Kaadt, Charles Frederick, d.1957, and Kaadt, Peter, d.1951, U.S., fraud. The Kaadt brothers of South Whitley, Ind., claimed to have the only reliable cure for diabetes. They discounted the 1923 breakthrough by Canadian physician Dr. Frederick Banting. Dr. Banting won a Nobel Prize for the discovery of insulin, the first effective treatment for the disease. Charles and Peter Kaadt, meanwhile, mixed a useless solution of saltpeter and vinegar and advertised it as a miracle cure in Home Circle magazine and Pathfinder.

The Kaadt brothers were both licensed physicians, having received their medical degrees at the turn of the century. By 1936, people from all over the Midwest began to visit the new "Diabetic Laboratories" in South Whitley, Ind., hoping to receive the permanent cure. "It is not necessary to use insulin," Dr. Charles wrote to an inquirer. "The length of the treatment varies from three
to seven months depending on the severity of the case."

In 1938 the Post Office began an investigation after receiving numerous complaints about the advertisements. Charles Kaadt was indicted for mail fraud, but the case collapsed when several witnesses unexpectedly died. Encouraged by the verdict, Dr. Charles resumed his "practice" but swore off the U.S. postal system to advertise the "cure." The Better Business Bureau was next in line to question the Kaadt's practices. Their two-year investigation revealed that the brothers were grossing more than $60,000 a month. The Food and Drug Administration acted quickly. Peter Kaadt's license to practice in Indiana was revoked and the Diabetic Institute closed down.

On Apr. 4, 1948, the brothers were indicted on seven counts of medical fraud. R.N. Harger, a biochemist from the University of Indiana, testified that their solution was of no medical value, and that prolonged use resulted in irritation to the kidneys and the intestines. The jury found the brothers and the clinic superintendent Guilty on all charges. However, the jury recommended leniency in the case of the superintendent. On May 4, Judge Patrick Stone sentenced each of the brothers to four years in prison, and assessed them a $7,000 fine. Dr. Peter Kaadt was released shortly before his death in 1951. His brother Charles completed his sentence and died in 1957.

Kammerer, Paul, d.1926, Aust., hoax-suic. In the 1920s, Dr. Paul Kammerer of Vienna was hailed by his colleagues for making "perhaps the greatest biological discovery of the century." Commenting on Kammerer's experiments with midwife toads, Professor G.H.F. Nuttall of Cambridge University said "he begins where Darwin left off."

Kammerer, the so-called "Modern Darwin," concluded that male toads raised on land lost their egg-carrying habits over several generations. But the toads who grew to maturity underwater developed "nuptial pads" on their thumbs, a common occurrence among water frogs. The pads were used to hold the toads' mates underwater. Kammerer's findings were published in book form in 1924 as The Inheritance of Acquired Characteristics. Dr. G.K. Noble of the American Museum of Natural History in New York was skeptical, however. He examined several of Kammerer's specimens and noticed that the blackened thumb pads lacked the usual epidermal spines. He noted a laceration on the toads' left wrists, and black ink washed out of them during dissection. Noble reported his findings in the Aug. 7, 1926, issue of Nature. Someone had perpetrated a scientific fraud. Kammerer blamed a laboratory assistant, but was so thoroughly discredited that he decided to commit suicide. He wrote to the Communist Academy in Moscow, where he was scheduled to receive a scientific award: "I find it is impossible to survive my life work's destruction. I hope to find tomorrow sufficient courage and fortitude to end my wretched life," which he did.

Katterfelto, Gustavus*8, d.1799, Brit., fraud. Passing himself off as a worldly philosopher and scientist, Gustavus Katterfelto swindled Londoners with his sleight of hand tricks and medicine show for nearly three years. In 1782, he claimed to have invented the Solar Microscope, which he used to detect a deadly plague similar to the Black Death. According to Katterfelto, there was only one known cure--a "scientifically tested" potion, attributed to Dr. Batto, and available for five shillings per bottle.

