by Dean Jobb
Leo was just as generous to his in-laws. When Mae’s father, Henry Mayer, died, leaving his widow, Bertha, $50,000 in life insurance and property, Leo acted as executor and obligingly invested the entire estate on her behalf. Mae’s sisters Pearl Mayer and Maude Klein put their money into Bayano; when another sister, Aimee, married Milton Simon, Leo gave the couple a half share of Bayano as a wedding present; two weeks later, he was kind enough to sell Milton Simon the other half share at face value, $500.
Leo later claimed he took their money because he had no other choice. “I never wanted members of my family in,” he contended, “and often I sought to persuade some friend or relative in all sincerity not to turn over their thousands.” He relented and let them buy shares “only because their suspicions were beginning to be aroused.”
His family’s involvement, in turn, became another powerful recruiting tool. For some investors, it was all the proof they needed that Bayano was a solid investment and their money was in good hands. “The man had his own relatives investing in his company,” Samuel Richman pointed out. “I did not suspect him in any way.” And it never occurred to him to make inquiries about the syndicate, or Leo for that matter. “I didn’t investigate,” he explained, “because I didn’t want to embarrass him.”
WHAT WAS THERE FOR Richman or any other Bayano investor to investigate? Leo lived a millionaire’s lifestyle—a suburban mansion, limousines, well-appointed offices. In 1916 he signed a ten-year, $300-a-month lease on an impressive residence at 2715 Sheridan Road in Evanston, a university town of about thirty thousand, north of the city, that one visitor touted as “the bedroom of Chicago,” home to “the successful merchant and professional man.”
The house was worth about $90,000—well over $1 million today—and sat on a landscaped one-acre plot with a hundred feet of lake frontage not far from the campus of Northwestern University. Clad in white stucco, topped with a high-pitched hipped roof, and as refined and grand as its tenant, it was “one of the show places of Evanston,” according to a reporter who checked out the property. “Scornfully it turns its back on the passerby, so that the back yard, if it can be so termed, faces the street.” The mansion—“for no other word will describe it,” the newsman assured his readers—had a glass-enclosed room at the north end that captured the morning sun and framed a spectacular view of the lake. A pergola marched through the grounds to the shoreline.
Mae’s budget for furnishing and decorating the home was $15,000, more than enough to assemble a collection of antiques and fine furniture, complete with a piano. Sèvres vases in blue porcelain, antique silver candelabras, statuettes, and other decorative pieces—many of them gifts Leo brought home from business trips—added richness to the decor. An autumn landscape by Bruce Crane, a sought-after American artist of the day, hung on a wall. In the drawing room, blue-green draperies framed the tall cathedral windows, and a davenport anchored the main sitting area. The reception room welcomed visitors with soft velvets and more of the antiques Leo loved to collect. The table in the billiard room was so large it would have cost a small fortune just to remove it from the house. Leo hired a staff of four to run the place, including a cook, a maid, and a houseman to tackle the chores. A German-born governess helped Mae look after the children—Mentor was nine when they moved in, and they now had a daughter, Mari, who was three.
And there was a library with an impressive collection of books, each volume containing a personal bookplate bearing the inscription “Mr. and Mrs. L. Koretz.” Leo bought thousands of dollars’ worth of books at a time, from valuable first editions to the latest two-dollar hardcover offerings by his favorite novelists. “Mr. Koretz was most sensitive to fine writing,” in the opinion of Adolph Kroch, proprietor of the Michigan Avenue bookstore where Leo did much of his shopping. “He could talk of what he’d read, too; he appreciated it.” Crime fiction was Leo’s passion—he snapped up the adventures of gumshoes and crooks as soon as they appeared—but he also scoured the shelves of Kroch’s store for literary works. One of his favorite authors was Joseph Conrad, a safe choice for a man who wanted to impress others with his taste in literature; Time magazine, which debuted in 1923, hailed Conrad as holding “probably the most exalted position in contemporary English letters.” Leo knew The Rubáiyát of Omar Khayyám by heart and splurged on an $850 copy of the twelfth-century ode to living in the moment. Given his twisted sense of humor, he no doubt relished reciting the line, “A Hair perhaps divides the False and True.”
