The Master $Windler$

Since the start of the 20th Century, Americans have been preyed on by more swindlers, and have supported them in better style, than any people in history. Billions of dollars have been stolen, in varied and ingenious ways, by men skilled at inducing in their victims what Samuel Taylor Coleridge called the willing suspension of disbelief. (Coleridge was describing the effects of poetry, but the phrase applies equally to the swindler's art.) Investors have been persuaded to put money into enterprises that turned out to be wholly imaginary. Real corporations have been taken over by swindlers and stripped of their assets while the stockholders were looking the other way. Thousands of bankers and businessmen have been trimmed, sometimes without even realizing it, in bogus brokerage offices operated by confidence men and known in the trade as "stores." Worthless and near-worthless securities have been sold to the public, in unprecedented volume and with an efficiency unknown to stock-jobbers of earlier times, through retail outlets called boiler rooms, where securities are hawked by batteries of telephone salesmen known as loaders or dynamiters.

The invention of the joint-stock company was a priceless boon to swindlers, and swindling has flourished wherever capitalism has. For one thing, capitalism has made people wealthy enough so that they can afford to be swindled. For another, business affairs have become so complicated that even the directors of a corporation may only dimly comprehend what the president is up to. More importantly, it is in the nature of stock markets that one can legitimately aspire to get something for nothing -- or, at any rate, to get a great deal for very little. All that is necessary is to invest in the right common stock and count the money as it rolls in. If the prospective investor has any qualms about getting rich with such immoral ease, he can comfort himself with the thought that by taking a flyer in the market he is putting his money to work creatively, and that he is thereby serving not only himself but his fellow citizens and the economy as a whole.

These aspects of life in a capitalist society are, of course, particularly prominent in the United States, and it is not to be wondered at that swindlers have found it a land of such enormous opportunity. In no other country have so many people been so rich, or so bent on entrusting their money to others in the hope of becoming richer still. "You Swedes are blockheads," the great Swedish swindler, Ivar Kreuger, once remarked to a friend. "You haggle about giving me money, but when I get off the boat in New York I find men on the pier begging me to take money off their hands."

Kreuger was speaking of the 1920s, a time when it was so easy to market phony securities that one Wall Street promoter impudently sold stock in a company bearing the name -- quite accurately, as it turned out -- of Phantom Oil. But the demand for merchandise of this sort, at least when sold under more plausible labels, was not simply a period fad, like mah-jongg or the Charleston. As far back as 1911, the Financial World of New York listed the names of 240 fake companies, with a combined capitalization (on paper) of more than a billion dollars, whose stock had recently been sold to the public. More significantly, for all the disenchantment with Wall Street that set in after 1929, and despite the establishment a few years later of a federal agency, the Securities and Exchange Commission, charged with curbing (among other things) the sale of watery and worthless stock, there were signs by the mid-1950s that more of the stuff was being sold than ever before. The national propensity to be swindled has proved remarkably durable.

• • •

Of all the stratagems by which Americans have been swindled, the most pleasing, from an esthetic standpoint, is the confidence game. Like heroes of tragedy, its victims are brought low by a fatal flaw in their own characters. The flaw is dishonesty: what chiefly sets the confidence game apart from other varieties of fraud is the fact that the victim, or "mark," is fleeced while he is trying to make money dishonestly. This not only makes the victim reluctant to squawk when he finds he has been swindled, but absolves the confidence man, at least in his own mind, of responsibility for his victim's plight. He may, indeed, look on himself as a species of satirist, one who uses psychological rather than literary means to demonstrate the folly and depravity of man. "My domain was the human mind," Joseph Weil, a confidence man known professionally as the Yellow Kid, once told novelist Saul Bellow. "I entered the lives of my dupes ... I (continued on page 82) Master $Windler$ (continued from page 80) only showed them their own purpose."

Before his retirement in the 1940s, Weil was one of the most gifted and versatile confidence men in the business. A small, elegant man, who worked out of Chicago, Weil posed variously as a doctor, a professor, an agent for a Wall Street syndicate, a mining engineer, and a representative of German capital. Sometimes he impersonated real people, such as Dr. Henry Reuel, a well-known mining expert. His credentials were always excellent. They included, for example, copies of books by the real Dr. Reuel in which the Kid had substituted his own photograph for that of the author.

