Empire of Deception

by Dean Jobb

  The arrest made headlines across America and around the world. In Canada, Leo was front-page news from Wolfville, Nova Scotia, to the Rocky Mountain community of Blairmore, Alberta. Overseas, newspaper junkies in Paris were able to tell their friends about the capture of a swindler from faraway Chicago. Singapore’s English-language newspaper, the Straits Times, ran a long piece on America’s “newest criminal sensation” and considered Leo “one of the outstanding examples of the type of swindler who exploits the get-rich-quick passions of his friends and acquaintances.” News of Leo’s exploits and his downfall even reached readers in Brisbane, Australia, and in the town of Burnie, at the northern tip of Tasmania.

  In Chicago, a reporter traced Mae to her new address in Winnetka. She was not home, but a peek through the windows confirmed she had salvaged some of the expensive furnishings—mahogany pieces and Oriental rugs—from her former home. Leo’s abandoned wife, the Daily News sniffed, was “far from destitute.” Once again her photo was splashed across the papers. She was tracked down at Mercy Hospital, where Mentor, now seventeen, was recovering from a hernia operation.

  “The children and I want only to fade out of the scene—we want to be just nobody,” she told a reporter as she sat at Mentor’s bedside. “You can’t imagine how hard it is on them.” The reporter suggested Leo might plead guilty and spare them the spectacle of a lengthy trial. “I hope so,” she said.

  So did his immediate family and his wide circle of in-laws and cousins. “The family had hoped that Leo would kill himself, or that he would die,” one unnamed relative said coldly, “to avoid the disgrace of his capture.” The only question in their minds was how soon Mae would file for divorce. “It doesn’t matter what Leo had done,” the relative added. “Mae would have forgiven him if he had not been untrue to her. That’s the thing that has rankled.” It had been bad enough when he was linked to Auerbach, the South Side “love nest,” the globe-trotting Jessie Taggart, and all the rest; every day the papers were exposing tales of his new round of womanizing in Nova Scotia. He had picked up where he left off in Chicago.

  The immediate concern was finding a way to break the news to Leo’s mother. Leo had always been her favorite, but she had told a friend, only a few days earlier, “I pray every night that Leo will not be found while I still live.” Family members avoided mentioning his name in her presence.

  SOME BAYANO VICTIMS WERE glad to hear he was in custody, but sorry to be reminded of their folly. “It’s been a pleasant day until now. Why spoil my dinner by reminding me of Koretz?” Arthur Mayer said when the Daily Tribune phoned. “I’ll have to admit that I am not crying because he was caught.”

  “Me one of his investors?” exclaimed Milton Mandel, Leo’s former doctor. “I was not. I was one of his boobs. I’m glad he’s caught.”

  Tribune reporters tried to contact, in all, fifty victims for comment. Ten were out of town on business, and the reporters discovered that several of those who had lost heavily were wintering in California or Florida. There will be “no hunger ravaged faces of starving dupes” to greet Leo upon his return, the paper concluded, and “none of them is in want as the result of Mr. Koretz’s fleecing.”

  Even if few Bayano victims were starving, Chicago Title and Trust was determined to recover as much money as possible to reduce their losses. The receivers sent three lawyers to Halifax to take custody of Leo’s assets in Nova Scotia. They found a cache of stocks and bonds in a safe-deposit box in a Liverpool bank. Pinehurst and its furnishings, thanks to Leo’s extensive renovations and shopping sprees, were worth an estimated $35,000. Cars, cash, the motorboat, and other assets added several thousand dollars to the tally. In New York, the Neighborhood Book Shop was valued at $5,000, and Leo revealed he had another $48,000 stashed in one of the city’s banks.

  The taxman, however, was threatening to take away every penny recovered. Coincidentally, a few weeks before the arrest, the US government had filed a claim for $753,067—almost $10 million in today’s dollars—in unpaid income tax for 1921, 1922, and 1923, the years the Bayano swindle was in full swing. It would take precedence over all other claims and threatened to leave nothing for Bayano investors. The wife of one victim, Grace Katz, was so incensed that she fired off a blunt letter to US Attorney General Harlan F. Stone asking the government to withdraw the claim so that the money recovered could be returned “to the people from whom it was stolen.” Chicago Title and Trust vowed to oppose the claim on the creditors’ behalf, arguing that money obtained illegally was not taxable.

