Ponzi's Scheme (13 page)

The bigger Ponzi got, the more threats he faced. Inquiries by the postal inspectors had not slowed his ascent, but they had sent shock waves through the cobwebbed corridors of the Universal Postal Union. The possibility that a Boston man was growing rich by trafficking in International Reply Coupons was too much to bear. Questions needed to be asked. Regulations needed to be tightened. During his meeting with the Boston postal inspectors, Ponzi had mentioned trading in coupons imported from Italy. They could not prove he was doing it, but they could not be sure that he was not. Either way, action needed to be taken. In April, Italian postal officials abruptly suspended sales of reply coupons. Their counterparts in France and Romania quickly followed suit.

The moves were technically not a problem for Ponzi, who had at least temporarily abandoned efforts to purchase coupons, having failed to overcome the practical and logistical obstacles. But looked at from another perspective, it meant his operation was attracting unwelcome notice. A net was slowly being woven to ensnare him.

The Ponzi family's new home on Slocum Road in Lexington.

The Boston Globe

C
HAPTER
N
INE

“A
LWAYS REACHING
FOR THE MOON
”

B
y early spring, Ponzi's operation was becoming the talk of Boston, exceeding thirty thousand dollars a week in new investments and attracting increased attention from police and postal officials. Yet despite the location of the Securities Exchange Company on the edge of Newspaper Row, the city's newspapers had been completely silent about it.

One reason might have been reporters' and editors' deeply ingrained aversion to providing free publicity—“Let 'em buy an ad” was a common newsroom refrain. For his part, Ponzi saw no reason to spend money on advertising; money was coming in as fast as he and Lucy Meli could count it. Another reason for the newspapers' silence might have been the absence of any official action against Ponzi. Newspapers tended to be reactive rather than proactive, and until someone with standing either accused Ponzi of wrongdoing or declared him a genius, he failed to meet the most basic definition of news. It was easy to expend ink on a shady politician, a disgraced sports figure, or an accused murderer. But editors and reporters understood that it was dangerous to go out on a limb to challenge a seemingly successful private businessman. It was no secret that the Supreme Court took a narrow view of the First Amendment. Only a year earlier, the court had unanimously ruled that the First Amendment, in the words of Justice Oliver Wendell Holmes Jr., does not “protect a man in falsely shouting fire in a theater.” Though that decision upheld the Espionage Act, journalists could imagine how the same court might respond to a libel case in which a businessman was mistakenly branded a fraud. Someone like Ponzi, with access to money and lawyers, might end up owning any newspaper that attacked him without hard evidence.

Another reason Ponzi escaped reporters' attention was the extraordinary number of major stories occupying Edwin Grozier's
Post
and the city's other newspapers during the first months of 1920. The national news pages were filled with stories about the Eighteenth and Nineteenth Amendments to the Constitution: Prohibition and women's suffrage. The liquor ban took effect in January, and the state-by-state battle to ratify women's voting rights raged into the summer.

Boston was overflowing with local news as well. The city was still recovering from the police strike the previous fall. Reporters were paying close attention to the abundance of rookies on the reconstituted force. Political reporters were taking the measure of Governor Calvin Coolidge, who had made a national name for himself by breaking the strike. Now he was being talked about as a vice presidential candidate.

Roundups of suspected radicals had the city on edge, as shackled foreigners were being held for interrogation and deportation at the emigration station on Deer Island in Boston Harbor. Crime reporters were keeping track of the usual mayhem, devoting an abundance of ink to the April 15 murders of a paymaster and a guard during a robbery in South Braintree, followed by the arrests of two Italian anarchists, Nicola Sacco and Bartolomeo Vanzetti. Sports pages followed Babe Ruth's first season pounding home runs for the New York Yankees after his stunning sale the previous winter by the Boston Red Sox. The Babe's move fueled the question of whether New York City might eclipse Boston as the “Hub of the Universe.” Most Bostonians doubted it.

The
Post
kept its readers abreast of all those stories, while preoccupied by yet another, one that would take a heavy toll.

