Ponzi's Scheme (27 page)

Between acts, Ponzi ducked outside for a snack in a little fruit store on Eliot Street, where P. A. Santosuosso caught up with him. The smile and the confidence had returned. Asked about the attempt to force him to declare bankruptcy, Ponzi laughed.

“That is foolish. I am solvent absolutely,” he said, adding that he would probably keep his offices closed until Friday. “I am very sure I that I will open for business again, and I predict a rush of business that will make financial history in Boston.”

W
ith his owlish glasses, receding hairline, and soft jowls, Herb Baldwin looked like a refugee from Edwin Pride's staff of accountants. But “Baldy,” as his friends in the newsroom called him, was used to being underestimated. Confident of his abilities, Baldwin had become interested in newspapers while growing up in Everett, a blue-collar city four miles north of Boston. After spending his high school years covering schoolboy sports for the weekly
Everett Herald,
he'd earned admittance to Harvard's class of 1911. He'd worked for two years in the Boston bureau of the Associated Press, then had joined the
Post
and made a name for himself as a no-nonsense reporter with a writer's flair.

On Tuesday, August 10, Baldwin arrived in Montreal armed with a few recent photographs of Ponzi and a determination to get the story. It soon turned into a dream day for Baldy.

Although more than a decade had passed since Ponzi's brief stay in Montreal, he had left an indelible image. As Baldwin moved through the Italian quarter of the city, one person after another looked at the recent pictures of financier Charles Ponzi and exclaimed, “That's Ponsi” or “Why, that's Bianchi.” The only question they asked was why he had shaved his mustache. Baldwin's best results came with Eugene Laflamme, who oversaw the rogues' gallery for the Montreal Police Department.

“Positively, that's the same man,” Laflamme declared, holding his mug shots of Bianchi/Ponsi beside Baldwin's Ponzi photographs. He showed Baldwin the matches of the earlobes, the pout of the lower lip, and the creases on the forehead. Laflamme went so far as to pull Bianchi/Ponsi's criminal file, which contained details of the forgery that had landed him in prison.

From the police offices Baldwin went searching for victims of Zarossi's bank failure. He soon found several willing to express their anger toward Zarossi's erstwhile manager Bianchi/Ponsi. Baldwin also scored with the notorious Montreal padrone Antonio Cordasco. At first, Cordasco said he did not recognize the photographs, but then he looked closer. “Ah, my fine friend,” Cordasco purred. “So I see you again. You are, you are—he's Bianchi, the snake!”

Bank clerk Dominico Defrancesco remembered his fellow clerk Bianchi/Ponsi as “a sporty feller” who always talked of making millions and dressed in fine clothes with white-collared shirts. Further confirmation came from a warden at the Saint Vincent de Paul Penitentiary. The only points for Ponzi were the warden's description of him as a model prisoner, though he weakened that portrait by saying that Ponzi had shifty eyes.

Baldwin had more than he could have hoped for: solid confirmation that the man who had gained the trust of tens of thousands of investors was a convicted forger and the former manager of a bank that had collapsed under a cloud of swindles. Elated, he wired what he had found to Richard Grozier.

“Are you sure?” Grozier wired back, knowing that a mistake of that magnitude could cost his family its newspaper and its fortune.

Annoyed but trying to toe the line of respect for his boss, Baldwin fired back: “Do you think I am making it up?”

That was all Grozier needed to hear. Baldy's got a big one. They'd better make room on page 1.

After being released on bond on August 13, 1920, Ponzi marches through
downtown Boston, certain that he has suffered only a temporary setback.

Boston Public Library, Print Department

C
HAPTER
S
EVENTEEN

“I
'M NOT THE MAN.
”

W
hile Baldwin spent the day linking past to present, Ponzi plotted ways to soften the previous day's blows: the freeze on his accounts, the bankruptcy filing, the attorney general's accusations, and the call for his investors to report to the State House. He ordered the offices of the Securities Exchange Company closed until further notice and spent the morning in Lexington, where he assessed the damage, girded for battle, and listened to a summer thunderstorm. He was determined to make some thunder of his own rather than surrender without a fight.

In the meantime, the officers of Hanover Trust tried desperately to balance their books. They calculated that Ponzi had overdrawn his account by $441,778, a potentially devastating dip into the red that could send the bank to its death. Treasurer McNary decided on the only course of action he thought possible to save the bank: He would use part of Ponzi's $1.5 million certificate of deposit to cover the overdraft. Ponzi would not have gained access to that money until August 27—thirty days after he gave notice that he wanted to withdraw the money—but this was an emergency and McNary made up the rules as he went along. After returning Ponzi's checking account to zero, McNary made out a new certificate of deposit to Ponzi with a balance of $1,058,222, having deducted the amount of the overdraft from the certificate.