One of Weil's favorite confidence games featured an imaginary copper mine. It was a swindle he often worked on bankers, whom he hated. "They are almost always shady," he once wrote. "Their activities are usually only just within the law."

After cultivating the acquaintance of a likely looking banker, Weil would open the game by remarking that he had picked up some interesting information about an Arizona mining company called Verde Grande Copper. The Morgan interests, he would confide, were quietly trying to take it over. As evidence, the Kid would produce a letter supposedly written by J. P. Morgan himself, and richly ornamented with references to other noted men of affairs. ("Today Mr. Elihu Root paid me the compliment of his august presence, and urged that we merge our interests ...") The burden of the letter would be that Morgan was so eager to get control of Verde Grande Copper that he was prepared to pay two dollars a share for as much of its stock as he could lay his hands on.

Weil would mention offhandedly that he knew of a retired farmer who owned some Verde Grande stock, and who might be induced to sell it for much less than two dollars a share, inasmuch as he probably knew nothing of Morgan's offer. Inviting the banker to go along, Weil would call on the "farmer" -- a confederate of Weil's, needless to say -- and talk him into selling his stock, 12,500 shares in all, for 10 cents a share. With the banker still in tow, Weil would take the stock to a nearby city. There, another confederate, posing as a broker authorized to act on Morgan's behalf, would buy it for two dollars a share, handing over $25,000 for stock that had cost Weil only $1250. After this demonstration, known as the "convincer," the banker was almost certain to ask Weil to cut him in on any future deals of this kind, and Weil would generously promise to do so.

The banker would not have long to wait. Weil would locate another Verde Grande stockholder -- this one, say, a rich grain merchant owning 250,000 shares and willing to part with it for a dollar a share. The banker, his pulses pounding at the prospect of a quick 100 percent profit, would remind Weil of his promise, and Weil would agree to let him buy 50,000 shares on his own account. At the grain merchant's insistence, the two men would pay for the stock in cash, the banker putting up $50,000, and Weil $200,000. (To conserve working capital, Weil would make his contribution in the form of "boodle" -- currency made up in bundles with $100 bills on the outside and one-dollar bills inside.) With the 250,000 shares in hand, they would set out for the office of the broker where the banker had earlier been given the convincer. Somewhere en route, Weil would slip away, leaving the banker to search in vain for his benefactor, for the accommodating broker, and for his missing $50,000.

Weil was also noted for his virtuosity at the classic stock swindle called the Rag. In this con game, as it was played between 1910 and 1930, the swindler posed as an agent of a syndicate of Wall Street brokers that from time to time manipulated stock prices, and that notified him of its plans by coded telegram. The swindler would offer to share the contents of the telegrams with the victim -- usually a businessman on an out-of-town trip -- and would take him to a brokerage office. There, some modest speculative gains would encourage him to try for a big killing. When he did so, however, he would find that he had somehow misunderstood the swindler's instructions: he had bought stock on margin, it would appear, when he should have sold it short. The price of the stock would plummet, and the mark would go home broke.

Sometimes a victim would not suspect for years that there had been anything odd about the establishment where he had made his costly mistake. The brokerage office used in the Rag was, of course, simply a "store." The clerks, the manager, the office boy chalking up quotations, the speculators calling for their profits in $10,000 bills -- all were part of an ensemble made up of shills or "sticks" and known collectively as a "boost." In New York, so many stores were in operation at one period that a daily shape-up for shills was held at a saloon run by a man called Dan the Dude. "You could get any kind of stick you needed in Dan's scatter," an old confidence man once told an investigator. "Many of them made up like millionaires and some wore morning clothes and top hats. Old Man Eaton always wore a silk hat on the boost. He had a beautiful set of whiskers like Justice Hughes of the Supreme Court and was always in demand."

• • •

The con man is distinguished not only by the dishonesty of his victims, but by the fact that he stalks them in stealth and cheats them one at a time. This contrasts sharply with the methods of swindlers who openly invite the world to entrust them with its money, and who fleece their victims in batches instead of individually.

One way of doing this is to invent an imaginary enterprise, and to get people to invest in it by paying dividends out of the capital that the investors themselves contribute. This system, which has much in common with the chain letter -- the earliest investors may make out fine -- is often associated with the name of Charles Ponzi, who promised some 40 years ago to make Bostonians rich if they would let him use their money to finance something called International Postal Reply Coupons.

