Ponzi's Scheme (33 page)

Authors: Mitchell Zuckoff

BOOK: Ponzi's Scheme

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Ponzi in bed in the charity
ward of a Rio de Janeiro hospital
in 1948.

The Boston Globe

“Well,” he began, smiling his old smile, “how much do you know about me? I was number one in those days before Al Capone. . . . Once I had fifteen million dollars. I used to carry a couple of million in my pockets in certified checks and cash. Look at me now. I guess a lot of people would say I got what I deserved. Well, that was twenty-eight years ago. A lot of water has gone under the bridge since. But I hit the American people where it hurtsâin the pocketbook. Those were confused, money-mad days. Everybody wanted to make a killing. I was in it plenty deep, rolling in other people's money.”

Then came the confession: “My business was simple. It was the old game of robbing Peter to pay Paul. You would give me one hundred dollars and I would give you a note to pay you one-hundred-and-fifty dollars in three months. Usually I would redeem my note in forty-five days. My notes became more valuable than American money. . . . Then came trouble. The whole thing was broken.”

Ponzi recounted the story honestly and without rancor. When he was finished, he told the reporter he was regaining his strength and hoped to have an operation soon to restore his sight.

Ponzi said as much in his final letter to Rose, dictated to a hospital employee: “I am doing fairly well, and in fact I am getting better every day and I expect to go back home for Christmas.” It was false hope, but that had always been his strength. Deep within the impoverished old man in the hospital bed remained the optimistic young dandy of 1920.

He was still Ponzi, and he still believed the triumphant words he had used to end his memoirs: “Life, hope, and courage are a combination which knows no defeat. Temporary setbacks, perhaps, but utter and permanent defeat? Never!”

P
onzi never left the hospital's charity ward. He spent his last days flanked on one side by a patient with a hacking cough and on the other by an old man who stared at the ceiling. Ponzi died of a blood clot on the brain on January 17, 1949. He was sixty-six. He had seventy-five dollars to his name, just enough for his burial. Rose would have liked to have had his body returned to Boston for a proper funeral, but she had lacked the money to do so.

Ponzi's death was reported by newspapers and magazines across the country, including a full page in
Life
magazine, giving reporters an opportunity to colorfully revisit the phenomenon he had created. They ran photos of Ponzi at the height of his popularity, and waxed poetic about his charm and moxie. Of course, the Peter-to-Paul scheme did not die with him. In the years that followed, reporters and fraud investigators began using Ponzi's name as shorthand when describing similar investment scams. In 1957, the
Encyclopaedia Britannica
formally acknowledged that his name had become synonymous with swindle. Soon the language sentinels at the
Oxford English Dictionary
followed suit, entering it into the great book as “Ponzi scheme.” Its definition: “A form of fraud in which belief in the success of a fictive enterprise is fostered by payment of quick returns to first investors from money invested by others.” It was not how Ponzi had hoped to be remembered, but it would have to suffice.

In 1956, Rose was working as a bookkeeper at the Bay State Raceway in Foxboro, Massachusetts, when she married the track's manager, Joseph Ebner. They had a good life together, regularly traveling back and forth between racetracks in Massachusetts and Florida. She died in 1993 at age ninety-seven, happily anonymous and beloved by her many nieces and nephews. After Rose died, her family went through her belongings and found Ponzi's letters. Reading his words, his playful responses to the notes she had sent him over the years, their suspicions were confirmed.

Despite the divorce and the heartaches, despite their dashed dreams and decades apart, the one thing Ponzi had never lost was Rose's love.

A NOTE ON SOURCES

This is a work of nonfiction. Though I have tried to bring Ponzi's story to life by writing this book in narrative form, I have invented none of the dialogue, altered none of the chronologies, and imagined none of the scenes described herein. All thoughts and feelings ascribed to persons came from the persons themselves, based on spoken or written comments. Descriptions of what a person experienced through his or her senses came either from the person or from photographs, newsreel footage, detailed street and fire insurance maps, or accounts in newspapers of the day. When I wrote that Rose Ponzi blushed, for instance, it was because a reporter had witnessed and recorded it. Put simply, I employed no fictional devices under the umbrella of literary license.