Katterfelto opened a sideshow in Piccadilly and hawked medical wonders to the public and advice to gamblers. At the time, an alarming outbreak of influenza devastated London. During the epidemic, Katterfelto cleared nearly £25,000.

In 1783, business dropped, forcing Katterfelto to sell his holdings at a loss. A year later, he introduced his latest gimmick: an invention to demonstrate perpetual motion. By this time, people were onto Katterfelto. Broke and out of favor, he was arrested for vagrancy. He died in Bedale, Yorkshire, in 1799.

Katzen, Morris (AKA: Saint George), prom. 1973, U.S., fraud. According to Morris Katzen, the secret of healing came to him while he was in a trance-like state aboard a ship in the Persian Gulf. "The best natural healing," he later wrote, "is accomplished by retaining the sexual fluid; by retaining the wind; and by not being too hasty with bowel movements."

Katzen published his "discovery" in two books: Keys to Life, and The Elixir of Life. He initiated a direct mail blitz which the U.S. Postal Department considered to be highly suspicious. Mail fraud charges were filed in February 1973. Katzen's assertion that the First Amendment guarantee of non-interference in religious matters protected him was hastily discounted by the Post Office Judicial Officers.

Keating, Charles H., Jr., 1924- , U.S., securities fraud. After Irvine, California-based Lincoln Savings & Loan collapsed, its chairman, Charles H. Keating, Jr. was the target of a federal civil suit alleged violations of the Racketeer Influenced and Corrupt Organizations Act (RICO). Keating and his fellow executives of American Continental Corp. were accused of buying the hapless savings and loan in order to divert its funds to themselves through "illegal, fraudulent and imprudent acts." According to the federal regulators who filed the suit, these acts included concealment of illegal cash payments, forgery, and false and misleading statements made to the regulators.

After the suit was filed, it was revealed that Keating had made substantial campaign contributions to five United States senators, who in turn had lobbied the federal regulators not to pursue their investigation of Lincoln's finances too closely. The senators, Alan Cranston of California, Dennis DeConcini and John McCain of Arizona, John Glenn of Ohio, and Donald Riegle of Michigan, were cleared of any wrongdoing, but having their names dragged into the S&L scandal as the "Keating Five" cast a pall over their political reputations.

Keating's troubles continued in November of 1989, when more than sixty federal agents and plainclothes Phoenix, Arizona police officers seized two luxury hotels that had been centerpieces of Keating's financial empire. As if to signal the end of his economic power, the agents sealed off Keating's office and proclaimed that he would no longer function as president of the hotel management company. When a congressional committee investigating Lincoln's economic collapse subpoenaed Keating to testify less than a week later, Keating pleaded the Fifth Amendment, stating, "On the advice of counsel, I respectfully exercise my constitutional prerogative and privilege and decline to answer questions here today." His brief silence during a ten-hour House Banking Committee session served to emphasize the trouble in which regulators found themselves.

Danny Wall, director of the federal Office of Thrift Supervision, testifying before the committee the same day, acknowledged that he and other regulators made mistakes in not having earlier caught illegal activities at Lincoln, but that fraudulent statements by Lincoln's officers had misled them. Political pressure had not influenced the regulators' procedures, Wall testified, but the circumstances of the hearing cast Wall and his colleagues more as investigative subjects themselves than as the lawmen who brought a fraud to light. Said Congressman Jim Leach of Iowa, a member of the Banking Committee, "Keating is at fault because he is a bank robber, but we in Washington made it, in part, a legal bank robbery."

On September 18, 1990, Keating was indicted on criminal fraud charges in a Los Angeles court. In keeping with his status as a monetary mogul, bail was set at $5 million. Indicted with him were 42-year-old Judy Wischer, who had been president of American Continental; 32-year-old Ray Charles Fidel, the former president of Lincoln; and 37-year-old Robin Scott Symes, Lincoln's one- time chief executive officer. There were those who thought it symbolic of an age of greed that Keating's co-defendants were all members of a younger generation.