Before the latest uproar, Ponzi had agreed to return this day to the weekly luncheon of the Kiwanis Club. This time, though, the club's president had arranged a “battle royal” between Ponzi and a celebrated psychic named Joseph Dunninger, a friend of Harry Houdini's and Thomas Edison's. The club advertised that the mind reader would “throw the X-ray of clairvoyancy on the subtle brain of the little Italian and reveal what he found to the audience.” So many people hoped to hear Ponzi's secret formula that the Kiwanians oversold the Hotel Bellevue ballroom and had to feed guests in shifts.

The afternoon was slipping away and still the show had not begun. Ponzi hated to disappoint his public, so at two forty-five he climbed onto a table, cigarette holder dangling from his fingers, and agreed to take questions. Before he could begin, someone called out, “Three cheers for Ponzi!” The crowd answered with gusto. Ponzi then regaled the room with his version of his rise from obscurity and poverty to fame and, apparently, fortune, tailoring his story to fit some of the latest developments. He said he obtained reply coupons directly from foreign governments, and that was why his activities were not reflected on the published tallies of how many coupons were issued in recent years. Ponzi also said those governments had profited from the deals, and that was why he had to keep his overseas contacts confidential. He vowed to reopen by Saturday, smiled incessantly, and needled the attorney general: “He has a good job, but mine is better.” The audience roared. Ponzi got the same response when he paid mock respects to “my opponents, the bankers.”

Finally it was time to pit Ponzi against Dunninger, wizard against wizard. First, Dunninger agreed to lower the stakes by promising not to reveal Ponzi's business secrets. The mystic asked Ponzi to write a sentence on a piece of paper and place it in his pocket.

“First,” said Dunninger, “is the letter ‘I.' ”

“Correct,” agreed Ponzi.

“The next letter is ‘P,' ” said Dunninger.

“Correct,” Ponzi repeated.

Encouraged, Dunninger claimed to have received a vision of the complete sentence in Ponzi's pocket: “I propose to apply to banking the principle of giving the people full value for the use of their money.” It was, indeed, what Ponzi had written, and the audience left the ballroom satisfied and enthralled at the magic they had witnessed. It was 1920, and anything seemed possible.

While Ponzi cavorted with the Kiwanians, offers of money flooded his offices. Hundreds of letters arrived at 27 School Street containing checks in amounts from twenty-five to ten thousand dollars, that last sum from a man in Savannah, Georgia. But Ponzi's clerks sent them all back on his orders. Ponzi spoke only briefly with reporters, using them to send a message to his investors: Hang on and do not cooperate with the attorney general. Nevertheless, about a hundred Ponzi note holders turned up at the State House.

Pride continued to refine his calculations, while federal prosecutor Dan Gallagher and Attorney General J. Weston Allen held one meeting after another to plot their next moves. Meanwhile, Bank Commissioner Allen took aim at a more established institution than Ponzi: the Hanover Trust Company.

As midnight approached, Herb Baldwin's copyrighted story rolled off the
Post
presses with a cannon's roar:

C
ANADIAN
“
P
ONSI
”
S
ERVED
J
AIL
T
ERM

Montreal Police, Jail Warden and Others Declare That Charles Ponzi of Boston and Charles Ponsi of Montreal Who Was Sentenced to Two and Half Years in Jail for Forgery on Italian Bank Are One and the Same Man

State Authorities Now Active and Promise at Least One Arrest in Case Soon

The headline writer had nailed it, though in his excitement he'd overstated the “promise” of an impending arrest. The story said only that one or more arrests were expected “momentarily,” and no state officials were quoted, even anonymously, making such a claim. Baldwin also overstepped a bit, making it seem as though Ponzi's forgery conviction was directly related to Zarossi's scheme of swindling his depositors by stealing money they intended for their relatives in Italy. Despite those minor missteps, Baldwin's story was as damaging as Ponzi had feared it would be when Santosuosso had first called to inquire about his Montreal past. For the moment, though, Ponzi refused to acknowledge it.

An hour after midnight, another
Post
reporter, Harold Wheeler, rushed to Lexington with a copy of the August 11
Post
still warm and redolent of ink. Hours remained before it would hit the streets, and Grozier and Dunn wanted Ponzi's reaction to Baldy's scoop. Whatever Ponzi said could be added to a later edition; the
Post
was driving the story forward, and its leaders did not want to cede the next news break—Ponzi's response—to the afternoon papers.

Wheeler made his way past the guards who surrounded the Slocum Road house and handed Ponzi the paper. Ponzi read Baldy's story slowly, deliberately, with a poker face. Wheeler studied him as he read, but could see no reaction—not a muscle in his face moved, nor did his eyes betray the gravity of the situation. When he had finished, Ponzi shrugged his shoulders.

“I'm not the man,” he said. “It does not concern me.”

“We think this is the truth,” Wheeler answered, “and we're going to print it.”