This particular variety of fraud may be better illustrated, however, by the work of a Chicago stockbroker named Leo Koretz. His schemes were not only more beautifully embellished than Ponzi's, but he was, on moral as well as esthetic grounds, a more engaging figure. Ponzi, like most swindlers who offer their wares on the open market, didn't care whom he cheated. Koretz tried hard to bilk only the rich. Once, it is true, he let his secretary invest $3000 in one of his enterprises -- but he apparently took her money only to keep from hurting her feelings.

Koretz launched his soak-the-rich program in 1916. He began by telling people casually that he had taken a little flyer in Panamanian timber. Soon afterward, according to W. A. Swanberg's admirably detailed account of his career, his style of living underwent a spectacular change. He moved into a 21-room mansion in suburban Evanston, and began arriving at his office in the Loop in a maroon Rolls-Royce brougham driven by a chauffeur in plum-colored livery. Koretz confided to a few friends that he owed all this to Panamanian mahogany, which he said grew like hay along the Bayano River, where his holdings happily were situated. After some coaxing, he agreed to share his good fortune. He organized a company called the Bayano Timber Syndicate, and within a year let himself be talked into selling his friends, and their friends, half a million dollars' worth of its stock.

But the money did not keep coming in fast enough to suit Koretz. His business expenses, to be sure, were minimal. They consisted mainly of paying the stockholders a five-percent dividend every six months (out of capital, of course, not (continued on page 119) Master $Windler$ (continued from page 82) profits); sending himself telegrams, ostensibly dispatched by executives of furniture companies, begging for bigger allotments of Bayano mahogany; and renting a suite at Chicago's Drake Hotel where a few of the most important stockholders were privileged to drop in and get the latest news from Koretz himself, who generally gave it to them from behind a huge mahogany desk made -- or so a brass plate proclaimed -- from the first log ever cut at Bayano.

Koretz' personal expenses, however, were something else again. Besides the house in Evanston, he was now maintaining two Rolls-Royces, a Pierce Arrow, a 60-foot yacht, a night-club hatcheck girl in New York, a manicurist in Hot Springs, Arkansas, and two Chicago girls, one of whom he kept in an apartment handy both to his Loop offices and to the Drake.

In 1920, Koretz decided to stop trying to live on mahogany alone. He jubilantly showed some of the biggest investors in Bayano Timber a cablegram, datelined Panama City, that read in part: Four More Gushers Struck at Bayano. our Geologists Predict 400,000 BBL Daily Minimum ... Please Rush Arrangements for more men, Tank cars, Pipeline and Equipment ...

A Bayano Oil Syndicate was formed, and Koretz accepted hundreds of thousands of dollars from well-to-do Chicago-ans so eager to buy stock in it that they were ready to pay as much as twice the par value of $1000 a share. Koretz continued to use telegrams as his chief sales aids. Once he took a boatload of investors for a cruise on Lake Michigan. A speedboat overtook them, and a messenger came aboard and handed Koretz a telegram. It was, as the guests could see when Koretz handed it around, an offer from Standard Oil to pay $25,000,000 for a controlling interest in Bayano Oil. A guest asked in an awed whisper if Koretz planned to sell. "Not today," Koretz said. "Standard Oil can run their own little party. We'll run ours. How about another drink?"

To keep stock in his Bayano enterprises moving briskly, Koretz raised his dividend rate: first to five percent quarterly, then to five percent monthly. He also formed a new company to raise bananas, cocoa, sugar and coffee on the fertile banks of the Bayano. But in 1923 the economic development of the fabled area halted abruptly. A delegation of stockholders made a trip to Panama to see this wonderful river for themselves, and they were unable to find any oil wells, logging camps or banana trees along its shores -- or, indeed, to find anything much except snakes and swamps.

The Illinois authorities were equally unsuccessful in finding Koretz. In late 1924, however, word reached Chicago of a man going by the name of Lou Keyte who had recently bought a large estate near Halifax, Nova Scotia. He had also bought a yellow Rolls-Royce, two other cars, a yacht, four saddle horses, $8700 worth of liquor, and four suits of custom-made silk pajamas lined with rabbit fur. Keyte described himself as a writer. To prove it, he invited Zane Grey to his house for some literary talk when the latter was in Nova Scotia on a fishing trip. Grey was a little startled when they were joined by a toothsome brunette in a negligee, but Keyte explained that she was his secretary, adding that "Whenever I get an idea, I fire it at her."