This approach was important for several reasons. First, given the nature of the subject himself, it seemed essential to draw a bright line between real and fake. Second, the truth was better than anything I could have invented. Third, Ponzi's true story was already at risk of being permanently obscured in misinformation as a result of a “fictionalized biography” and other imaginary tales. One writer referred authoritatively, and erroneously, to Ponzi's brothers and sisters, and then let his fantasies run amok when describing Ponzi's Lexington home: “Interior decorators charged him half-a-million dollars to make the home livable. One hundred thousand dollars went to stock his wine cellar with clarets and brandies from the 1870s. He had a house staff of fifteen employees including armed guards with orders to shoot any prowler on sight. The twenty-acre estate was surrounded by a brick wall topped with barbed wire.” And so on.

Important insight into Ponzi, as well as dialogue and certain scenes, came from his little-noticed autobiography,
The Rise of Mr. Ponzi.
Portions of his memoirs are, like the man himself, flawed by self-aggrandizement and unreliability. However, much of Ponzi's account squares with verifiable facts. I have used Ponzi's version primarily to illuminate his unique impressions of people and events, and I have been careful to avoid repeating his errors. Moreover, I have used expanded source notes in several places to sort through the more tangled or incredible aspects of his account. Finally, newspaper stories without page numbers came, almost without exception, from the archives of the
Boston Globe,
where clips were cataloged by date without notations of the pages on which they appeared.

NOTES

Prologue

xii	a gullible newspaper reporter: “Police Bring Back Money Magicians,” Boston Herald, August 27, 1920, p. 5. Also “Money âMade' as Victims Looked On,” Boston Daily Globe, August 27, 1920, p. 1.
xii	In 1920, anything seemed possible: David E. Kyvig, Daily Life in the United States, 1920â1939: Decades of Promise and Pain, Greenwood Press, 2002. Also Frederick Lewis Allen, Only Yesterday: An Informal History of the 1920s, Harper & Row, 1931, and numerous newspaper stories.

Chapter One: “I'm the man.”