The last word in opulence could be found in the two-car garage facing the street—“a building of no mean architecture or proportions,” noted the newsman with the eye for real estate. It had a hipped roofline to match the mansion and housed those two Rolls-Royce limousines. Leo told friends he had answered the doorbell one evening and found one of them, a closed-cab model in tasteful maroon paint, idling in his driveway, with a thank-you note from “your grateful partners” on the steering wheel. It was a gift, he said, from Al Watson on behalf of the other members of the Bayano Syndicate. Leo had surprised Mae with the other Rolls, an open touring car, but she preferred to run around town in a more modest Packard, at least until she traded up to a snazzier Stevens-Duryea. Life in Evanston was good—and getting better every year. It became a tradition for Leo and Mae to invite the rest of the Koretz clan to the mansion to celebrate the holiday season.
Leo, who still dabbled in wills and divorce cases, ensured his downtown law offices were as impressive as his home. He rented space in the Daily Tribune’s skyscraper—located in the dead center of the Loop, at “the hub of business activity”—for six years, until 1912, when he traded up to a newer building, the Rector. “I always have had a beautiful suite of offices and at all times the very finest and most expensive engraved and embossed stationery,” he would one day boast. “They never failed to make the right kind of impression.”
By 1920 he was renting the entire third floor of the Majestic Theater Building at 22 West Monroe Street, a couple of blocks west of the Michigan Avenue lakefront. With a wedding-cake facade of gleaming white terra-cotta that soared twenty stories, the Majestic had been the city’s tallest building when it opened in 1906 and was considered “a striking specimen of skyscraper architecture.” The main-floor theater featured more than a dozen vaudeville shows and movies a day, and Leo could invite guests downstairs to enjoy topflight acts such as the escape artist Harry Houdini. The lease alone cost him more than $5,000 a year, and as usual, he did not scrimp on the decor.
The suite was expensively furnished, and each office featured a picture of Illinois’s favorite son, Abraham Lincoln. An inner vault held a stash of hundreds of bottles of wine and liquor; although Leo drank little himself, he made sure he had plenty of booze to offer to clients and investors. His personal office was fitted with a wall-mounted electric cigar lighter, and visitors were surprised to see a Bible on his desk—until they discovered it was a cigarette holder. A quote in praise of “Honest Abe” claimed a prominent place near his desk, an appropriate office accessory for a man with such a solid reputation in business and finance. Leo rented space to Samuel Richman and other lawyers, injecting bustle and energy and disguising the fact that he only needed a staff of two—a secretary and an office boy—to run his law practice, his rice farms, and his Bayano holdings.
LEO HOSTED LAVISH DINNERS and parties at his mansion and was invited, in turn, into the homes of wealthy Chicagoans. He thought nothing of booking restaurants and nightclubs to entertain relatives, friends, and investors. Memberships in the city’s best clubs expanded his social circle. Charming and funny, well read and sophisticated, he was also a bit of a dandy who was seen strutting around in checked sports coats and dangling a walking cane. When he dropped by Henry Heppner and Company’s tailor shop on State Street, no one batted an eye if he ordered $1,000 worth of new suits and accessories. He had an unlimited charge account with Lewy Brothers Jewelers, at the corner of State and Adams, where he often bought pieces costing more than $5,000.
He once ordered a pair of $1,500 cuff links from another jeweler but sent them back, complaining they were tawdry.
Leo gained a reputation around Evanston as generous and community-minded. He supported the Chicago Jewish war relief fund and other charity drives and served as vice-chair of the Evanston Council of Boy Scouts. In 1917, when his doctor and friend, Milton Mandel, was serving at a military hospital in France, Leo sent over money and asked that it be used to cheer up the patients. He dutifully filled out a draft card in September 1918, two months before the war ended, when the Selective Service Act was extended to cover men up to the age of forty-six; he had just turned thirty-nine and, under the heading “Present Occupation,” described himself as an attorney “also engaged in rice growing in Arkansas.”
