1 OUR PONZI THEY WERE DESCENDING on Chicago''s newest hotel to honor a financial wizard. The Oil King, some called him, with a mixture of reverence and gratitude. Others dubbed him the New Rockefeller, a nickname as grand and audacious as he was, one that celebrated his greatest financial triumph to date. Leo Koretz, the man of the hour, had thumbed his nose at John D. Rockefeller and his mighty Standard Oil Corporation and was making this select group of Chicagoans very, very rich. The evening was billed, tongue in cheek, as "a testimonial banquet tendered to Mr. Leo Koretz by the friends and relatives whom he has dragged from the gutter." It was June 22, 1922.
The setting was the Drake Hotel, fourteen stories of limestone-clad Italianate grandeur on the northern edge of downtown Chicago, with its broad back to Lake Michigan and a view from the front rooms of Michigan Avenue, the city''s skyscraper-studded main drag. The "most spacious hotel in the United States," proclaimed the embossed, leather-bound city guide found in each of its eight hundred rooms, whose "reputation for elegance and quality may never be surpassed in this generation." Seventeen tuxedo-clad former gutter dwellers filed through the Drake''s brass revolving doors and ascended a flight of wide stairs. They crossed the lobby''s marble-tiled floor, passed an oasis of potted palms, and entered a private dining room. Inside, the table was overflowing with fresh-cut flowers. One glance at the centerpiece confirmed that this was the place. In the midst of the flowers was a plaster model of a seaway carved through a wilderness of mountains and jungle--a replica of the Panama Canal Zone. "O, we spread it on thick," recalled Charles Cohn, a partner in an insurance firm and a charter member of the Leo Koretz fan club.
"Expense was absolutely disregarded in getting up that dinner." The sky was clear, and a stiff wind off the lake kept the air cooler than the guests were accustomed to on the second evening of summer. There was plenty of news to loosen tongues as they found their seats. Prohibition agents had raided a dozen illegal saloons on Chicago''s South Side the night before, making Cohn and his companions wary of returning to their favorite speakeasy. The president of the University of Illinois was assuring parents his school was doing its part to rein in the rebellious youth of postwar America. And everyone had read the reports from the Illinois coal-mining town of Herrin, where a bloody clash between strikers and scabs had left twenty-three men dead. Shocking, the diners nodded in solemn agreement. Senseless.
Perhaps it was best that King Coal''s days were numbered. Oil was the fuel of the future, and it was oil that had brought them together this evening. Cohn and his companions could only marvel at their good fortune. Their friend Leo had let them in on the ground floor of Chicago''s best-kept investment secret--the Bayano Syndicate, a moneymaking machine that controlled five million acres of timberland in the Republic of Panama. For more than a decade, investors had been earning fat profits from the sale of mahogany and other exotic woods. But the discovery of oil on the property in 1921 had transformed Bayano into a petroleum heavyweight that produced tens of thousands of barrels of crude every day. It was little wonder that Standard Oil had offered $25 million--more than $300 million in today''s dollars--for a small stake in Bayano. Leo had rejected the offer, assuring his dumbfounded investors that they could do much better if they held on to their stock and went head-to-head with the Old Rockefeller.
He had been right, as usual. By 1922, Bayano stock was paying dividends of 5 percent a month --an astounding 60 percent annual return. The Oil King strutted into the Drake that night as if he owned the place. Leo had a large suite on the sixth floor, so every doorman and porter knew him--and his reputation as a good tipper. He was meticulous about his appearance and flaunted his discriminating eye for tailored suits and silk shirts. Neckties were in fashion, but he usually sported a bow tie, ensuring he would stand out in a crowd. Even so, a stranger would have been surprised to learn that this middle-aged man was a financial genius and a multimillionaire. Take away the expensive clothes and he looked, well, ordinary.
Leo Koretz (his surname was pronounced "korits") was of average height, five foot nine, and a tad overweight at 170 pounds. His stroll through the lobby displayed the stoop of his shoulders and the slight paunch over his belt. His light brown hair was well groomed but thinning on top, exposing even more of his high forehead. Only his gray-blue eyes, framed by horn-rimmed glasses with lenses as round as his face, told a different story. A writer of detective stories--reading them was Leo''s guilty pleasure--would have pulled out all the stops to describe the way those eyes turned a spotlight on the world. Penetrating, piercing, razor sharp. It was as if he could peer straight into a person''s soul. Leo was "the wealthiest Jew in Chicago," in the estimation of one Chicago newspaper.