James Michael Curley was anxious to mount a political comeback. After losing the mayor's office, he ran for Congress in 1918 but lost again. With another mayoral election approaching, Curley was determined to regain City Hall and its spoils. As he looked around the city to count friends and enemies, he knew the
Post
would surely be among the latter. Edwin Grozier and his managing editor, Clifton B. Carberry, Boston's premier political commentator, considered Curley and his machine throwbacks to a corrupt past. They were ready to throw the full weight of the paper against him.

In the spring of 1920, Curley went on the offensive. He publicly and repeatedly accused Grozier of secretly taking money from England to oppose Irish independence. Such a charge, if true, would certainly alienate the
Post
's large Irish immigrant readership, which Grozier had assiduously and sincerely courted for decades. Curley took the stage at the St. Patrick's Day celebration on Boston Common and claimed that he had learned of Grozier's alleged perfidy several years earlier. In 1917, Curley claimed, he'd discovered that Grozier had purchased a quarter million dollars in city bonds. Curley said the city treasurer had informed him that money for the bonds had come from a draft on a London bank and that the money was “part of an immense propaganda campaign fund spent in this country . . . to influence the American mind in favor of Great Britain.” The money had supposedly come from Lord Northcliffe, a British newspaper baron. In short, Curley was accusing Edwin Grozier of prostituting himself and the
Boston Post
to betray the cause of Irish independence. Curley's timing was incendiary: The feared British irregulars, known as the Black and Tans, were just arriving in Ireland to battle the rebels.

Grozier was outraged. The claim was a bald-faced lie from a politician with only a casual regard for the truth, but the publisher feared that his years of support for the Irish would be undermined without an equally fierce response. He sat down in his cubbyhole office on Washington Street and wrote an extraordinary challenge that he published on the front page of his newspaper, headlined in bold type:

A
C
ORDIAL
I
NVITATION TO
E
X-MAYOR
C
URLEY

Here Is an Opportunity for Him to Prove His Interesting Charges Against the Boston Post and Edwin A. Grozier, Its Editor

Below that, Grozier recounted Curley's scurrilous charges, then made his offer: “If Mr. Curley has a scintilla of evidence to back up his charges of improper conduct, I hereby ask him to produce it for free and conspicuous publication in these columns. If he or anyone else can produce proof to show that Edwin A. Grozier or
The Boston Post,
as conducted by Edwin A. Grozier, ever received at any time, anywhere, anyhow, from Lord Northcliffe or his representative $250,000 or $1, or any sum or other consideration, directly or indirectly, to influence its attitude . . . Edwin A. Grozier will take pleasure in presenting to James M. Curley his entire interest in
The Boston Post.
” Grozier was betting his fortune, his legacy, everything he had spent three decades building. All to defend the honor of his name and his beloved paper.

Curley had no evidence; but that was never the point. The wily politician had borrowed a strategy from his friend the pugilist John L. Sullivan: Lead with wild punches to keep a dangerous opponent from delivering an early knockout. Knowing he could not provide proof of his charge, Curley tried to turn Grozier's invitation to his advantage. He offered to debate the
Post
publisher at any time or place of Grozier's choosing on the question of whether Grozier was a paid agent of the British government. Grozier ignored the proposal. It was as if Curley had proposed a debate on whether Grozier beat his wife. No matter what he said, Grozier could not win. Even if he was tempted to try, he was no public speaker, certainly not in Curley's league.

Grozier could take satisfaction in knowing that all but the most rabid Curley fans would recognize that the
Post
had carried the day. Curley would surely have produced evidence, humiliated Grozier, and seized the newspaper if he could have. His diversionary tactic of a debate challenge could only be seen as a concession.

Though Grozier won the round on points, the timing of the episode suggests it was a costly victory. Never blessed with robust health, the sixty-year-old
Post
publisher had spent his entire adult life trying to emulate the dawn-to-midnight work ethic of his newspaper mentor Joseph Pulitzer. In late spring 1920, in the weeks that followed his face-off with Curley, Edwin Grozier suffered a complete physical collapse. He was hospitalized in intensive care, fighting for his life, unable to play any role at the
Post.
At the same time, the
Post
's managing editor was away for the summer. Their roles needed to be filled, and the job fell to the man who held the titles of assistant publisher and assistant editor.