This sounded like Koretz, and it was. He was brought back to Chicago, pleaded guilty to embezzlement, and died in prison shortly afterward. The total losses suffered by investors in his Bayano companies were set officially at around $2,000,000. The figure would doubtless have been higher if all of Koretz' victims had owned up to their gullibility.

• • •

Another imaginary enterprise of impressive scope and duration was set in motion in the 1920s by a man calling himself F. Donald Coster, who was president at the time of McKesson & Robbins, then and now an important drug-manufacturing concern.

Coster, whose real name was Philip Musica, brought to the creation of his masterwork nearly a quarter century's experience in the faking of sales orders, cashbooks and other forms of business records. His first swindle involved the use of false bills of lading to cheat the United States Government out of import duties on cheese that Musica and his father were in the business of importing from Italy to New York. Later he devised a scheme for borrowing money from banks on the security of fake invoices. This landed him in prison for three years. Then, after Prohibition had gone into effect, he found another and safer way to make use of phony documents. He set himself up as a manufacturer of shampoos, hair tonics, and liniments, and arranged to have department-store buyers give him large fictitious purchase orders. On the strength of these orders, he would get Government permits allowing him to buy denatured alcohol -- which was, not at all by coincidence, a major ingredient of every product he was making. Musica would actually use the alcohol to mix up batches of Dandrofuge, Painophobe and other items in his product line. Then, instead of shipping the stuff to the department stores, he would sell it to bootleggers for conversion into what passed in those days for gin and whiskey.

The profits were good, and Musica, or Coster as he was now known, could soon afford to branch out. In 1926 he paid $1,000,000 to buy McKesson & Robbins. Under his management, the company grew with such phenomenal speed that by 1937 it was reporting sales of $174,000,000 and earnings of $4,000,000.

This remarkable showing was largely due to a series of legitimate, and highly advantageous, mergers put through by Coster. But part of the company's growth could be attributed to its successful speculations in oil of snakeroot, dragon's-blood powder bright, Ketone musk, and other so-called crude drugs traded on the world market. This end of the business was handled personally by Coster, who had given his fellow directors on the board of McKesson & Robbins to believe that he had become an authority on crude drugs while earning an M.D. and a Ph.D., in chemistry, at the University of Heidelberg. The impression was borne out by Coster's stiff, Teutonic manner, and by the fact that the crude-drugs division invariably reported a nice profit.

Actually, the performance was a complete sham. The huge sums on the company's books that supposedly reflected its investment in crude drugs -- by 1938, the figure had risen to $21,000,000 -- reflected nothing at all. There were no profits from Coster's transactions in crude drugs, for the simple reason that he never really bought or sold any. He only pretended to do so in order to siphon money out of the company's treasury, and into his own pocket, through the payment of commissions on fictitious sales and by similar devices.

To carry out the pretense, Coster made use of seven imaginary business firms. One was a fictitious Montreal bank. Five were Canadian wholesale houses that supposedly bought drugs for McKesson & Robbins' account and stored them in warehouses in Montreal. And one was a firm called W.W. Smith & Co. that was cast in the role of sales agent for the crude-drugs division.

This last firm, whose letterhead listed branches all over the world, did, in a sense, have a physical existence. That is to say, the name W.W. Smith & Co. appeared on the door of a one-room office in Brooklyn. Presiding over this office was a man who called himself George Vernard, but who was really Arthur Musica, a brother of Coster's. His job was to supervise the work of a young lady who filled out, using seven different typewriters, the myriad business forms on which Coster's imaginary transactions were recorded. Vernard also employed two women in Montreal whose only responsibility was to mail letters. From time to time, for example, McKesson & Robbins' auditors, Price, Waterhouse & Co., would write to the fictitious Montreal wholesalers and ask for inventories of the crude drugs they were holding in their warehouses for McKesson & Robbins. The queries would be forwarded to Brooklyn, where Vernard would have his girl type up the inventories on the appropriate typewriters (a different one for each warehouse), put them in envelopes addressed to Price, Waterhouse in New York, and send them to Montreal to be dropped in a mailbox there.