  At the New York bookshop, Temple Scott took the news of his boss’s real identity in stride. “May be the joke’s on me. We’ll see,” he told a reporter. “Possession is nine points of the law, they tell me,” he added, and the store remained in his possession, “at least until the Chicago authorities indicate what they intend to do.” But Zane Grey saw nothing amusing about being linked to Leo’s alter ego, Lou Keyte. The Herald and Examiner published his photo and reported Leo’s boasts about entertaining the author at Pinehurst. “Mr. Grey,” it reported, “was very much perturbed by this unsought publicity.”

  In Nova Scotia, reaction to Lou Keyte’s true identity ranged from disbelief to bemusement. The Morning Chronicle marveled at how easily he had masqueraded “as a respectable person” and how he had used his wealth “to flutter various sensitive hearts and silly minds.” Liverpool, too, was said to have its share of people “who could have been knocked down with the proverbial straw.” Leo had “flashed across the skyline of the social life of Queens” like a meteor, the Liverpool Advance acknowledged, and “no one suspected that he was what after events proved him to be.”

  People who knew or had befriended the fictional Lou Keyte scrambled to distance themselves from the real-life con man. “The few Halifax people who knew him say that their acquaintance was very casual,” the Morning Chronicle noted in a feeble attempt to rewrite history. “They always thought there was something ‘fishy’ about him.” Leo “was never received with open arms by the best people of the town,” insisted a dispatch out of Liverpool.

  For George Banks, the news was “a bolt from the blue.” With the Franklin impounded to cover Leo’s hotel bills, Banks and his daughter caught a train back to Caledonia to face choruses of “I told you so’s” from their less trusting friends. Thomas Raddall was astonished to discover his friend the “jolly millionaire” was a notorious con man. He also remembered how Leo had talked, at the Pinehurst housewarming party, of making his fortune speculating in rice farms and “down on the Bayano River” in Panama. Most of what Leo told him that night, he realized, had been true.

  The question on many minds was why a fugitive from justice would make such a spectacle of himself. Had Leo chosen to live a quiet life instead of spending freely and living large, noted a writer for the Morning Chronicle, his real identity might never have been discovered.

  27

  THE GANG WAR

  ROBERT CROWE BROKE the news to the Chicago press and issued a statement taking credit for nabbing the elusive swindler. The Daily Tribune ran his photograph on page 1 and described how “Crowe’s men” had tracked Leo to the east coast of Canada. It was, a prominent attorney told the paper, “a notable achievement for law enforcement in Chicago.” The Evening American was in booster mode as well, attributing the capture “to the fact that State’s Attorney Crowe would not permit himself to ‘pass up’ any kind of clue.” The Daily News, however, gave credit where credit was due, to the detective work of Chicago Title and Trust’s Abel Davis and his legal team. The state’s attorney, the paper pointed out, “merely had to make the arrest.”

  In the dying days of 1924, Crowe needed a “notable achievement” and good-news headlines. His bid to send Leopold and Loeb to the gallows had been a spectacular failure. He had been elected only weeks earlier to a second term as state’s attorney but faced a sudden surge in gangland violence.

  Chicago was caught in the crossfire as gangs battled for control of bootlegging, gambl
ing, and prostitution, and the deadly war was heating up. Al Capone had emerged from the shadow of his former boss, Johnny Torrio, and had seized control of suburban Cicero. Delivery trucks loaded with illegal beer were routinely hijacked. Crooks were killing other crooks in the speakeasies and on the streets. Less than two weeks before Leo’s capture, a major underworld player, Dion O’Banion—“Chicago’s arch-criminal,” in the opinion of Police Chief Morgan Collins, and suspected of committing or ordering at least twenty-five murders—had been shot to death in his North Side flower shop. The prime suspects were O’Banion’s bitter gangland enemies, Torrio and Capone, and their Sicilian allies, the Genna brothers. The day Leo was arrested in Halifax, the boxer-turned-saloon-operator Eddie Tancl was gunned down in his Cicero bar for refusing to buy beer from one of the gangs jockeying for control of his part of town.