For the first time in his life, at thirty-two, Richard Grozier had a chance to escape his father's shadow. He was in charge.

A
s spring gained confidence, so did Ponzi's investors. By May, the twenty-dollar guppies were still welcome, but more often they were dwarfed by thousand-dollar whales who saw 27 School Street as prime feeding grounds.

Louis and Charlotte Blass had met Ponzi a year earlier, when he was a poor clerk, and had watched from a safe distance as he parlayed his big idea into a moneymaking machine. Knowing that his friends the Blasses had money in the bank, and hoping to separate them from some of it, Ponzi dropped by their home in the Jamaica Plain neighborhood in March. Louis Blass was forty-five, a traveling salesman of cotton waste products who had formerly run a mill in New York. He and his forty-two-year-old wife had emigrated from France seventeen years earlier, and now they were raising two sons and two daughters. The eldest planned to start classes at the Massachusetts Agricultural College in the fall. Ponzi showed them a few reply coupons and described his business, watching as always for the moment their eyes lit up at the sound of 50 percent interest in forty-five days. The Blasses spent weeks thinking about Ponzi's proposal before plunging in with both feet.

On May 10, the couple showed up at Ponzi's office with eleven thousand dollars in certified checks, from two emptied bank accounts, plus ten thousand dollars in Liberty bonds. Ponzi accepted the bonds as the equivalent of nine thousand dollars in cash and wrote out the biggest single certificate to date from the Securities Exchange Company: twenty thousand dollars, with thirty thousand dollars due in forty-five days. Louis Blass was so certain of the windfall he began urging his bosses and his customers to follow his lead and invest all they could. His boss, textile merchant Sam Finkel, was intrigued enough to inquire about speculation in postal reply coupons during a trip to Washington. He was told it was implausible. He declined to invest and shared that information with Blass, who nevertheless remained confident in his pal Ponzi.

With more investors came more salesmen. Ponzi brought in his brother-in-law Rinaldo Boselli, who was married to Rose's sister Mary; and his friends Harry Mahoney and Henry Neilson, among others, and by the end of the month the Securities Exchange Company had more than three dozen employees. Neilson's route to a job with Ponzi was typical. A Danish immigrant who worked as a forty-five-dollar-a-week meat cutter in Somerville, he had met the finance wizard socially the previous year at the home of a friend of his, Ponzi's landlord, Anders Larsen. They stayed in touch, and when Larsen and his wife, Karen, invested five thousand dollars with Ponzi, Neilson and his wife, Hilda, took a chance with two thousand. The Neilsons made their first investment on May 18, then got so excited by the expected profits that they returned twice more within the next week, adding another thirty-four hundred dollars. Ponzi appreciated Henry Neilson's confidence, not to mention the thirty-six-year-old Dane's dashing looks and smooth manner. Ponzi knew a natural salesman when he saw one. So Ponzi hired Neilson to work in the office, explaining the system to would-be investors. Ponzi knew that customers were comforted when they heard salesmen honestly utter the words “Why, I have several thousand dollars of my family's own money invested here.”

Another new salesman was Charles Ritucci, who ran the Plymouth office for Ponzi. He learned quickly from his boss's enterprising nature, printing flyers in English, Italian, and Portuguese, then pasting them on store windows. They read:

Securities Exchange Company, No. 27, School Street, Boston, Mass.
NOTICE
Do you want to get rich quick? See our agent, Charles Ritucci, 3011/2 Court Street, Upstairs in Plymouth Theatre Building, who will explain how you can get fifty percent profit on your investment, payable forty-five days from date of investment. Our bank office in Plymouth opens every night from 6 to 8. Yours truly, Securities Exchange Company.

Investors could not help but throw money at such a sure thing. Ponzi began opening new bank accounts, including one at the North End branch of the Hanover Trust Company, where he deposited sixty thousand dollars on May 24 at the urging of the bank's manager, an ambitious young man named Charles Pizzi. Pizzi was tired of seeing his depositors withdraw their money to invest with Ponzi.