3	Locomobile: Information on the Locomobile was provided by Evan Ide, curator of the Larz Anderson Auto Museum in Brookline, Massachusetts, which displays one that belonged to General Pershing.
3	At the wheel: “Receiver for Ponzi Today,” Boston Traveler, August 17, 1920, p. 1.
5	holding copies of that morning's: “Ponzi Has a Rival Next Door to Him,” Boston Sunday Post, July 25, 1920, p. 1.
5	On the left side of the front page: “Doubles the Money Within Three Months,” Boston Post, July 24, 1920, p. 1.
6	eclipsed two previous stories: “Dear Old âGet Rich Quick' Pops out of Postal Guide,” Boston Traveler, June 9, 1920, p. 1; “Boston Man Is Sued for $1,000,000,” Boston Post, July 4, 1920, p. 1.
6	Three weeks earlier: Charles Ponzi, The Rise of Mr. Ponzi, originally self-published in 1937, republished by Inkwell Publishers, Naples, Florida, 2001. Pages cited here are from the Inkwell edition, pp. 105â6.
8	Cost of living figures are from various sources, including newspaper ads; JoAnne Olian, Everyday Fashions 1909â1920, Dover Publications, 1995; Harvard University treasurer's statement, 1919â20, p. 174; and Kyvig.
8	would-be investors had begun assembling: Names of Ponzi investors, along with the dates and amounts they invested, as well as quotes from a few, were printed in the Boston Post during a two-week period in August 1920. Personal details about some of the investors were obtained from the 1920 census and the 1920 Boston City Directory. Also “Pearlstein Made $500âNow He Sets Good Example for All the Others Who Collected in Time,” Boston Globe, August 14, 1920, p. 2. John Collins did, indeed, add another $700 to his investment on July 26; his investments were included in the Post 's published list of investors on August 26, 1920. Names and dates of depositors were also found in numerous court documents, including Cunningham v. Brown, 265 U.S. 1 (1924), a case involving Ponzi that made it to the U.S. Supreme Court.
11	was five foot two: There are differing accounts of Ponzi's height. Most put him between five foot two and five foot four. My decision to settle on five foot two was based on a detailed physical description contained in a “Wanted on Indictment” poster issued in 1926 by the Suffolk County, Massachusetts, District Attorney.
12	“the two million inhabitants”: Ponzi, p. 148.
12	blue steel pistol: “Ponzi Pays, Smiling, as Pi Alley Rages and Mob Beats Door,” Boston Herald, August 3, 1920, p. 1. Also Ponzi, p. 133.
12	Another pocket: “Ponzi Stops Taking Money, Awaits Audit,” Boston Globe, July 27, 1920, p. 1.
12	he stepped from the car: An account of the scene at Ponzi's office on July 24, 1920, is contained in “Ponzi Has a Rival Next Door to Him,” Boston Post, July 25, 1920, p. 1. Although the story has no byline, the reporter's knowledge of Italian and other details makes me suspect that it was written by P. A. Santosuosso, who also did significant later reporting on Ponzi for the Post.
12	a mellifluous tone: Although the newsreel movies made of him were silent, news accounts of the day noted the quality and tone of Ponzi's voice and its almost complete lack of an Italian accent.
13	“a swirling, seething”: Mary Mahoney, “Ponzi Bothered None at All by Accounting: His Million-a-Week Business Carried Entirely on Handwritten Cards, No Ledgers,” Boston Traveler, July 29, 1920, p. 3.
14	a man named Frederick J. McCuen: “Agent's Profit Large: McCuen Got $10,000 for 21â2 Days' Commissions; Has Not Turned Back a Cent to Ponzi Estate; Left Ponzi to Engage with Rival Concern,” Boston Evening Transcript, October 26, 1922.
15	“would have made”: “Ponzi Has a Rival Next Door to Him,” Boston Sunday Post, July 25, 1920, p. 1.
15	“They had me”: Ponzi, pp. 146â47.
15	newly hired officers: Francis Russell, A City in Terror: 1919, the Boston Police Strike. New York: Viking Press, 1975, pp. 50, 112â13.
15	Several patrolmen even moonlighted: Reports of police acting as agents for Ponzi are contained in numerous stories in the Boston Post and other newspapers, as well as “Bursting Golden Bubble Wins Gold Medal,” Editor & Publisher, June 4, 1921, p. 1.
15	Captain Jeremiah Sullivan: “$100,000 Ponzi Gift to Charity,” Boston Sunday Advocate, August 1, 1920, p. 1.
15	Inspector Joseph Cavagnaro: “Reported Investor Denies Depositing with Ponzi,” Boston Herald, August 24, 1920, p. 8. The story focuses on the denial of Richard Engstrom but also mentions Cavagnaro's refusal to comment about his investments. The inspector's name was first revealed in a list of investors published a day earlier by the Boston Post.
16	Providing for his wife and four daughters: 1920 Boston Census, viewed online at www.ancestry.com.

Chapter Two: “I'm guilty.”

