A Ponzi schemer and his unlikely game of tomes
Dean Jobb’s new book tells the story of Leo Koretz, a notorious Chicago swindler who fled to New York and Nova Scotia, spinning a web of literary lies
In the 1920s a bookstore on the Upper East Side, just a block from Central Park, catered to New Yorkers who appreciated fine literature. The Neighborhood Book Shop was “one of those highbrow places,” noted one journalist who stopped by, “where bestsellers are hidden and food for the discriminating few is given preference.”
The owner, Lou Keyte, claimed to have made a for- tune in real estate before coming to the city to pursue a new career as a bookseller and literary critic. He was witty, charming and impressed listeners by reciting quotations from classic works.
It turned out this well-read fellow was more than a fan of novels — his whole life was a finely crafted work of fiction.
Keyte’s real name was Leo Koretz, and he was one of the most brazen and successful American swindlers of the 20th century. He ran an elaborate Ponzi scheme in Chicago for almost two decades, seducing the city’s elite with promises of fat profits from vast oilfields he controlled in a remote region of Panama.
There was no oil, of course, and Koretz simply robbed Peter to pay Paul. “Profits” were funded by money from new investors who were clamouring to get in on the windfall. By the time his scam collapsed in 1923 and he fled to New York, Koretz had defrauded his victims of as much as $30 million — some $400 million in today’s terms.
I discovered Koretz’s amazing fraud by chance, while researching another subject at Nova Scotia’s provincial archives.
An index card offered a brief description of the swindler’s arrest in Halifax and launched my quest to uncover the truth about a man who lived a lie for much of his life.
I soon learned that Koretz posed not only as a financial wizard but also as a bookworm and literary figure.
He had flaunted his love of books for years. In Chicago, he spent thousands of dollars building a library that convinced investors they were dealing with a man of intellect and taste.
“Mr. Koretz was most sensitive to fine writing,” noted Adolph Kroch, proprietor of a Michigan Ave. bookstore where he did much of his shopping. Koretz’s collection grew to include his favourite author, Joseph Conrad, and the complete works of Mark Twain. He knew The Rubaiyat of Omar Khayyam by heart and splurged on a rare edition that would be worth almost $10,000 today.
Koretz fled to New York in December 1923, days before his swindle was exposed. Buying the Neighborhood Book Shop at the corner of Madison Ave. and 73rd St. — it cost him a fraction of the loot he salvaged from his Ponzi scheme — helped to establish his new literary persona and new identity as Lou Keyte.
He hired a transplanted English publisher, anthologist and lecturer, Temple Scott, as manager. Scott was a literary snob who turned up his nose at anything new or popular; he was thrilled to discover Keyte was a kindred spirit.
“All the books he took from the store or read were high class, many of them classics,” noted Scott, who considered his boss “one of the most interesting men I have ever known.”
In early 1924, Keyte left Scott in charge of the store and moved to Nova Scotia to evade the detectives on his trail. He renovated a secluded hunting lodge on a lake north of Liverpool and hosted dinner-dances to entertain and impress a new circle of friends.
A Halifax newspaper introduced him to its readers as “a writer of reputation,” and the fugitive swindler took on the role with gusto. He scoured bookstores for rare titles and was often seen walking about with armloads of books. He boasted he had launched the career of bestselling author Zane Grey, the prolific writer of western adventures.
Even his new name bolstered his literary credentials — people often added an “s” to Keyte, pronouncing it as if he were a distant relative of the poet John Keats.
Not everyone was fooled. John D. Logan, a professor at Acadia University in Wolfville and one of Canada’s leading literary critics, sought out Keyte to discuss their mutual interest in rare books. He quickly spotted a phoney.
“I mentioned title after title that every book collector should know and he was not familiar with any of them,” Logan recalled. “He didn’t know a good book from a bale of hay.”
American authorities finally traced Koretz to Nova Scotia and arrested him in November1924. Today, the corner in New York where he operated his Neighborhood Book Shop is home to a clothing boutique and art gallery, leaving no trace of the city’s connection to one of history’s greatest frauds, both financial and literary.
The elusive Leo Koretz would have wanted it that way. But the more I uncovered during my research, the more I realized this iconic crook and master storyteller deserved a book of his own.