  Guns and gangs and revolving-door justice seemed woven into the fabric of life in wicked, brawling Chicago: “They tell me you are crooked,” Carl Sandburg wrote in “Chicago,” his ode to the city, “and I answer: Yes, it is true I have seen the gunman kill and go free to kill again.”

  Shooting victims who survived attacks refused to cooperate; witnesses dropped out of sight or were too scared to testify; gangsters thumbed their noses at the law and got on with the business of selling vice and shooting rivals. Gangs and guns had transformed the Wicked City into Murder City, and the state’s attorney and the police seemed powerless to stop the bloodshed. Chicagoans fought back. Leading businessmen and citizens formed a watchdog group, the Chicago Crime Commission, and demanded better cooperation among law enforcement agencies. The Daily News issued an ultimatum: “Either the gunman or the decent citizen is going to run Chicago.”

  There seemed to be little difference between law enforcers and lawbreakers. Police officers took bribes to tip off the targets of impending raids or arrests. When charges were filed, delays and outright corruption prevented many from ever being aired in a courtroom. In 1923 alone, Crowe’s staff withdrew or plea-bargained an astounding twenty-four thousand felony charges and sent fewer than two thousand offenders to prison. There were allegations of payoffs to fix cases. US District Attorney Edwin Olson, Chicago’s top federal prosecutor and one of Crowe’s Republican rivals, made headlines around the time of Leo’s arrest by alleging that bribery was as much a fixture in Cook County’s courts as the daily ritual of calling the first case.

  In one courtroom, it was claimed, a system had been worked out: if a bailiff stationed in a back room knocked on the wall when a defendant’s case was called, it was a signal to the prosecutor and judge that payment had been received and charges should be withdrawn or dismissed. So many judges were turning up at the funerals of slain gang leaders—including O’Banion’s send-off, which drew twenty thousand mourners and was described as “the gaudiest of all gangland’s burials”—that in late November a senior jurist made a public plea for them to stop. “Familiarity between judges and gangsters,” he warned, “has lowered the courts and the law in the eyes of the public.”

  There were disturbing links, too, between the gangs and the state’s attorney’s office. O’Banion had helped to deliver two crucial North Side wards to Republican candidates, including Crowe, in the November 1924 elections. Not long before his death, he had led his thugs on an Election Day tour of polling stations, buying drinks for the converted and threatening those inclined to vote for the Democrats. “We’re going to have a Republican victory celebration tonight,” he declared in one saloon. “Anybody who votes Democratic ain’t going to be there,” he added menacingly, “or anywhere else.”

  When old age or a bullet ended the life of a prominent underworld figure, the funeral home operated by John Sbarbaro’s family usually handled the arrangements—and, again, O’Banion’s funeral had been no exception. One chronicler of crime in Chicago called it “a gangland favorite,” and Sbarbaro personally barred reporters and photographers from the chapel during services for one prominent gangster. Only in 1920s Chicago could a public official prosecute criminals at his day job and in his spare time prepare the dead ones to face their final judgment. William McSwiggin, who had accompanied Sbarbaro to Halifax to catch Leo, was no better at hiding his underworld connections. He was a police sergeant’s son but hung around with a group of boyhood pals that included members of the O’Donnell gang, West Side beer runners who would soon be at war with Capone.

  The press demanded action. “The gunmen merely take advantage of official weakness and widespread corruption,” the Daily News chided. The Evening Post said it was time for Crowe and the police to “teach the masters of crime that the law is not to be bought or sold, cajoled or threatened.” When Crowe was formally sworn in for his second term, he dispensed with the usual ceremonies and floral tributes. The Herald and Examiner thought it the prudent thing to do. “With the community aroused over gangster murders, gambling, bootlegging and other crimes in Cook County, a celebration of Mr. Crowe’s continuance in office might be misunderstood,” an editorial writer remarked. “The public might not appreciate clearly who was doing the celebrating.”

