Ponzi’s loyal bookkeeper, Lucy Meli, in their School Street office.

The Boston Globe

CHAPTER TEN

“I NEVER BLUFF.”

With his bank accounts bulging and no postal coupons to buy, Ponzi went on a shopping spree. He resolved that the only way to become a latter-day Columbus was to sail on, all sheets to the wind, until he somehow bumped into a continent of profits. His investments fell into four categories: businesses that were already profitable, real estate, unsecured loans to friends, and, most significantly, attempts to gain control of one or more banks. Then there were a few personal items for himself and Rose.

As summer approached, Ponzi spent sixty-one thousand dollars to buy a thousand shares of the Napoli Macaroni Manufacturing Com-pany, joking that he did so to make sure he “wouldn’t run out of spaghetti at home.” He wrote a check for thirty thousand dollars to buy three hundred shares and a controlling interest in the C & R Construction Company. Then one day he wandered past Faneuil Hall and into the offices of his old employer the J. R. Poole Company. After catching up with his former office mates, Ponzi walked unannounced into John Poole’s private office for a meeting that Ponzi never grew tired of recounting.

“Have a seat, Charlie,” Poole said. “They tell me that you’re in business. Dealing in some sort of foreign securities.”

“That’s right,” Ponzi answered.

“How are you making out?” his former boss asked.

“Fairly good,” he replied. “That’s what brought me here. To get your advice. I have a few dollars I would like to invest.”

“Why don’t you buy a few shares of my preferred stock? It pays 7 percent.”

“I would rather have some common.”

“I’ll tell you what I’ll do,” Poole said. “I will give you twenty-five shares of each.”

“Is that all?” Ponzi asked coyly. “It hardly seems enough to bother with it.”

Poole wondered if his former clerk was joking. “How much more stock do you want?” he asked.

“I’ll take all you have,” Ponzi said casually.

Poole laughed, and then, like a teacher addressing a not terribly bright child, told Ponzi: “Listen, Charlie, it takes a lot of money to buy this company.”

“I figured it would,” Ponzi said. “That’s why I waited this long to call on you. I was afraid I wouldn’t have enough.”

“And you may still be short of the mark,” Poole said, beginning to wonder.

They dickered a bit over the price Ponzi would have to pay for a directorship, and Ponzi brought out his checkbook.

“I didn’t think you meant it,” Poole said.

“J.R., I never bluff.”

Over the next few days Ponzi paid Poole $240,000 for control of the company. He gave Poole five loans totaling $155,000 to launch a major expansion that included opening branches in several foreign countries. In addition to the import-export business, Poole’s holdings included a sardine factory in Maine and a meatpacking plant in Kansas City, which Ponzi thought went nicely with the Napoli Macaroni Manufacturing Company. All he needed was some contraband Italian red wine and he could make a meal from his own holdings.

Next he expanded his real estate holdings. He bought a small tenement house in the city’s West End that cost him six thousand dollars. He issued loans secured by mortgages ranging from fifteen hundred dollars to thirty-five thousand dollars on homes in East Boston, Brookline, and the city’s Roslindale section.

Ponzi also made a series of unsecured loans, given mostly under the same terms as the one he had given Daniel Desmond, the treasurer of the Lawrence Trust Company—money provided to friends or acquaintances to help them buy certificates from the Securities Exchange Company. The biggest was for forty thousand dollars to Charles Pizzi, the young Hanover Trust banker who had landed Ponzi’s deposits. The smallest, for five hundred dollars, went to James McTiernan, police chief in the suburb of Sharon. Ponzi did not like McTiernan, whom he thought had “more gall than a brass monkey.” But with postal inspectors still dropping by on a regular basis, Ponzi wanted as many friends with badges as possible.

When Ponzi turned his attention to the banks, he started by spreading his money around. He bought fifty shares of Fidelity Trust for six thousand dollars, five shares of Tremont Trust for five hundred dollars, and one hundred shares of Old South Trust for $12,500 dollars. But little pieces of large institutions did him no good. He certainly was not going to earn his way out of the hole he was in by collecting dividend checks on his relatively small investments. A plan began to form in his mind. If he could gain control of a bank, he might weather any storms that came his way. Given enough time, the plan might allow him to transform his unsustainable business into something more permanently profitable.