Keating and his associates got a break in November 1990, when 22 of the 42 charges against him were dropped due to their being "too vague." Despite this legalistic leniency, however, the trial went ahead in the summer of 1991. Keating was accused of selling "junk bonds," high-risk but potentially high-yield securities that promised the possibility of profit for investors, but then keeping the proceeds himself.

A highlight of the courtroom proceedings occurred on August 2, 1991, the first day of trial, when a diminutive 90-year-old former Lincoln investor lost her composure and began screaming at the six-foot, five-inch Keating, then grabbed the lapels of his tailored suit and demanded her money back. Before bailiffs were able to escort her from the courtroom, she also punched Wischer's defense attorney, Abbe Lowell, in the stomach. Superior Court Judge Lance A. Ito said he might order searches of anyone entering the court from then until the end of the trial, while outside demonstrators heckled Keating with taunts of "Pay it back, Charlie," and "Mr. Cheating, where's our money?" Throughout the proceedings, Keating maintained his innocence.

After a trial in which the defense called no witnesses, however, Keating was convicted on 17 counts of securities fraud. Keating, his son, Charles H. Keating III, 36, Wischer, Robert M. Wurzelbacher, 37, and Andrew F. Liggett, 34, all former American Continental officers, were indicted anew in December 1991 on charges that they conspired to operate an illegal financial scheme.

When the case went to trial in Tucson in March 1992, Keating again took the Fifth Amendment. Nevertheless, Keating was again convicted. Before his sentencing, more than 120 people wrote letters to the judge to plead for clemency, including Mother Teresa, who vouched for Keating's generosity in support of her charitable works in Calcutta. On April 10, 1992 Judge Ito sentenced Keating, by now 68 years old, to ten years in state prison and a quarter-million dollar fine. Explained the judge, Keating deserved the maximum sentence he received because of the large number of victims of Keating's fraud--more than 17,000--and the vast amount of money, an estimated $250,000,000, they collectively lost.

Keating and his son were on trial yet again the following winter. A federal jury in Los Angeles convicted the elder Keating of 73 more counts of racketeering, fraud, conspiracy, and transporting stolen property. His son was convicted on 64 counts. Regarding the veracity of Keating's testimony at this trial, which denied wrongdoing and accused regulators of pursuing a personal vendetta, one juror remarked afterward, "I don't want to hurt his feelings, but we all felt we would have liked to have one of those fake expanding noses that grows longer and longer. We just didn't think any of it was valid."

Keely, John E. Worrell, prom. 1872, U.S., fraud. In 1872, John E.W. Keely announced an invention that could power a thirty-car train from Philadelphia to New York using just a quart of tap water for fuel. The hydro-pneumatic -pulsating vacue machine whirred, hissed, and pulsated before the astonished eyes of potential investors. Keely was reluctant to show the device, but he invited select customers to his Philadelphia plant to demonstrate his machine's applications, like shredding iron and sending bullets into planks a foot thick. The pressure gauge showed the machine generated 50,000 pounds per square inch.

The Keely Motor Company made thousands of dollars by selling worthless shares to investors. The machine was just an elaborate gizmo hooked up to a hidden compressed air assembly. But it took investors years to figure it out. "With these three agents alone--air, water, and machine--unaided by any and every compound, heat electricity, and galvanic action, I have produced in an inappreciable time by a simple manipulation of the machine, a vaporous substance at one expulsion of a volume of ten gallons having an elastic energy of ten thousand pounds to the square inch...It has a vapor of so fine an order it will penetrate metal," Keely said. His fraud was exposed after his death.

Knetzer, Robert L., prom. 1948, U.S., fraud. Robert Knetzer weaseled his way through life. As a con man car salesman in Edwardsville, Ill., he accepted cash installments for cars he had no intention, or way, of delivering. The law finally caught up with him in 1948, charging him with fraud. However, Knetzer died of a heart attack before he could come to trial.

