John Jacob Factor was probably the most successful swindler of all time. He was born Iakow Factrowitz, the second son of a rabbi and the youngest of ten children. Jake, as he preferred to be called, was born in England and taken to Lodz, Poland before his first birthday, where he lived until he was eleven years old. In or about 1900, the family moved to St. Louis, Missouri and then to Chicago.
Although not illiterate, Factor could barely read or write. "I have," he said, "a hazy recollection of several months of schooling in Poland."
It was Factor's mother who supported the desperately poor family through various menial jobs, mostly as a street peddler. Jake's half brother, Max Factor, eventually made his way to California and settled in West Los Angeles. He found work as a make-up artist with the major studios where he helped to create pancake make-up. Pancake is composed of special creams used for Technicolor filming, which kept the actors' faces from appearing green on film. Factor made a few changes to the formula and
started to mass market the finished product to department stores, but met with only moderate success. His real success came with the second World War, when the United States Marines ordered massive quantities of his makeup in several shades to use as camouflage.
With money from that order, Max Factor created a product called Long-lasting Lipstick and Water Resistant Mascara, which didn't smear or lose color; his timing could not have been more perfect. The war had pushed women into the work force and they were flush with cash to spend on themselves. As a result, Max Factor Cosmetics became the first successful mass marketed make-up business in America.
Jake Factor took a different route to success. While still a teenager, he went to work as a barber in one of his brother's shops. He used most of the money he earned to support his parents. From that job, Factor picked up the name that would haunt him the rest of his life, a name he hated so much he sometimes paid newspaper people not to use: "Jake the Barber."
Jake left the shop to sell securities in the boom market. He was indicted under a federal warrant for stock fraud in 1919. The case was closed after he returned the funds, only to be indicted again in Florida in 1922 and 1923 for land fraud.2 There were two more indictments for mail fraud, a gold mine stock swindle in Canada and another in Rhodesia, but the government was never able to obtain a conviction in the cases and Jake the Barber returned to Chicago, rich enough to live in a 14- room apartment on the Gold Coast and employ a chauffeur, but still he wanted more.3
Sometime in late 1923, Factor convinced New York's master criminal, Arnold Rothstein, to put up an initial cash investment of $50,000 that Factor needed to pull off the largest stock swindle in European history. Handsome, relaxed and likeable, Factor arrived in England in early 1924 and began successfully selling worthless penny stocks.
As it is in any good scam, greed was the hook. Factor assured the investors a guaranteed return of 7 to 12 percent on their initial investments, an enormous sum compared to the one to three percent normally paid out by banks and brokerage houses. Factor was careful about paying each dividend on schedule, but only because it convinced investors to spread the news about their wise investment which brought in even more investors. When enough money was in the till, about 1.5 million, Factor left the country. He left knowing that most of the victims wouldn't file a formal complaint since that would entail revealing both their stupidity and their greed. It proved true. No formal complaint was filed against him.
In early 1925, Factor returned to England, again financed by Rothstein, and planned a second, larger scam. At the heart of the swindle was a stock brokerage firm Factor invented called Tyler Wilson and Company and again, greed was the hook. After offering a carefully compiled list of clients a legitimate stock called Triplex at four dollars a share, Factor, working through the Tyler Wilson name, offered to buy the stock back at six dollars a share, earning his victims a quick fifty percent profit.
A month later, Factor, through Tyler Wilson, offered another stock called Edison-Bell, at $3 a share and quickly bought the stock back at $6 a share, careful never to actually deliver the stock certificates to the buyers, meaning that the transaction had only happened on paper. Had the transactions been real, Factor would have lost $750,000.
When the investors were hungry for another deal, Factor sent them another offer for two unlisted stocks named Vulcan Mines and Rhodesian Border Minerals, both of which were supposed to be South African gold mining companies, which Factor hinted, were on the verge of a major expansion. The Barber sold shares in the companies for as low as twenty-five cents each, allowing thousands more to enter the scam, and then pumped the earnings up to as much as $2.50 a share.
It worked. Tens of thousands of money-hungry buyers flooded in, and Jake made sure that each of them got something for their money-an unspecified plot of land in Africa in exchange for their investments-making fraud difficult to prove.
In 1930, England's newspapers started to run articles about Factor and his schemes and there was a persistent rumor that even members of the royal family had invested hundreds of thousands of dollars in his fake stocks. Suddenly, Jake the Barber closed Tyler Wilson and company and fled England with an estimated £1,619,726 or about $8,000,000, an incredible sum of money in 1930. Then, Jake made the one big mistake that would haunt him years later. In December of 1930 he returned to the United States from England, by way of Mexico and up through El Paso, Texas. Factor was admitted back into the United States as a visiting immigrant and swore out a statement that he had been born in Hull, England on October 8, 1892.