  The state’s attorney got the blunt message. Within hours of taking credit for Leo’s capture, he opened a grand jury investigation into the Tancl shooting and a possible link to O’Banion’s murder. The following day, detectives under his command and squads of city police raided illegal bars and gambling dens around the city, including Capone’s flagship operation in Cicero, the Four Deuces. It was touted in the papers as “the biggest smash at the forces of gangland in the history of Cook County,” and Crowe ordered the officers “to bring in every gangster, gunman, beer runner, gambler and vice lord they could find.”

  Leo’s capture could not have come at a better time for Crowe. Prosecuting a swindler would be far easier than taking on Capone and his fellow mobsters. Leo’s extradition from Canada and his trial on fraud charges would give the legmen, sob sisters, and rewrite men a juicy story to keep them busy. Headlines and editorials about a master con man and his gullible investors would divert attention, for a while at least, from the surge in gang violence and allegations of corruption in Cook County’s justice system. It was the kind of high-profile case that would help Crowe restore his tarnished reputation as a crime fighter. All he had to do was get Leo Koretz back to Chicago.

  28

  THE PRISONER

  LEO STOOD WITH his hands in his pockets, looking relaxed and slightly bemused. It was Monday, November 24—the morning after his capture—and the man making headlines around the world posed for news photographers in front of the Halifax County Jail. He had exchanged the brown suit he was wearing when arrested for a new outfit: green suit, white vest, polka-dot bow tie, topped with a derby. He was the “last word in style,” a reporter noted, except for the trousers, which had lost their razor-sharp crease. Malcolm Mitchell, the jailer, stood beside him, holding his pipe at his side and striking a dignified pose.

  Once Leo was back inside, a barber was summoned. The beard, Leo said, had served its purpose and he wanted a shave. “I want to go back to Chicago clean—like I left there.” His face emerged, pale and glistening, for the first time in almost a year.

  “Feels odd. Do I look any better?” he joked, rubbing his cheeks. “Well, now my troubles are just starting. I will have to shave all over again.” Whether he looked better was debatable; the ravages of diabetes and a year of being the life of the party had left his face thinner and jowly. His troubles, without a doubt, were just starting.

  He was taken next door to the courthouse at eleven in the morning to be arraigned. The lobby and broad staircase leading to the second-floor courtrooms were lined with spectators. Some were there for a murder trial, but many hoped to catch a glimpse of the swindler who had fooled almost as many people in Nova Scotia as he had in Chicago. The Koretz watchers were out of luck—he was whisked into the office of Judge William B. Wallace for a private hearing.

  Leo, minus the beard that had helped to mask his identity for almos
t a year, agreed to be extradited from Canada to face prosecution.

  “Can I waive my right to fight extradition without making a statement?” Leo asked after the judge read aloud the allegations of defrauding Samuel Richman. Wallace said he could, but extradition could not be ordered without supporting evidence. He suggested Leo sign a written statement denying guilt but conceding that the State of Illinois had established a prima facie case—that the charges, on their face, had merit. Sbarbaro announced he would take steps to speed up the extradition process, as Leo wished.

  Joseph Connolly, the young lawyer Leo had met at a Royal Nova Scotia Yacht Squadron dance a few weeks earlier, sat in on the hearing and agreed to serve as his defense counsel. Just twenty-nine and in his third year of legal practice, Connolly had served in a machine-gun battalion and won the Military Cross for bravery at the Battle of the Somme. Dublin-born and long-faced, with a close-cropped mop of thick curls, he had been admitted to the Nova Scotia bar without writing the entrance exams, thanks to a waiver available to former servicemen. Like Leo, he had parlayed a job as office boy at a top law firm—Henry, Rogers, Harris, and Stewart’s clients included many of the region’s major corporations—into a legal career. He was “a witty, big-hearted, flamboyant yarn spinner,” a colleague recalled, who “embellished everything, including the truth.” It was little wonder he and Leo had hit it off.