Knetzer left a bankrupt legacy behind. Specializing in Cadillacs and Chevrolets, he asked his enthused car customers for $1,000 down, with the promise of delivery in thirty to ninety days. When he came through with a car, which he did about one-fifth of the time, he asked for an additional $750. But Knetzer was buying the cars he sold for $2,500 each. He was losing $750 with each sale. In business two years, Knetzer was able to convince enough people to put $1,000 down that he amassed $5 million and delivered 1,300 cars. Spurred by reports from investigative journalists in St. Louis, Mo., and complaints of competing car dealers, the state's attorney eventually figured out Knetzer's game. Knetzer was using his backlog of deposits to buy the occasional car. Police believe he probably hoped to someday make money using the deposit cash to turn some super deal.

Knoop, George F. (AKA: John L. Deviland), 1933- , U.S., fraud. George Knoop's private life was in a shambles and his business debts were piling up. On Mar. 27, 1964, he drove from his home in Las Vegas, Nev., to Lake Mead. He parked his car and walked to the edge of the water, where he donned scuba diving gear. Knoop left his clothes in the sand and swam out to the deep water, by all appearances, a desperate man ending his life. But sometime later, Knoop re-emerged on shore to enter a waiting car registered under the name John L. Deviland.

Knoop went to Los Angeles and applied for a new Social Security card in the name of Deviland. He established residence in El Segundo, Calif., and went to work as a machinist. Meanwhile, his wife, Janice, returned to her home in Cedar Falls, Iowa.

She was in on the scheme with her husband, and planned to collect $23,000 in insurance money from a claim of "death by accidental drowning." She married a college teacher named Chester McNelly and forgot about her ex-husband.

An anonymous tipster notified police in January 1967 that Deviland, who had since married a 25-year-old divorcee, was not who he seemed. Detectives took Knoop into custody and charged him with failing to return $150 worth of rented scuba equipment. Knoop was soon confronted with his past. His true identity was proven by his mother and sister, who visited the dispirited Knoop in jail. The scheming Knoops both received suspended sentences.

Koch, William, b.1885, U.S., fraud. Dr. William Koch received a doctorate in chemistry from the University of Michigan, and later a medical degree from Wayne State University. His credibility as a physician was dubious. In 1919 Koch claimed to invent a cure-all serum which he called "glyoxylide," promising that the compound would cure leprosy, cancer, and tuberculosis with just one injection. Koch said that a healthy person who took the serum would be virtually invulnerable to disease. The price was $350 a shot. During the peak of his popularity Dr. Koch was making more than $150,000 a year. An investigation was soon launched and it was shown that glyoxylide was just a fancy name for distilled water. In 1942 the government clamped down on him, forcing the doctor into hiding. He re-located to Rio de Janeiro.

Koretz, Leo (AKA: Arthur Gibson, Lew Keyte), d.1925, U.S., fraud. Leo Koretz was a successful stockbroker working in Chicago. He had a comfortable, if not luxurious, home and a wife and child. He was a respected and well-known businessman who represented some of the wealthiest families in the Midwest. Over the years, his stock purchases on behalf of these millionaires proved to be sound and profitable. Koretz had the appearance of a dull investment broker. He had a middle-aged paunch, a round, flabby face, and large eyes with drooping lids that were magnified by thick-lensed glasses. Koretz may have looked like an uninspired financial adviser cogging his way through life, but he harbored the secret dream of becoming a multi-millionaire like his clients. A scheme slowly took shape in his conniving brain. He would swindle his own clients out of their inherited millions.

In 1916, Koretz began talking confidentially to a few intimate 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. He then became tight-lipped about his adventuresome 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 near Panama.

When Koretz returned to Chicago, he began to improve his lifestyle drastically. He bought a 21-room mansion and moved his family into it. He purchased a lavish summer place on Lake Michigan and 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.