The problem was that the United States Immigration Department already had papers on Jake, sworn out by his parents upon their arrival in the States in 1905, that John Factor was a Russian national, born in Lodz, Poland on January 10, 1889. At that point, the immigration service opened an investigatory file on Factor which they would later use to deport him from the country.
New York underworld figure "Legs" Diamond (John Nolan), following Jake the Barber's adventures in England, decided he needed every penny Factor's scam had earned for his narcotics business.
Arnold Rothstein had taught Diamond everything there was to know about the narcotics business, molding him into an expert in heroin imports. Diamond had a knack for the business which in turn made Rothstein, already America's foremost narcotics peddler, a very rich man. But big drug money made Rothstein careless and lazy, which are dangerous traits to have in the volatile world of drug smuggling. Soon others saw the profits from the dope trail that Rothstein had blazed and started to invade his territory. What Rothstein wouldn't give, they took by force.
After Rothstein's death, the remnants of his once vast criminal empire were up for grabs. Diamond quickly laid claim to the European drug importing routes and contacts. But claiming the routes and controlling them were two different things. Command of the U.S. side of the narcotics market hinged on earning money for the European dealers who needed to export their dope into the lucrative and insatiable American market. They wanted to do business with someone who had the cash to flood the
States with low cost, high quality drugs on a continuous basis which would lead to a steady market.
Legs Diamond had the money and the connections. Prohibition had made him rich, but all of his cash was tied up in yet another street war over control of bootleg beer outlets. He tried to raise more money to expand the narcotics market from different sources, mostly from the Mafia. But the underworld knew and understood that he lacked any real organizational ability, that he drank too much too often, that he was too violent and far too mentally unstable to deal in the sedate and shadowy world of international drug trafficking.
With nowhere else to turn, Diamond sent word to John Factor over in England that he was taking over all of Rothstein's rackets, including the Factor relationship, and wanted his share of the take from the stock swindles.
Factor never responded, probably assuming that once Arnold Rothstein, his original financier, was dead, that the proceeds from the swindle were his and his alone. But Diamond disagreed, and took a luxury liner to England to find the Barber, but Factor avoided him by simply returning to the United States and hiding out in Chicago, probably cutting in Chicago hoodlum Murray Humpreys for a percentage of his take. Factor knew that a killer like Diamond didn't give up easily, especially when millions were involved, and, never a violent man, Jake the Barber had enough sense to partner with those who had no aversion to violence.
Legs Diamond gave up chasing Jake to attend his own trial in New York State for the attempted murder of a competitor in the bootleg beer business, for which the jury returned a verdict of not guilty. The night after the decision Diamond went out with
friends on a drinking binge. He returned to his room in a boarding house in the early morning hours and fell into an alcoholic stupor. A half an hour later, two well-dressed men entered Diamond's room and fired three .38 caliber slugs into his head, killing him.
Murray Humpreys was suspected of engineering the murder, if not committing it himself, on behalf of his new best friend and business partner, Jake Factor but the suspicions were never proven nor was there an investigation into the murder. No one cared. Legs Diamond was dead and that's all that most really wanted.
With Diamond out of the way, Jake the Barber emerged from hiding and when he did, he was arrested in Chicago on the demand of the British government for receiving property knowing it to be fraudulently obtained, but was released on a $50,000 bond.
On December 28, 1931 the United States Commissioner in Chicago ruled that Factor should be extradited to England, where he had already been tried and convicted, in absentia, and sentenced to eight years at hard labor. Factor's lawyers appealed on the grounds that each of his victims had received a small plot of land in South Africa, or at least the deed to one, and therefore no one was swindled. A federal judge agreed with Factor and overruled the Commissioner. The Justice Department appealed and the case was headed for the Supreme Court in Washington.
It was generally agreed in legal circles that Factor had a weak case and would be extradited before the spring, but armed with several million in cash and the best lawyers money could buy the Barber managed to delay his hearing until April of 1933.
2. According to federal documents, the Florida land was sold as "improved lots" when most of the lots were not only unimproved, they were under water.
3. Jake was married by then and the father of one child, Jerome. In all Jake would marry three times. In 1925 he married Helen Stoddard who worked at the notorious Freiberg's Dance Hall, one of Chicago's more legendary whorehouses.