“Then you are going to get the presses ripped out of your building,” Ponzi threatened.

If Ponzi imagined that the
Post
would retract its story, by dawn he knew that any such hope was false. He met reporters again on his front porch at eight in the morning, dressed in a silk bathrobe with his Colt .25-caliber in the pocket. Seeming on the verge of coming unglued, he pulled it out and explained to the startled reporters that he intended to use it for self-protection against two men he had noticed loitering near his house.

Asked about the
Post
story, Ponzi seemed uncertain about the best approach. He began with a rambling, awkward statement referring to himself in the third person that sounded like the start of a confession about his Montreal past. “If the statements printed in certain morning papers are true,” he said, “I feel that either he is one of many who have made some mistake and paid for it, or that he paid for some mistake of another, and a perusal of the records there might hide a deeper motive than it would be expedient to establish at the present time.” Ponzi then took a shot at the
Post:
“It is evident that some of the local papers are endeavoring to hurt him for purposes which are as clear to him as they are to the public.” Suddenly he interrupted himself and began a new statement. After starting and stopping two more times, Ponzi got into the Locomobile and went to Boston to meet with his lawyers.

By noon, Ponzi was ready to meet the press once again. The reporters were admitted into Daniel McIsaac's imposing law offices on the tenth floor of the Pemberton Square building known as Barristers' Hall. They found Ponzi seated behind a large desk, hunched down in a chair, looking smaller than they had ever seen him. His gold cigarette holder dangled from his hand. The reporters looked for his smile, but it was gone.

“The statement that I am about to make I should probably have made before, in view of the notoriety given me by the press,” he began, a stenographer recording his every word. “However, I felt that my past had no bearing on the present situation. If several years ago I sinned—if I made a mistake and paid for it—I had every reason to believe that society owed me another chance.

“I am not the first one to commit a sin. I am not the only one, even in the city of Boston. And when I see others who have been under the same circumstances years ago and are today occupying prominent positions I do not see why I should be made an exception to the general rule and become an object of persecution on the part of either the authorities, the press or the public.”

He paused and turned to McIsaac. They spoke for several minutes about one of Ponzi's former prison mates, not in Montreal but in Atlanta, a man who had enjoyed the support not only of President Taft but also the very same Clarence Barron who had helped lead the charge against Ponzi. To speak of “Ice King” Charles Morse, Ponzi would also have to disclose his own prison term in Atlanta, but at the moment that seemed the least of his concerns. McIsaac gave him the go-ahead.

“Charles W. Morse, at one time a prominent banker, was also convicted in the United States court,” Ponzi said, “and sentenced to fifteen years in Atlanta, Georgia. I know it because I was there with him. Released after serving a very small part of his sentence, he has been out occupying for three years a position greater than he occupied before. He is a banker, mingles with bankers, deals with the United States government, and associates with the most respectable men in the United States.

“I do not mean in any way to imply that he is not deserving the respect of the public. But I merely ask, if he is as deserving why shouldn't I be?”

Ponzi paused again to let that sink in. Then, to lighten the mood, he gave a half smile and announced to the reporters surrounding him: “A new paragraph.”

“The Montreal records,” he continued, “show that a man of my description was convicted of forging in 1908 and sentenced to three years in the penitentiary of Saint Vincent de Paul, and served twenty months. That is all that the public in general cares to know. However, I feel that it is also very important for the people at large to know that, although I am the man who was convicted and sentenced for that crime, I am not the man who perpetrated that crime.”

Grasping for a life preserver, Ponzi spun a fanciful tale in which he claimed to have taken the blame for a forgery committed by his former boss Zarossi, who had been enticed into the illegal act by an extortionist. Ponzi said he'd acted to save Zarossi because his boss had a wife and four children. Halfway through the complicated story, Ponzi's lawyer, McIsaac, had heard enough; he put on his coat and hat and said he would be back later.

“I am not trying to pose as a hero,” Ponzi insisted even as he did just that. He claimed that at least two other men in Boston could vouch for his story, though he declined to name them.

Having opened the door on his second conviction, Ponzi felt compelled to address it. Again he assumed the pose of a wrong-place-at-the-wrong-time Samaritan.

“My next unfortunate experience,” he began, “did not come of my own volition, but happened as a consequence of my first mistake. Released from prison without a friend, without a dollar, and without credentials—they didn't give me anything—I tried to earn a living as best I could. Within ten days of my release I was asked to escort five Italians into the United States. I did not smuggle them in. I crossed the border on a train—openly—and was placed immediately under arrest. I didn't dodge the consequences and I pleaded guilty. I expected leniency in view of the fact that the crime was only a misdemeanor and not a felony and that I didn't resist conviction. Yet I was sentenced to two years at the federal prison at Atlanta, Georgia, and my sentence was the maximum ever imposed for a similar offense.