Meet the 'forgotten con,' the man who out Ponzi-ed Ponzi and Madoff

Author Dean Jobb tracks the life of 1920s Chicago swindler Leo Koretz in ‘Empire of Deception.’ 

Author Dean Jobb says the swindler’s story 'speaks across the decades' in the light of the Ponzi schemes that still bedevil us today. 

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July 21, 2015

By Randy Dotinga

In the annals of American swindlers, Leo Koretz’s name has been eclipsed by a pair of men who lack his knack for high society and international intrigue.  But the 1920s Chicago con man deserves a bigger place in history, and not just because he’s a more flamboyant character than Charles Ponzi or Bernie Madoff. 

Koretz, who ripped off millions from the Second City’s elite over two decades, outshines both men in terms of pure chutzpah.  He conjured an elaborate Panama oil empire that didn’t exist, stole from the rich to feed the rich, and then absconded to Nova Scotia and a secret identity.  The victims, meanwhile, got blamed for being greedy. 

It’s a story that seems to be as American as it can get, and it’s told well by a Canadian author in the lively and captivating new book Empire of Deception: The Incredible Story of a Master Swindler Who Seduced a City and Captivated the Nation. 

Dean Jobb, a Nova Scotia journalism professor, says he stumbled upon the story of Leo Koretz about 20 years ago as a Halifax newspaper reporter.  While poring over a historical archive, he came across an index card that mentioned Koretz’s ultimate local fate.  Jobb learned that the con man hid out in plain sight, changing his name and buying a secluded lodge while whirling though local society. 

“He was the subject of a manhunt that was almost worldwide, and he appeared in the Chicago papers on an almost daily basis,” Jobb says. “ But he’s been forgotten here and, surprisingly, in Chicago.” 

In an interview, Jobb says the swindler’s story “speaks across the decades” in the light of the Ponzi schemes that still bedevil us today. “ It’s not like this is ancient history,” he says. “ It’s a reminder – if people still need it, and apparently they do – that if it an investment sounds too good to be true, it probably is.” 

It’s absolutely fair to say that.  He was running his scheme far longer, as long as anyone in history has managed.  By the time Ponzi was caught, Leo been doing it for 15 years.  His friends started calling him “Our Ponzi” as a joke. 

The need to keep a scam going for 20 years is remarkable because you need to get new investors to pay off the old investors and keep them happy.  The only other comparable con man is Bernie Madoff. 

Q: Why was he so successful as a con man? 

He obviously had an amazing ability to act.  This is a man who for almost 20 years successfully lied to everyone around him, lived this incredible double life pretending to be an oil and land baron in Panama. 

His closest friends, his family, his wife – no one suspected for a moment.  He was obviously completely trustworthy, came across as someone who could be trusted. 

And he had an amazing capacity to keep it all straight.  When you think of the time over which he did this, the sheer scale and brazenness of his lies, it’s amazing that he never missed a single interest or dividend payment to an investor. 

Q: While he was hardly a looker, Koretz was popular, especially among women who weren’t his wife.  What was his secret? 

He was a charming, a funny guy, ingratiating, the kind of guy people liked to socialize with.  He was generous and liked to hold parties and dote on the wives and girlfriends of his investors. 

He lived the pretense of the successful multimillionaire investment guru, with a wife and kids tucked away in a mansion, and he had affairs on the side. 

Q: We hear about the victims of Ponzi schemes, in which swindlers pay investors with proceeds from new investments until the whole scheme collapses.  But we don’t hear much about those who make a bundle.  Did some people make out like, well, bandits? 

When a Ponzi scheme goes on this long, its possible for people not only recoup their investments over time but actually make money. 

They got steady dividends of 10 percent, and Koretz would promise and apparently pay out 60 percent a year in dividends.  Someone who managed to get 60 percent for 2 years would have obviously made money, but it’s only the early investors who can really stand to survive and even profit. 

Q: There were suggestions that the victims weren’t really true victims due to their greed.  How did they fare? 

He did leave a lot of burned investors.  Some of them were wealthy enough to endure the blow, but there were some people who apparently lost life savings.  It’s pretty clear that a lot of people just didn’t come forward, bankers and businessmen and professionals who had a reputation to preserve. 

The investors should have known better, but they’re putty in the hands of someone who could be this credible.  Investors, then and now, do have to take some responsibility and do some homework and due diligence, but it is a two-way street.  The con man is selling trust. 

Q: What was this fake Central American empire that he created? 

This was such an outrageous investment scheme.  He said he had oil fields producing oil in Panama, and Standard Oil, the largest petroleum company, was desperate to buy a small stake.  He either had or was building a fleet of tankers, and he had pipelines, he had oil wells and facilities.  He produced convincing maps and plans.  They all believed this whole. 

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But if any of them had done a little bit of research, they’d see that oil wasn’t an import from Panama.  When a group of investors heads to Panama in late 1923, believing they’re going to tour the oil plant, he disappears. 

Q: What did you find fascinating about this guy? 

His brazenness, the chutzpah he showed by getting up every day and posing as a multimillionaire baron, pulling that off and never really tripping up. 

Q: You’re looking at this American story as a Canadian.  What do you see from that perspective? 

I quote a writer who says Chicago is the only place on earth in the 1920s where everyone comes with the avowed goal of making money.  That desire for wealth, that push for the American dream, drove Leo.  It was a time when it was easy to sell a get-rich scheme because people were striking it rich on a lot of fronts. 

Q: What’s the legacy of this story today? 

It’s amazing to me still that almost a century after Ponzi, and almost a century after lLo Koretz, the Ponzi scheme is still working well. 

If someone’s guaranteeing steady returns or selling the idea that they have a way to beat the market, these should be red flags.  They weren’t in the ’20s, and they still don’t seem to be now.  It’s a reminder of “buyer beware.” 

Randy Dotinga, a Monitor contributor, is president of the American Society of Journalists and Authors. 

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