Messages glowing with incredible timber and oil production and shipment continued to flood Koretz's new posh offices. The little man with the thick glasses sat behind a huge mahogany desk on which a brass plaque read: "Made from the first log cut at Bayano, Jan. 23, 1917." As investors continued to rush into Koretz's offices, they would stare at this plaque and the little man behind the ten-foot slab of mahogany, and foist enormous amounts of money upon him. He accepted their checks seemingly reluctantly, selling shares at $10,000 each. As time went on, he increased this to $50,000 a share, then $100,000 a share and still the investors littered his desk with huge checks.

The switchboard in Koretz's outer offices was constantly receiving calls from Panama and which were put through to Koretz as he sat with investors. He would straighten in his chair and beam, saying into the phone. "Arthur, are you saying that we are doubling our production on timber? How many tons were shipped? Four thousand a day? Excellent! What about the oil? Two more derricks went up yesterday? Production is up to 40,000 barrels a week? Wonderful." He would then hang up and the investors would begin writing checks.

Of course, there was no Panamanian manager running the Bayano Timber & Oil Co. Leo Koretz was the industrious Arthur Gibson, an alias he employed when setting up his long distance phone calls from Panama. He simply placed calls to various hotels and businesses in Panama, making inquiries and asking to be called back. He received these calls from total strangers talking in Spanish, and he would pretend to be getting more good news from the mythical Arthur Gibson. Koretz managed to return huge profits to his investors by simply
employing the old Peter-to-Paul routine, paying earlier investors with the money later investors made in his firm, while retaining enormous amounts for his own use. This was the same technique used by many another highbinder, notably Charles Ponzi of Boston.

It was rumored that even the redoubtable William Randolph Hearst was an investor in Koretz's fabulous enterprises. This, no doubt, came about when Hearst's right-hand editorial director and fellow newspaper tycoon, Arthur Brisbane, invested heavily in the Bayano Timber & Oil Co. Brisbane went further. He gave an enormous banquet in honor of Koretz and invited more than 500 fellow millionaires to attend in praise of Leo Koretz. The fete was held in the main ballroom of the Congress Hotel. During the festivities, a horde of newspaper boys suddenly raced into the ball room, waving extras and shouting: "Extry! Extry! Read all about it! Leo Koretz oil swindle! Con man Koretz exposed! Millions lost in swindle!" The guests were stunned into silence and several fell back in their chairs on the verge of collapse. Before anyone suffered an apoplectic attack or stroke, Brisbane quickly rose smiling, the grinning Koretz at his side.

Brisbane announced that the whole thing was a party joke. "It's a lark!" announced Brisbane, guffawing. "Mr. Koretz is a great and honorable financier!" Brisbane went on to explain that he had printed the fake extras "exposing" Koretz and that Koretz himself had helped in writing the details of the story, pointing out how his own investors had been hoodwinked. Of course, none of it was true, Brisbane assured one and all.

And to make sure that "lovable Leo Koretz" was appreciated for all he had done for his investors, Brisbane arose and, holding a spoon aloft, led the hundreds of suckers in singing the praise of the man who was, at that moment, bilking them. Koretz stood next to Brisbane and, through a pudgy smile, listened to his victims sing For He's A Jolly Good Fellow and then bowed when he was engulfed with a thunderous applause.

The party jest, however, proved all too real. It put suspicion in the minds of some of the investors who, in late 1923, sent representatives to Panama to check on Koretz's operations. They reported back that the Bayano Timber & Oil Co. simply did not exist. Neither did Arthur Gibson. And no one in Panama had ever heard of Leo Koretz. Newspaper extras then announced the bold multi-million-dollar swindle. When police arrived to arrest Koretz in his sumptuous offices, they found the arch confidence man gone. He had fled the country with one of his many show girl friends. For months the police of several states searched for Koretz. He was finally tracked down in Halifax, Nova Scotia, living like a rajah in the company of several women.