Mae, too, was active in the community. She served on the executive committee of the mother’s aid group at Chicago’s Lying-In Hospital and Dispensary, which offered free prenatal and obstetrical care to residents of the Maxwell Street ghetto. Leon Klein, who was married to Mae’s sister Maude, christened her “the most wonderful woman on the North Shore” and reckoned she donated more than $1,000 a month to a Jewish orphans’ fund and other charities.
Down in the Loop, Evanston’s model citizen, Leo Koretz, was generous in other ways. He was often seen escorting women to restaurants for lunch or dinner. “The women were crazy over Leo,” exclaimed Anna Auerbach, a Bayano investor and close friend, but he never “played flappers and unmarried women.” These rendezvous, she insisted, were innocent and aboveboard. “He specialized in the companionship of ladies who were safely married to sound business men,” herself included, and “most of the times it was with the husband’s knowledge.” “They were glad that Koretz admired their wives,” she said. Leo doted on his dining companions and never forgot a birthday, sending along a bouquet of roses or orchids or a diamond butterfly pin or other gift. His investors and associates, it seemed, trusted him with their wives as much as they trusted him with their money. “He was so sympathetic and kind,” Auerbach gushed. “And so thoughtful.” Mae knew of his many female friends—there are “many women in Leo’s life,” she often remarked to Auerbach—but since they were married and their husbands seemed to approve, she trusted him, too.
There could be a darker side to his attentiveness. He used at least one woman to lure her husband into the Bayano fold. She had met Leo at a party and accepted his invitation to lunch. He took her to a busy restaurant, to ensure they would be seen together, and asked her to persuade her husband to invest; otherwise, he warned, people might think their lunch date was about something other than business. “The poor woman,” as the story was later told, “afraid of gossip though she had done nothing wrong, went home and told her husband that Koretz had tipped her off to a very good thing, and that he had better invest in it.” Her husband did, and once again Leo had been able to make a sale without soliciting the buyer.
But not everyone was buying the dreams of easy money Leo was so adept at selling. Maurice Berkson, a lawyer who had attended school with Leo, insisted he “never liked or trusted the man.” To some, Leo’s reticence about his wealthy Bayano partners spoke of classiness and discretion. To Berkson, such secrecy was a red flag. “He was one of the mysterious sort,” he said. “Always there seemed to be a mystery about him. He never was out in the open and nobody ever knew exactly what he was doing.”
A few stockholders wondered whether Bayano’s fat profits were simply too good to be true. “Now and then the thought did occur that we were being paid excessive dividends,” noted Clara Philipsborn, “but somehow the man’s personality and his standing in the community allayed our suspicions.” She also took comfort in the fact that Leo had never asked her to invest a dime.
Those who doubted Leo’s word or betrayed the slightest unease with his methods were quickly brought into line. At one point, several investors became troubled after taking a close look at the promissory notes they held as security for mortgages—fake mortgages, of course. The signatures on the notes were almost illegible, and a delegation was formed to ask for the proper documents. Leo, so the story went, “became indignant at their lack of confidence.” He needed to keep the original records, he explained, to collect the interest payments on their behalf. The investors backed down, unaware how close they had come to discovering the truth.
Such suspicions were rare. People thought they were in on a good thing because, to all appearances, they were. Arkansas farms and Bayano stock paid dividends or interest of at least 10 percent a year, every year; a check for profits earned arrived on the first day of the month, every month. “It was like a hot tip on a horse race,” noted one of Leo’s relatives. “Everybody jumped on who could.” Profits were high enough to attract investors but not large enough to make Bayano smack of a get-rich-quick scheme. A Chicago financier who never invested but watched closely from the wings believed Leo’s business empire was real: “You could have told me he was a swindler, a robber and a bank bandit and produced a police photograph to prove it,” he later told a reporter, “and I’d have laughed at you.” Leo’s reluctance to take money also silenced the doubters; by the time investors finally wore him down and got their hands on some Bayano shares, the possibility of being swindled was the last thing on their minds.
If anyone who held stock got cold feet or wanted out for any reason, Leo wrote a check on the spot. “The few investors who sought to withdraw always were given their money on a moment’s notice,” noted one press account, and this only enhanced his reputation for integrity.
When one man who sank $30,000 into Bayano became uneasy and asked for his money back, Leo said, “Sure thing,” and wrote out a check for $40,000—the original investment plus a parting bonus. “Your stock really earned it,” he said. “Nothing but fair to you.”