These inventories were often more convincing to the auditors than they would have been to a crude-drug expert. Once, for instance, McKesson & Robbins appeared to have on hand a supply of Ketone musk, a substance derived exclusively from the Himalayan musk deer, so enormous that it could have been obtained only by killing every musk deer in Asia. But the Price, Water-house men knew nothing about musk or about deer or about Asia, and saw no reason to alter their opinion that the crude-drugs division was the best-run division of the company.

The auditors never did find Coster out. He might have kept up the deception indefinitely if it had not been for the recession of 1937. McKesson & Robbins' board, wanting to get the company into a more liquid financial position, instructed Coster to convert some of his crude-drug inventories into cash. This was a directive Coster could not very well carry out, and when he failed to act, one of the directors grew curious and stumbled on the astounding truth. The company was placed in receivership, and soon afterward, in December 1938, Coster killed himself.

The amount of Coster's thefts was eventually fixed at $3,200,000. Surprisingly, he had been almost broke at the time of his death, and McKesson & Robbins was able to recover very little from his estate. But the company, which was restored to full financial health by 1941, did collect more than $2,000,000 from persons who had abetted Coster, innocently or otherwise. Among them were the partners of Price, Waterhouse, who paid $522,000 as a sort of enforced tribute to what someone described as Coster's "ceaseless experimentation with the limitations of accountancy."

• • •

The form of swindling that has doubtless cost Americans the most money is not the confidence game nor, for that matter, any of the varieties of fraud in which the swindler and his victims meet face to face. It is, rather, the large-scale, impersonal stock fraud in which the swindler functions like a manufacturer, turning out as his product securities that have little or no intrinsic value, but that are designed to command high prices when properly merchandised and sold through boiler rooms.

One of the most notorious swindlers of this school was George Graham Rice. Rice, whose victims are estimated to have lost $100,000,000, most of it in the 1920s, by investing in stocks that he promoted, used to prepare the way for the dynamiters who sold his securities by putting out a daily paper called the Iconoclast. Rice got the confidence of his readers by denouncing the perfidy of Wall Street brokers and investment bankers. Now and then, however, the Iconoclast would discover and recommend the stock of a company that had escaped the clutches of the Wall Street crowd -- and which was invariably controlled, though the Iconoclast would neglect to say so, by George Graham Rice.

Rice was particularly good at breathing a spirit of romance into his stock tips. One of his companies, for instance, was named Colombia Emerald; according to the Iconoclast, it was the owner of a fabulously rich Inca mine that had just been rediscovered, under the foundations of an old church, by a Catholic priest. Unlike Koretz, Rice thought a company should have real assets, and Colombia Emerald did have a mine of sorts, from which it even managed to extract some emeralds. It later appeared, however, that they had been put there by Rice.

The 1929 crash, and the establishment of the Securities and Exchange Commission, shut down the boiler rooms. But they reopened after the war, and by 1956, when the SEC began a campaign against them that has for the time being thinned their ranks, there were at least 40 operating in New York City alone. Many of their proprietors were men whose only qualifications as stock brokers were distinguished-sounding names. One boiler room, for instance, was run by a man named Cornelis de Vroedt, a former singing waiter who told the SEC he had switched to the brokerage business because his wife objected to his working nights. The proprietor of another establishment was named George F. Rothschild, "This is the house of Rothschild," his salesmen would announce when calling a prospect to offer him some soggy Canadian oil stock.

Among the leading figures in the postwar boiler-room renaissance was Alexander Guterma. Now in his middle 40s, Guterma came to the United States in 1950, claiming to be the son of a Czarist general. He was soon living like a Greek shipping magnate. He owned a Dual-Ghia sports car, two or three Cadillacs, a 90-foot yacht and a Convair plane.