Koretz was extradited to Illinois, tried in Chicago, and convicted in December 1924. Koretz was sentenced to ten years in prison. "I'll never serve a day in Joliet State Prison," he said confidently from his cell in Cook County Jail. He did not. One of his obliging girlfriends brought him a five-pound box of candy. Koretz sat down on his prison bunk, ate the entire box of candy in one sitting, and then keeled over dead. Leo Koretz had escaped prison through one of the most bizarre suicides on record. He was an acute diabetic and the massive ingestion of sugar killed him, as he had known it would.

Kreisler, Fritz, 1875-1962, Ger., hoax. Born in Vienna, Aust., Fritz Kreisler made his concert debut playing the violin at the age of seven, and was an international star at the age of ten. While still in his teens, the child prodigy found himself in an artistic quandary: the repertoire available to violinists in the late 1800s was limited--there was really only enough violin material for one strong concert. Kreisler figured he had two choices: he could spend hours searching for undiscovered music in the forgotten corridors of Europe's music libraries; or he could compose music for himself. He chose the latter option, and since it would be arrogant for a soloist to travel around the world playing recitals of his own music, he "borrowed" some forgotten composers and claimed that he had discovered some of their long-neglected works.

The debut of a piece attributed to Gaetano Pugnani, an eighteenth-century Italian, brought raves from critics. Other short works allegedly by Louis Couperin, Nicola Porpora, and even Antonio Vivaldi were hailed as "little masterpieces." When Kreisler played one of his newly discovered pieces,"Posthumous Waltzes," by Josef Lanner, one Viennese critic chastised the violinist for performing one of his own compositions on the same bill with Lanner's "gems." Kreisler could not resist the temptation to publish a letter admitting that the Lanner waltzes were actually original works. Remarkably, this confession did not cause anyone to check into the authenticity of any of the other Kreisler discoveries.

The publisher of Kreisler's "found" pieces was aware of the maestro's secret. He agreed to publish each piece with an inscription stating that each piece was "freely treated from old manuscripts and constitutes, in fact, an original work." Still, no one caught on. The new music continued to receive praise, sometimes receiving better reviews than his violin technique.

Finally in 1935, on Kreisler's sixtieth birthday, Olin Downes, a New York Times critic, asked him about the history of the compositions. It was the first time Kreisler had been asked directly, and he acknowledged that he had composed all the pieces himself. Insisting that he never attempted to write in the composers' individual styles, he said "a child could have seen" that the pieces were not stylistically accurate. The music world split in their reactions to the admission: some found the situation humorous and fantastic; others found it a disgrace and an outrage. Nevertheless, British music critic Ernest Newman conceded that "one cannot escape the conclusion that violin literature has been pricelessly richened by this music, which has brought unmeasured happiness to thousands of listeners."

Kreuger, Ivar (AKA: The Match King), 1880-1932, Swed., fraud-suic. The safety match was invented in Sweden in 1848. The practical, innocuous little invention had already gained widespread acceptance among smokers by the time its greatest promoter, Ivar Kreuger, was born in the rustic town of Kalmer, Swed., in 1880. The man destined to become the "Match King" of the world embarked on an entirely different career path early in life. He had little time for such a "commonplace unexciting object" though his father was busily engaged in running a small, successful match business in Southern Sweden.

Following his graduation from the Royal Technical Institute in Stockholm, Kreuger decided to seek his fortune in the U.S. With less than a hundred dollars Kreuger arrived in New York in 1900. He continued to Chicago, but found the midwestern city spiritless and backward compared to Manhattan. Returning to New York in 1902 following an extended trek through Colorado, the Southwest, and Mexico, the enterprising young engineer went to work for the Fuller Construction Company. He helped build the Plaza Hotel, the R.H. Macy building, Flatiron Buildings and the Metropolitan Life headquarters- -architectural marvels of the age--before sailing to South Africa. Unsatisfactory wages, and the remoteness of Johannesburg drove the nomadic young businessman back to the U.S. in 1906. After working for a contracting firm that did extensive work in the Buffalo, N.Y., area, Kreuger went back to Manhattan where he became manager and vice-president of the Consolidated Engineering Company. He supervised the construction of Archibald Stadium and several other buildings on the campus of Syracuse University. Kreuger was greatly impressed by a new kind of iron implanted in the foundations of the structures. The process was invented and patented by Julius Kahn, a Detroit construction mogul who convinced Kreuger he should go back to Europe and sell the concept to local industry. It was timely advice for Kreuger, who had become disenchanted with the "American outlook." He returned to Sweden in 1907 "bursting with ideas."