19	born March 3, 1882, in Lugo: Numerous accounts give Ponzi's birthplace as Parma, but in fact he was born in the smaller city of Lugo, where copies of his birth records and a certificate of family status and residence were obtained from the clerk's office. See Comune di Lugo, Situazione di Famiglia Originaria, under Oreste Ponzi.
19	a decidedly working-class neighborhood: Author's visit to Lugo in August 2003 and accounts from city registrar Rosanna Rava.
20	honor his maternal and paternal grandfathers: Pedigree chart based on Italian baptismal records, prepared by genealogist Carolyn Ugolini.
20	employed in Lugo as a postman: Registro di Popolazione for Lugo, Italy, 1882.
20	significantly more prominent stock: Pedigree chart based on Italian baptismal records, prepared by genealogist Carolyn Ugolini.
20	“castles in the air”: Ponzi is an important source of information on his early life, and his accounts are consistent enough with verifiable facts to be considered reliable. Among the most complete reports can be found in: Ponzi's autobiography; “Ponzi Tells How He Rose,” Boston American, August 9, 1920; “Ponzi Relates Story of His Life,” Boston Post, August 9, 1920, p. 16; and Charles Ponzi, “Ponzi's Own Story of His Life Reads Like a Romance,” Boston Sunday Advertiser, August 8, 1920, p. 3.
20	settled in Parma: Certifico di Stato di Famiglia Piu' Certificato di Residenza. Lugo, Italy, for Ponzi family.
21	a group of wealthy students: “Ponzi Tells How He Rose,” Boston American, August 9, 1920.
22	“Poor, uneducated Italian boys”: Ibid.
22	“paved with gold”: Ponzi, p. 2.
22	the S.S. Vancouver: Information on the ship that brought Ponzi to the United States was obtained from the National Archives and Records Administration office in Waltham, Massachusetts. Postcards picturing the ship are held by the Peabody Museum of Salem and can be viewed online at www.greatships.net.
23	conditions for steerage passengers: A description of steerage is contained in a 1911 report to President William H. Taft by the United States Immigration Commission, an excerpt of which was found online at www.americanparknetwork.com/parkinfo/sl/history/journey.htm.
23	Most of the Vancouver 's passengers: The complete manifest of the November 3, 1903, voyage, including details on passengers, has been preserved on microfiche and was viewed and copied at NARA's Waltham office.
23	A cardsharp: Ponzi, pp. 2â3.
24	Splendor Macaroni Company: Sanborn Fire Insurance maps of Boston, vol. 5, pp. 551â53.
24	“like a million”: Ponzi, p. 2.
24	sticky, black mud: Ibid., p. 3.
24	“some fifth cousin”: Ibid., p. 3.
24	Ponzi was feeling tricked: “Ponzi Tells How He Rose,” Boston American, August 9, 1920.
25	into the arms of an Irish policeman: Ponzi, p. 4.
25	Ponzi's series of jobs: Ibid. Also Ponzi, p. 6; “Ponzi's Own Story of His Life Reads Like a Romance,” Boston Sunday Advertiser, August 8, 1920, p. 3.
25	spree at Coney Island: “Mr. Ponzi and His âPonzied Finance,' ” Literary Digest, August 21, 1920, p. 49.
26	Banco Zarossi: Ponzi, p. 7.
26	Antonio Cordasco: Robert F. Harney, “Montreal's King of Italian Labour: A Case Study of Padronism,” Labor/Le Travail vol. 4, (1979), pp. 57â84. Also Donna R. Gabaccia, Italy's Many Diasporas, UCL Press, 2000, pp. 58â80.
27	the full 3 percent, plus: “Montreal Detective Believes Ponzi's Story; Always Thought Him Guiltless; Cordasco Says Scheme Was That of Zarossi,” Boston Globe, August 12, 1920. Also Herbert L. Baldwin, “Canadian âPonsi' Served Jail Term,” Boston Post, August 11, 1920, p. 1.
27	Zarossi's pretty seventeen-year-old daughter: Ponzi, pp. 10â20.
28	Antonio Salviati: “Old Partner of Ponzi Arrested,” Boston Globe, datelined August 19, 1920.
28	the Canadian Warehousing Company: “Ponzi's Canada Career: Stole a Bank Check and Committed Poor Forgery,” Boston Post, August 12, 1920. In his autobiography, Ponzi gives an elaborate account of his Montreal caper, explaining that he took the blame for the forgery to spare Zarossi from prison because Zarossi had a wife and family. Ponzi's general account was believed by a Montreal detective, George Sloan, who brought Zarossi back from Mexico City and was quoted in the Boston Globe on August 12, 1920. But Sloan was not directly involved in Ponzi's arrest, and Ponzi's claims of chivalry are contradicted by the timing of his actions relative to Zarossi's disappearance and extradition, and also by a court transcript of the case unearthed by the Post. Somewhat less believably, Zarossi also disavowed Ponzi's account with his own self-serving explanation of his bank's demise: “Zarossi Disputes Ponzi: Blames âWizard' for Loss of $10,000 in Montreal Crash,” Boston Traveler, August 12, 1920, p. 1.
29	vermin-infested jail: Ponzi, p. 12.
30	Saint Vincent de Paul Penitentiary: Ibid., pp. 17â22.
30	a swindler named Louis Cassullo: “Denounces Ponzi . . . as Embodiment of a Lie,” Boston Globe, November 30, 1922.
30	Ponzi sized up Cassullo: Ponzi, p. 90.
30	a model prisoner: Herbert L. Baldwin, “Canadian âPonsi' Served Jail Term,” Boston Post, August 11, 1920, p. 1.
30	five dollars in his pocket: Ponzi, p. 22.