Guterma owed his affluence to a variety of activities for which he is now serving time in the federal penitentiary in Atlanta. Among other things, he stole the assets of companies he controlled, induced a bank officer to make him unauthorized loans, and engaged in market-rigging. Once, when business was a little slow in the United States, he flew to the Dominican Republic and tried his hand at swindling the late General Rafael Trujillo. Guterma had just acquired control of the Mutual Broadcasting System, and he offered its facilities to Trujillo for the dissemination of pro-Dominican propaganda. As a sample of what Trujillo might expect, Guterma arranged for Mutual to carry a couple of special beeper-phone reports from Ciudad Trujillo. He also got Walter Winchell to broadcast the news that Porfirio Rubirosa, the noted Dominican ladies' man and a former son-in-law of Trujillo, was going to produce a movie on location in the Dominican Republic. Guterma assured the dictator that if he were given some money to play around with, he could get stuff like this into millions of American homes on a regular basis. Trujillo obligingly handed over three quarters of a million dollars in cash. Guterma took the money to New York in an attaché case, paid off a number of people who had helped him swing the deal, sold his controlling interest in Mutual, and forgot about Trujillo's public relations problems. This caper eventually got Guterma into legal difficulties -- not because he had swindled Trujillo, but because he had neglected to register as an agent of the Dominican government.

Guterma also may well have supplied more watery stock to boiler rooms than anyone else in this line of business during the 1950s. To discourage such activities, the law has provided since 1934 that new stock issues must be registered with the SEC. This means that the company issuing the stock must make public complete and accurate information about itself. Guterma got around this inhibiting requirement by taking advantage of an SEC rule applying to corporate mergers. The rule, which has since been revised, provided that stock issued to effect a merger, rather than for sale directly to the public, did not have to be registered.

Guterma's modus operandi may be illustrated by the history of Shawano Development Corporation. Guterma organized Shawano in 1953, with himself as president, for the ostensible purpose of growing a fiber called ramie. But he didn't do much with the company until 1955, when he launched what was advertised as a "dynamic program of carefully planned expansion and diversification." In the course of a few months, Shawano acquired, through mergers, a dairy herd in Florida, mercury-mining claims in Nevada and Oregon, oil wells in Kansas, uranium deposits in the Poison Basin area of Wyoming, and a Miami resort hotel called the Isle de Capri. In each case, the properties were acquired by giving the sellers big blocks of new Shawano stock, which they then turned over to boiler rooms to be sold. Since the stock had not been registered with the SEC, the public had no chance to find out that the oil wells and other assets picked up by Shawano were mainly junk that had been unloaded on the company, at enormously inflated valuations, by Guterma and his friends.

To help move the stock, Guterma arranged to have it touted by a less-than-independent market letter called DuVal's Consensus, which carried on excitedly about ramie ("strong enough for tarpaulin [sic], yet sheer enough for a negligee") and about Shawano's "oil 'sleeper' which alone is worth several dollars on every share." All told, nearly 18,000,000 shares of Shawano stock were sold by boiler rooms, most of it at from one dollar to two dollars a share. But the oil sleeper remained a sleeper -- Guterma, it developed, had overestimated the size of Shawano's oil reserves by about 1000 percent -- and by 1957 the price of Shawano stock had sunk to a more realistic level of a few cents a share. At this point, Guterma abandoned Shawano. Soon afterward, it went into bankruptcy, a fate that overtook most of the companies he had anything to do with.

• • •

Boiler-room swindles are closely related, from a technical standpoint, to the kind of financial piracy in which the swindler buys enough of a corporation's stock to put him in control, installs himself as president, and loots its treasury -- typically, by means of deals with dummy corporations that he himself owns.

One of the most ingenious looters of recent years was a minister's son named Lowell Birrell. Birrell is now in semiretirement in Rio de Janeiro, a circumstance that arises from his indictment in New York in 1959 on charges of larceny and fraud, and from the fact that there is no extradition treaty in effect between the United States and Brazil. When he was still in this country, and at the peak of his career, Birrell led the sort of life that ministers' sons are traditionally supposed to yearn for. He had a 1200-acre estate in Bucks Country, Pennsylvania, where he threw parties that went on for days. He drank heavily. He sometimes stayed up carousing all night for two or three nights in a row, refreshing himself now and then by catnapping in a telephone booth or with his head on a nightclub table. He liked to have a pretty and complaisant girl within easy reach at all times.

