Uncle Leo, the Con Artist - Part I

This is Part I in a series of what should be 3 posts about my wife's great-uncle... who was (how shall we say) not so great - in fact, he was the black sheep of the family. And yes, this is a true story.

Lou Keytes showed up from nowhere in Nova Scotia during the roaring '20s. He was a bit of a ladies man, during a time when there were very few eligible bachelors. Not because he was the most handsome man, in fact, he was a bearded, balding 43-year-old, with stooped shoulders, a distinct middle-aged paunch and a pasty-faced complexion that looked as though he hadn't seen the sun in ages. He suffered from severe headaches and couldn't see well unless he was peering through a pair of very thick, wire-rim glasses.  What a catch!!

But two things made Keytes the darling of the Halifax social scene in 1924; he had style and, he was rich.  Very rich.

The source of his wealth was very vague. Keytes offered few details, telling people that he'd made a his money in real estate in the united states and had retired to Nova Scotia for his health. But even though the source of his money was unknown, there was no doubt he had lots of it. After he arrived in Nova Scotia in March, 1924, he paid over $17,000 in cash for a quiet, isolated hunting lodge named Pinehurst, located on 200+ acres in south-western Nova Scotia. He spent $30,000 on renovations to the six-bedroom lodge, furnished it with beautiful antiques and installed the latest in electrical conveniences such as electric lighting throughout.

Keytes was a lavish entertainer. He threw frequent parties at Pinehurst, sometimes hiring cars to ferry guests to and from the estate. For one party, he imported several members of the Boston Symphony Orchestra to provide the evening's entertainment.

But every couple of weeks or so Keytes drove to Halifax to sample the city's wares. He joined the exclusive Royal Nova Scotia Yacht Squadron, was a fixture at the best parties, and hosted dinners at Halifax hotels. He called himself a literary critic, and scoured bookstores for rare books to add to his collection. He was cultured, charming, always immaculately dressed. And it was his taste for fine clothes that would prove to be his undoing.

In November 1924, eight months after his arrival in the province, Keytes dropped by a Halifax tailor shop, ordered three pairs of silk, fur-trimmed pajamas worth $150 (a small fortune in the day for pajamas), and left a suit coat for repair.  As tailor Francis J. Hiltz worked on the coat, he removed a piece of cloth from the lining and noticed that underneath was the label of the coat's Chicago maker and the name, stitched into the lining, of "Leo Koretz".

The unwitting tailor took the coat to a man he knew, Horace A. Flemming. Mr. Flemming sent a telegram to the authorities in Chicago on Nov. 19. (By coincidence, Mr. Flemming was one of the bankers victimized by a robbery staged, in 1876, during the Barnum circus parade through Halifax)

Four days later, two policemen walked into a Halifax hotel and arrested Leo Koretz, alias Lou Keytes. Nova Scotia's mysterious socialite was a fugitive wanted in Chicago for bilking scores of investors of at least $2 million in a Central American oil swindle. After dancing his way into Halifax's social circles, the man described by the city's press as a "social lion" and "a prince of entertainers'" was about to face music of another sort.

STOCK SWINDLER

Leo was Born in Chicago in 1881, and was the son of middle-class Jewish European immigrants. He grew up speaking German as well as English, and worked as an office boy for a local law firm while studying law. He eventually opened his own practice with what was later described as "mixed success."

Two incidents helped transform the struggling lawyer into a smooth stock swindler. First, according to his own account, Koretz was part of a group of investors who paid $10,000 for land in Panama. But, when he went south to look at his holdings, he discovered the land was worthless and the seller had never owned it.

Then, about 1902, he became involved in a project to transform Arkansas swamp land into rice fields. The plan worked. Koretz made a tidy profit and earned a reputation in Chicago business circles as an astute land speculator.

Somewhere along the line Koretz realized that he could reap more profit from bogus land than from the real thing. His own experience at the hands of a con-artist had shown him how easily intelligent, trusting people could be fooled.

In 1916, Koretz began talking confidentially to a few 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 (about $1 per acre). He then became tight-lipped about his investment until a few months later when he informed a few people that he was leaving for Panama to inspect his Panama 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 anywhere near Panama.

When Koretz returned to Chicago, his lifestyle had changed drastically. He bought a large Evanston lakefront mansion with terraced gardens and moved his family into it. 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 his story of the Bayano lands. "The mahogany trees are thick as wheat fields. I've got six hundred men cutting them down in three shifts. They work at night, even, by torch light. 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. And investors were more than pleased with their returns. They did get as much as 50 percent on their money almost every year. Koretz was hailed as a real estate and financial genius.

More about Leo and the Bayano River Timber & Oil Company in tomorrow's post... stay tuned, it gets even better.