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.