It was not long before the man returned, chastened, with the uncashed check in hand. “Here, Leo, take back your check,” he pleaded. “I think I made a mistake in getting out.”
Other investors made it easy for Leo to meet his mounting obligations. Many followed the lead of his brother Julius and invested their profits in more Bayano stock. Milton Eisenstaedt, a doctor, earned a dividend every month for a decade—doubling his original investment—and reinvested every one. The family of Bessie Rosenthal, one of Mae’s closest friends, invested $45,000 and never cashed a single dividend check. “I have never received a penny from him,” Rosenthal once noted, “that I did not reinvest.”
Rosenthal, Eisenstaedt, and other investors who used their imaginary profits to buy more imaginary Bayano shares became unwitting accomplices. Their votes of confidence freed up cash Leo could use to keep other investors happy. And as his moneymaking machine became more complex and more unwieldy, he needed all the help he could get. “There was no turning back,” he later explained. “Men and women believed in Bayano even more than I did. … The Bayano bubble lifted me off my feet and swept me along.”
Leo had been juggling people and numbers and spinning lies and half truths, day in and day out, for almost fifteen years. He kept hundreds of investors happy while constantly on the lookout for new ones. He fooled his wife and family, his closest friends, his fellow lawyers, his business associates, and everyone else. There were dividends to distribute and bills to pay. He had an expensive home and an opulent lifestyle to maintain. He was in far too deep to ever get out. Emil Koretz recalled watching his brother jot notes in a small black book and assumed he was keeping track of his financial affairs. He was—keeping track of the myriad details of a make-believe world of fat profits and Panama riches, of Arkansas rice farms and mysterious syndicates.
As the twenties were about to roar, Leo’s investment juggernaut was running out of steam. Every month he needed to scrape together thousands of dollars to feed the insatiable appetite of the beast he had created. New investors and new money were not coming in fast enough; “business,” as he put it, “was dull.” To make matters worse, not everyone swapped their profits for more Bayano stock or
wanted to stay in for the long haul. The only way he could continue to meet his obligations—and stave off a default that would expose his intricate fraud—was to bring in more money.
He needed a fresh angle, a new product from the Bayano River valley that would unleash a new scramble for shares in the syndicate—something so attractive and so lucrative that more people would camp out at his doorstep and beg him for a piece of the action.
And then it came to him—the perfect, irresistible product that would make 10 percent annual returns on Panamanian timber and Arkansas rice farms look like chump change. The Big Idea was about to become much, much bigger.
8
THE HANGING JUDGE
As LEO WAS plotting the next phase of his Bayano fraud, Chicagoans were fixated on the disappearance of a little girl. The neighbors called her Dolly, and there was no denying that the six-year-old with the bobbed blond hair and deep blue eyes looked like a China doll. In the photo that ran in the newspapers in the summer of 1919, Janet Wilkinson sat with her hands folded in her lap and her mouth caught midway between a pout and a smile.
ALL CHICAGO SEEKS SOLUTION OF MISSING CHILD MYSTERY, blared a headline. The Daily Tribune offered a reward to anyone who knew where she was. Police officers combed her North Side neighborhood, poking through basements, sewers, and garbage bins; even her classmates at Holy Name Cathedral School joined the search. Janet had disappeared at about noon on July 22 and was last seen speaking to a man who lived on the other side of her duplex, a hotel night watchman named Thomas Fitzgerald. He was an odd man, awkward around adults and known to offer candy and comic books to kids. He was the kind of man whom parents—including Janet’s—warned their children to steer clear of.
Police took him in for questioning. For more than four days, as the search continued, Fitzgerald was interrogated around the clock. He finally cracked and confessed. He had grabbed Janet and hauled her into his apartment. She screamed. He panicked. “I grabbed her by the throat,” he told the lead investigator, “and choked her to death.” He led police to the basement of his building and showed them where he had hidden the girl’s body. She was under a pile of coal that was wedged between a chimney and the foundation wall, a space so narrow no one had bothered to check it during the search. The autopsy added a gruesome coda to an already horrific crime: Janet was still alive when buried.