On May 18, 1908, Kreuger entered into a partnership with Paul Toll, a 25-year-old engineer who shared his enthusiasm for the Kahn method. The two entrepreneurs hung out a shingle bearing the inscription: "The Trussed Concrete Steel Co." Within the next year they had their first important commission: an electrical plant in the small Swedish town of Gullspng. Later that year, the partners went to work on the nation's first steel-reinforced "skyscraper," a six-story department store. Kreuger demonstrated his shrewd business acumen by agreeing to pay $1,200 a day in fines for each extra day beyond the allotted four months. If they were to finish ahead of schedule, however, Toll and Kreuger stipulated that they should receive the same amount for every day saved. To meet these ends, Kreuger ordered his men to work around the clock. A Stockholm newspaper commented unfavorably on Kreuger's methods. "If this American method of building catches on, the Stockholmer will never have a quiet night again." Kreuger and Toll paid no attention to the criticism and collected a tidy bonus of $70,000 after finishing the project in a record time of two months.

In the next three years the partners established themselves as the premier building contractors of Sweden. In 1913, they decided to diversify and enter the match business. Kreuger and Toll quickly bought up and consolidated seven of the independents before setting their sights on the Jnkping-Vulcan combine. The merger was completed in 1917, and for the first time the match-making industry of Sweden was monopolized by one man: Ivar Kreuger and his Svenska Tndsticksaktiebolaget (Swedish Match Company). That same year, the partnership was split off into two separate entities. Paul Toll retained control of the contracting enterprise while Kreuger increasingly concerned himself with Swedish Match.

An intensely private man, Kreuger nevertheless entertained lofty ambitions. In 1919, he approached the Scandinavian Credit Bank and the Swedish Commerce Bank for a loan of sixty million kroner to expand the business overseas. Kreuger was given the working capital he needed, because by this time he was a highly respected and accomplished entrepreneur. Kreuger counted among his employees many down-and-out noblemen whose titles meant very little in the face of financial ruin. The Match King delighted in ordering these privileged minions about like servants. Yet his Stockholm offices were strangely silent, certainly not like any bustling, prosperous corporation. "The entire home staff of the huge match organization consists of 150 persons including secretaries," Isaac Marcosson of the Saturday Evening Post reported. "You scarcely ever see anyone as you move through the halls and never hear a sound." Kreuger was a chain smoker. Curiously though, he never carried a match. When asked about this he replied that it was "a petty superstition." It is commonly believed that it was Ivar Kreuger who invented the "three on a match" superstition, which at thevery least helped promote business.

Ivar Kreuger's intention was to monopolize the world market. Although by 1924 he controlled nearly 70 percent of industrial production, he still was not satisfied. Kreuger used the bulk of his fortune to bolster the sagging economies of Western Europe and South America, nations devastated by WWI, crop failures, and the chaos brought on by the Depression. In 1925, he loaned the government of Spain $12 million in return for a promise from King Alfonso that he would receive 16 percent in interest each year. That same year Kreuger told his investors of a similar transaction completed with Poland before borrowing money from French and American banks. "Mind you, not a word of this to the Stock Exchange or the Course," he warned. "If anything was leaked out then it would mean the end of Spain, the fall of Poland. In fact it would probably bring about war!" The scheme was deceptively simple. Kreuger issued forged shares, debenture certificates, and securities. In effect, he borrowed money from one nation to lend to another, a sophisticated version of the old "robbing Peter to pay Paul" swindle. The original debt was never repaid, for Kreuger simply altered the bank statements and balance sheets. "I will gain control by foul means or fair if I have to," he told his associates. "Do not ask to see my books. There are none--except for those I keep in my head." In 1930, he supplied Lithuania with $6 million. Another $1 million went to Danzig, $125 million to Germany, $10 million to Turkey, and an additional $32 million back to Poland. During this time Kreuger & Toll paid 30 percent in dividends through its 125 subsidiaries.