(Although it may only be that their private affairs more often become public than those of more orthodox businessmen, swindlers seem to crave an exceptional amount of variety and action in their sex lives. Yellow Kid Weil said that he took up swindling so that he could afford beautiful women, and much of the money that he stole from bankers was spent on showgirls. Serge Rubinstein, on the day before he was strangled in the bedroom of his Manhattan town house, had lunch with one ladyfriend, dined with another, and at two o'clock in the morning was calling for further female companionship. BenJack Cage, a Texan who is now on the lam in Brazil, once listed on a single expense voucher, which he turned in for payment to an insurance company he was looting, the names of five girls on whom he had spent a total of $3100. When he was not on the expense account, Cage is said to have combined business with pleasure by giving friendly young ladies shares of stock in his companies.)

Birrell was so adroit at stealing corporate assets that when the stockholders got around to locking the barn door the whole structure was sometimes on the verge of collapse. One company from which Birrell stole many millions of dollars was Doeskin Products, a leading maker of facial tissues. He began by buying control of the company with its own money: that is, he sold Doeskin certain highly dubious securities -- they included debentures of an enterprise called the Beverly Hills Cemetery, located in Peekskill, New York -- and used the proceeds to buy out the controlling stockholders. Later, he had Doeskin issue 700,000 shares of its stock, with a value at then-current prices of around $8,000,000, to effect an exchange of assets between Doeskin and another publicly held corporation controlled by Birrell. The exchange never took place, however. Birrell simply assigned the shares to Canadian nominees who arranged, on his behalf, to have them sold to the public by New York brokers.

In 1957, Birrell ostensibly cut his ties with Doeskin. But he managed to go right on looting the company, even after he had left the United States to begin his self-imposed exile. He did this by contriving, before he resigned as Doeskin's chief executive officer, to have the company issue 1,070,000 new shares of stock. The stock was supposedly purchased, for two dollars a share, by a syndicate of Cuban and Venezuelan investors. Records on file at Doeskin's headquarters in New York indicated that $2,140,000 had duly been deposited to Doeskin's account in a Havana bank -- and immediately thereafter transferred to the account of a subsidiary of Doeskin's, and then to a subsidiary of the subsidiary, for investment in "Cuban natural resources."

In reality, however, there was no $2,140,000 payment. To make it seem that this sum had been in Doeskin's pos- session, at least fleetingly, Birrell had organized a check ring: worthless checks drawn on one account were "covered" by the simultaneous deposit of equally worthless checks drawn on another account. The Cuban-Venezuelan syndicate was, of course, Birrell himself.

Through intermediaries, Birrell brashly sold some of the stock he had acquired back to Doeskin. He used the rest to keep a tight grip on the company's affairs, acting through stooges whom he installed as executives and who voted the stolen stock at annual meetings. With their help, he milked the company in a variety of ways. He got Doeskin to hand over $52,000 to one of his bagmen as a commission on the fictitious stock sale to the Cuban-Venezuelan syndicate. He had dummy corporations file phony claims against Doeskin, and arranged for Doeskin to pay them. He organized companies to take over the trucking and packaging of Doeskin's products -- on terms considerably more favorable to Birrell than to Doeskin.

After draining off most of the company's liquid assets, Birrell almost succeeded in selling his Doeskin stock. A Virginia paper company, which had no notion it was being offered stolen merchandise, agreed to pay $750,000 for it, and made a $60,000 down payment. The deal fell through when Birrell and his accomplices in the looting of Doeskin were indicted for fraud.

So far as anyone can tell, Birrell is no longer milking Doeskin. But his style of life in Rio de Janeiro, where at last report he had installed an old girlfriend in one of the city's most expensive apartment buildings, does not suggest a man pinched for cash. He has, in fact, become a tourist attraction, pointed out proudly to visitors as he sits in bars along the Copacabana, buying people drinks and talking about the wonderful promise that Brazil holds for a businessman of vision and imagination.

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Successful swindlers are usually regarded by their fellow men -- excluding those whom they have victimized -- with a tolerance and even with a certain admiration that is seldom accorded other criminals. One reason for this is that a man whose thefts run upward into the millions inevitably inspires awe. Another is that intellectual feats, in crime as in other spheres, tend to command more respect than those that are purely physical, and swindling demands a particularly high order of intelligence. Swindlers have often, in fact, been notably precocious. Birrell, for example, graduated from college at the age of 18, and Rubinstein was running a bank when he was still in his 20s. Furthermore, swindlers are likely to possess in large measure such enviable traits as daring, resourcefulness and imagination. And while effrontery is perhaps not generallyaccounted a virtue, it is hard not to admire the gall of a man like Koretz, or like Guterma, who once remarked, in the days of his prosperity, that his companies thrived because "they are run by a goddamn genius."

