hand editorial director and fellow newspaper tycoon, Arthur Brisbane, invested heavily in the Bayano Timber & Oil Co.

Brisbane went further. He gave an enormous banquet in honor of Koretz and invited more than 500 fellow millionaires to attend in praise of Leo Koretz. The fete was held in the main ballroom of the Congress Hotel. During the festivities, a horde of newspaper boys suddenly raced into the ball room, waving extras and shouting: "Extry! Extry! Read all about it! Leo Koretz oil swindle! Con man Koretz exposed! Millions lost in swindle!"

Before anyone suffered an apoplectic attack or stroke, Brisbane quickly rose smiling, the grinning Koretz at his side. Brisbane announced that the whole thing was a party joke. "It's a lark!" announced Brisbane, guffawing. "Mr. Koretz is a great and honorable financier!" Brisbane went on to explain that he had printed the fake extras. Brisbane then, in honor of Koretz, led the gathered tycoons in a rousing rendition of For He's A Jolly Good Fellow. Koretz bowed when he was engulfed with a thunderous applause.

The party jest, however, proved all too real. It put suspicion in the minds of some of the investors who, in late 1923, sent representatives to Panama to check on Koretz's operations. They reported back that the Bayano Timber & Oil Co. simply did not exist. Neither did Arthur Gibson. No one in Panama had ever heard of Leo Koretz. The swindler fled, but was finally tracked down in Halifax, Nova Scotia, living like a rajah in the company of several women.

Koretz was extradited to Illinois, tried in Chicago, and convicted in December 1924. He was sentenced to ten years in prison for swindling more than $1,700,000 from more than 100 investors. "I'll never serve a day in Joliet State Prison," he said confidently from his cell in Cook County Jail. He did not.

One of his obliging girlfriends brought him a five-pound box of candy. On January 6, 1925, Koretz sat down on his prison bunk, ate the entire box of candy in one sitting, then keeled over dead. Leo Koretz had escaped prison through one of the most bizarre suicides on record. He was an acute diabetic and the massive ingestion of sugar killed him, as he knew it would.