After the disastrous stock market crash of 1929, the Kreuger empire began to teeter. In November 1931, repayment on $100 million of forged Italian treasury bonds came due. Four months later, his American creditors were demanding payment on a $2 million loan that had been made to Swedish Match months earlier but Kreuger's resources were virtually depleted. In desperation, the "Savior of Europe," as he liked to think of himself, returned to the U.S. to attempt to obtain a loan to bail out the financially strapped conglomerate. The bankers, squeezed by the Depression themselves, proved unresponsive. In March 1932, Kreuger boarded the Ile de France for the trip home, aware that he was being shadowed by a private detective employed by J.P. Morgan. The American financier who was personally owed $11 million from a phony transaction advised Detective John C. Brown that Kreuger just might slip over the rail of the promenade deck one night. "He's not the sort to do it with a razor or gun," Morgan said. "Kreuger Vanishes at Sea" is more to his taste than Kreuger Shoots Himself." By the time the ship reached Southampton, the Match King was in a desperate quandary. He could turn himself over to the Swedish authorities, or he could gamble one more time.

From the Ile de France, Kreuger wired his second-in-command, Krister Littorin, to meet him at the Hotel Meurice in Paris on Mar. 11. The collection of businessmen and bankers who sat in on the board meeting listened as Kreuger asked for additional credit. Sigurd Hennig asked him to explain where he got the treasury bills. Kreuger replied that they had come from Fascist dictator Benito Mussolini. "He gave them to me as payment for a secret loan," Kreuger explained. But Krister Littorin knew better. The loan never went through according to an earlier conversation he had had with Mussolini. "He also says that if you have any bills they must be forged. Is that true?"

Kreuger emphatically denied the charge, and then adjourned the meeting. He slipped out of the hotel and proceeded to a gun maker's shop on the Avenue Victor Emmanuel III, where the store owner sold him a small handgun and several rounds of ammunition. The following day, the Match King shot himself in the chest and died. He left behind a short note of apology to Littorin. When news of his death reached the Swedish Riksdag, the ministers hastily convened a meeting to discuss how to stabilize the kroner before the European stock exchanges opened the next day. Soon there were reports of other suicides. In Estonia, a top-ranking official of the State Match company shot himself behind closed doors. But the real panic came two days later on Mar. 14, when the par value of the Kreuger stock fell through the floor. An audit conducted by the accounting firm of Price, Waterhouse & Co. determined that the evidence of wrongdoing dated all the way back to 1917. In his heyday Kreuger had bilked the public out of $560 million and various banks in excess of $164 million. Price Waterhouse concluded that the success of the scam had everything to do with the perception of the man himself. "The perpetration of frauds on so large a scale and over so long a period would have been impossible but for (1) the confidence which Kreuger succeeded in inspiring, (2) the acceptance of his claim that complete secrecy in relation to vitally important transactions was essential to the success of the projects, (3) the autocratic powers which were conferred upon him, and (4) the loyalty or unquestioning obedience of officials who were evidently selected with great care."

Ironically, the Kreuger debacle affected the economy of Sweden the least. Since most of the Match King's business was conducted abroad, the Swedish people suffered few hardships, though a number of middle-class investors were wiped out. Swedish Match declared a moratorium on its debts, and set up a large reserve fund to offset the writing down of assets. In time the company re-organized and again became the dominant match making concern Kreuger
envisioned in 1917.

From the World Encyclopedia of Con Artists and Confidence Games