But it is not only intelligence and gall that mark the master swindler off from the general run of criminals. His special status also derives from the nature of his offenses. However deplorable his motives, the swindler's crimes are somewhat mitigated by the fact that as a rule only the greed and gullibility of his biggest victims makes them possible in the first place. The swindler's depreciations may, indeed, be read as social comment. Among other things, they demonstrate that the headlong pursuit of material gain often blunts the ethical sensibilities of the pursuer.

This point has never been driven home with more stunning force than it was, a generation ago, by Ivar Kreuger. Before his exposure as a swindler, Kreuger commanded a worldwide admiration and respect that few if any other businessmen have ever enjoyed. In the 1920s, Kreuger bolstered the finances of one European government after another by lending them huge sums of money. In return for the loans, he obtained monopolies for the manufacture and sale of matches that put him eventually in control of three quarters of the world's match business. His integrity was unquestioned, and in public-opinion polls the securities of his companies were often named as the safest in the world.

Yet it became clear after Kreuger committed suicide in 1932 that this "Puritan of finance," as the New Statesman of London eulogistically described him, had undoubtedly been the biggest thief in history. To be sure, some of the $650,000,000 that Kreuger had raised through the sale of securities, or by borrowing from banks, had been used for legitimate business purposes. But large amounts had simply been paid out in the form of dividends. And at the same time that Kreuger had been reporting imaginary earnings to justify these dividends, tens of millions of dollars, which supposedly were being spent by his companies to secure match monopolies through secret agreements, or to conclude other deals of a highly confidential kind, were in reality being diverted into Kreuger's own pocket via shadow firms and bogus banks in Zurich, Amsterdam and Liechtenstein.

It was never established just what Kreuger did with all this money. He lost millions, shortly before his suicide, frantically trying to make a killing in Wall Street. He was undoubtedly blackmailed for large sums. He also spent a lot of money on his own comfort and pleasure. He had, among other dwelling places, a 23-room duplex apartment in Stockholm, three country places elsewhere in Sweden, an apartment in Paris, a suite at a hotel in London, and a penthouse on Park Avenue in New York where he grew fruit trees and flowers in a seven-foot-thick bed of soil imported from France. He kept mistresses in just about every major city in Europe, and had frequent affairs of a more transitory kind.

Kreuger's stature as a swindler is derived from more than just the amount of money he stole. His record is further distinguished by the caliber of the people he duped. The securities that he sold in America -- a quarter of a billion dollars' worth in the 10 years before he died -- were not palmed off on the public by cynical dynamiters. They were underwritten by eminent bankers, supposedly shrewd and sophisticated men, who believed in Kreuger quite as strongly as did the people to whom they sold his watery stocks and bonds. In the case of Lee, Higginson & Co., the old Boston banking house that floated most of Kreuger's American issues, this belief is attested to by the fact that partners in the firm, and their families, lost $8,000,000 when the Kreuger bubble burst.

The faith that Kreuger inspired in American financial circles rose in part from his wealth, his somber dress, his polished bearing and his nationality (who could conceive of a Swedish swindler?). Americans were also impressed by Kreuger's European connections. They were undeniably lofty, and Kreuger made them seem loftier still, when his American bankers dropped in at his headquarters in Stockholm, by holding imaginary conversations with leading European statesmen on a bogus telephone that he could ring by pushing a concealed button.

Kreuger's thefts were made easier, moreover, by the atmosphere of the 1920s, a time when almost everybody believed in magic. If Kreuger was extraordinarily secretive about his dealings, and if some of the profits he reported seemed altogether too good to be true -- well, why ask rude questions as long as the dividends were coming in?

It is customary, and doubtless accurate, to note that changes in American law and customs would make it impossible for anyone to duplicate Kreuger's feats today. But the exploits of Guterma and Birrell suggest that not all of us are prepared to let institutional or legal reforms interfere with the God-given right to be swindled, and another Kreuger might well succeed merely by using other materials, and following other architectural plans, in the construction of his financial fictions. As Kreuger once remarked, "I've built my enterprise on the firmest ground that can be found -- the foolishness of people."