To another he embodied the American Dream, "an outstanding example of the Horatio Alger type of self-made young man." An immigrant from central Europe, he had started at the bottom, as an office boy at the law firm Moran, Mayer, and Meyer, and slogged through years of night classes to earn a law degree. He practiced law, but his real talent was making money. Soon he was advising members of his inner circle to invest in mortgages, Arkansas rice farms, and the Bayano enterprises that were making him--and his friends--unimaginably rich. Bayano profits paid the lease on an Arts and Crafts mansion overlooking the lake in the posh suburb of Evanston and filled it with antiques and fine furnishings. They surrounded his wife, Mae, and their young daughter with live-in servants and sent their teenage son to private school. The mansion was "one of those kinds of places where a person knows without looking that there are Rolls-Royce automobiles in the garage," in the words of one newsman. There were two, in fact, and when Leo was not being chauffeured around town in a gleaming Rolls, he was traveling on Bayano business.
He was a regular at the St. Regis Hotel in New York, where the cashier, Basil Curran, was convinced his net worth must have been in the $20 million range--a quarter of a billion dollars in today''s terms. In Chicago, Leo schmoozed with the city''s elite. He belonged to a long list of clubs and, in the Chicago Daily Tribune ''s eyes, enjoyed "a rating of 100 per cent in both social and business circles." He was a lavish entertainer who hired musicians or acting troupes to stage private performances at downtown hotels for his friends and investors. When other wealthy Chicagoans hosted parties, his name was often on the guest list. Everyone wanted to be around him, and not just because he knew the secret to making money. Bighearted Leo, Lovable Lou--his other nicknames said it all.
He was charming, with a quick wit and an ingratiating way of cracking jokes at his own expense. He exuded "a personal magnetism that was well-nigh hypnotic," W. A. Swanberg, a Pulitzer Prize-winning author, would later note. "He had a handclasp and warm smile that made men--and women--feel that he loved them." Especially women. He was "a genius with the ladies," a writer for the Chicago Evening American declared with envy, and doted on the wives of his investors and business associates. "His manners were wonderful," recalled Anna Auerbach, a Bayano investor.
"Why, a woman was made a social success if she could but persuade Leo Koretz to come to one of her parties." Smart, classy, fluent in German, and able to toss in a few Czech phrases as well, he captivated listeners with his deep, suave voice. He was the kind of smooth talker who could sell refrigerators in Alaska. The guest list that June night was a who''s who of prominent businessmen, doctors, and lawyers. Most, like Leo, were drawn from Chicago''s large and influential German Jewish community. Charles Cohn had known him since their school days and had been profiting from his friend''s stock schemes for a decade. He was one of the syndicate''s bigger investors, holding $55,000 worth of Bayano''s green-bordered share certificates. Samuel Cohen, another major shareholder, was a lawyer with the downtown firm Elmer and Cohen.
If Leo had been asked to name his best friend, the answer would most likely have been Cohen. Another longtime friend, Henry Klein, had struck it rich selling whiskey; when Prohibition forced him into early retirement, he had entrusted his money to Leo. Seated across the table was another old friend, Francis Matthews, a lawyer from the blue-chip firm where Leo got his start as an office boy. There were plenty of Koretzes on hand. Leo''s five brothers were not accustomed to rubbing shoulders with such an upscale crowd--Adolph and Ludwig each operated a paint and wallpaper store, Julius sold women''s hats, Ferdinand was a buyer for a department store, and Emil, a former postal clerk, managed rental properties--but all held sizable blocks of Bayano shares. Even their elderly mother was sitting on a $38,000 Bayano nest egg. "He has always been good to us," Emil would later say, speaking for the entire family. "We were proud of him--so proud!" To the Chicago sportswriter Westbrook Pegler, the twenties were "the era of wonderful nonsense.
" It was a time of dance crazes and bathtub gin, of bob-haired flappers and ballyhoo. And the well-heeled businessmen assembling at the Drake were proof, as well, that the postwar economy was booming. "More people were comfortably well-off, well-to-.