Chapter Three: “Newspaper genius”

33	living in his parents' house: Cambridge City Directory, 1917â20.
33	nearly flunking out of college: Numerous letters between E. A. Grozier and Harvard's Dean Hurlbut between 1905 and 1909 regarding Richard Grozier's grades, deficiencies, and so on, contained in student files located in the Harvard University Archives.
33	destined to inherit: “Editor of Post Dies,” Boston Post, May 10, 1924, p. 1.
33	largest-circulation newspaper: Editor & Publisher, January 22, 1921, p. 41.
33	largest in the nation: Editor & Publisher, March 19, 1921, p. 1.
34	fifteen printed: Herbert A. Kenny, Newspaper Row: Journalism in the Pre-Television Era, Globe Pequot Press, 1987, p. 18.
34	“On roof and wall”: Oliver Wendell Holmes, “After the Fire,” 1872.
34	oceans of water: Kenny, p. 19.
34	The eager buyer was the Reverend Ezra D. Winslow: “The Short Story of a Big Swindle,” Boston Times, January 30, 1876, p. 1.
35	forged the signatures: “E. D. Winslow: A Partial List of His Forged Endorsements and More of His Guilty Doings,” Boston Post, from the newspaper files of the Boston Public Library, date missing.
35	fewer than three thousand subscribers: Kenny, p. 20.
35	antiquated printing plant: “Editor of Post Dies,” Boston Post, May 10, 1924, p. 1.
35	Grozier was born: Ibid.
36	“It was soon raised”: Keene Sumner, “A Great Editor Tells What Interests People,” American, January 1924, p. 37.
36	most profitable and most copied newspaper: “Sensationalism: Joseph Pulitzer and the New York World, ” Cambridge History of English and American Literature in Eighteen Volumes, 1907â21, vol. 17, online at www.bartleby.com.
36	“I never saw”: Keene Sumner, “A Great Editor Tells What Interests People,” American, January 1924, p. 117.
37	one thousand dollars in gold coins: Kenny, p. 23.
37	wish was to buy a newspaper: Ibid., p. 119.
37	his meager price range: “Editor of Post Dies,” Boston Post, May 10, 1924, p. 1.
37	“If you have even the slightest objection”: Keene Sumner, “A Great Editor Tells What Interests People,” American, January 1924, p. 37.
37	crowded with newspapers: Timelines of Massachusetts newspapers prepared by Henry Scannell of the Boston Public Library.
38	“a small, brownish man”: Kenneth Roberts, I Wanted to Write. Doubleday, 1953.
38	“Of first importance”: G. S. MacFarland, “The Owner of the Boston Post, ” Hearst's Magazine, May 2, 1914.
39	“By performance rather than promise”: “Editor of Post Dies,” Boston Post, May 10, 1924, p. 1, excerpt taken from October 14, 1891, editorial.
39	dropped the paper's price: Kenny, p. 24.
39	“Most of the time”: Keene Sumner, “A Great Editor Tells What Interests People,” American, January 1924, p. 122.
40	Accounts of Post promotional gimmicks, including the Boston Post Cane: Kenny, pp. 32â33; Keene Sumner, “A Great Editor Tells What Interests People,” American, January 1924, p. 121; Laurel Guadazno, “The Boston Post Cane,” Provincetown Banner, January 13, 2000.
43	friend to the little guy: Kenny, p. 53.
43	careful reader of the census: Ibid., pp. 54â55.
43	“identical justice”: Ibid., p. 57.

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