He set his sights on Hanover Trust, a bank with about $5 million in assets, small enough for him to have a shot at taking over, yet large enough for it to be worth his while. An added incentive was the chance to settle an old score. Ponzi had not forgotten that when he’d been in dire straits the previous summer and had needed two thousand dollars to keep alive his Trader’s Guide idea, he’d been shown the door by the bank’s president, Henry Chmielinski.

Ponzi began putting his plan into motion with a two-pronged strategy of buying stock and increasing his deposits. On the stock side, he first bought small blocks of shares, seventy-five in all—not enough to gain control but enough for a foothold. At the same time, he endeared himself to several of the bank’s Italian stockholders the way he knew best: financially. The largest mortgage loan Ponzi made was to one of those stockholders, Enrico DiPietro, who turned around and invested in the Securities Exchange Company.

By making friends with other Hanover Trust stockholders, Ponzi might eventually control the votes that came with the shares they owned. By Ponzi’s count, between his own seventy-five shares and the stock owned by his friends, he controlled about six hundred of the two thousand shares of Hanover Trust stock. At the beginning of June, the bank intended to issue another two thousand shares. If Ponzi could buy fifteen hundred, he would have about twenty-one hundred, a majority of the stock.

At the same time that he was eyeing Hanover Trust stock, Ponzi was depositing more and more money into the bank. Though he kept accounts at more than a dozen other banks as well, he focused his money on Hanover—eventually keeping $2.7 million there, making him easily the bank’s biggest depositor. Ponzi knew that the larger his deposits, the greater his leverage over the bank’s officers. A bank with $5 million in assets might have access to only one-tenth that amount at any given time. The reason is that money accepted as deposits—which are liabilities on a bank’s books because the bank has to pay interest on them and the principal on demand—is not kept in vaults but is put to work making money as loans. Banking in 1920 was not a lot more complicated than that. Some bankers joked about how easy it was, describing their work as governed by the “rule of threes”: Pay 3 percent interest on deposits, charge 6 percent interest on loans, pocket the 3 percent difference as profit, and be on the golf course by 3:00 P.M. But that apple cart would be upset, perhaps irreparably, if a large depositor like Ponzi suddenly closed his account and withdrew his money without advance notice. At the moment, none of that was on anyone’s mind at Hanover Trust. Chmielinski and the bank’s other officers—none of whom remembered the poverty-stricken Ponzi who had come to them barely a year earlier—were plainly thrilled to have such a prosperous new depositor. And Ponzi knew it.

One afternoon in early June, he walked around the corner from his office and into Hanover Trust’s main branch on Washington Street. This time, Ponzi was ushered into Chmielinski’s private office, where bank officials buzzed around him like yellow jackets at a honeysuckle shrub. Chmielinski was a bull of a man, with a large head mounted on a thick neck. At thirty-seven he was almost the same age as Ponzi but twice his size. Chmielinski had emigrated from Poland in 1898. He’d run a Polish-language newspaper, the Daily Courier, before getting started in the banking business several years earlier by his brother, a Catholic priest. Father John Chmielinski headed the Polish Industrial Association, a combination bank, steamship agency, and all-purpose service center for Boston’s Poles in the North End.

With little preamble, Ponzi promptly offered to buy all two thousand shares of the bank’s soon-to-be issued stock. As eager as they were to please, the Hanover Trust officials recognized the danger.

“We cannot do that,” said one, “because we would be selling you the control of the bank.”

“That’s just what I want,” said Ponzi.

“We are sorry, but we cannot consider anything like that.”

They went back and forth awhile, but neither side would budge. Ponzi had expected as much, so he played his trump card.

“It seems to me that our differences cannot be bridged,” Ponzi said. “Let’s drop the subject. Keep your bank and I’ll look for another one.” He slid his checkbook out from his jacket pocket. “Can you tell me what my balance is today?”

Blood drained from the bankers’ faces. Fearing the sudden loss of Ponzi’s account and the havoc it would play with their books, the bankers hastily offered a compromise.

“We will sell you one thousand shares of the new stock,” one said.

“Nothing doing,” answered Ponzi. With some more prodding, he got the bank’s officers to acknowledge what he already knew: Collectively, they controlled roughly fourteen hundred shares. If the votes attached to those shares were added to the votes of the Italian shareholders, who had until then always supported the bank’s officers, the current Hanover Trust regime would continue to control a majority. Thinking their reign was safe, the bank officers made another proposal: “We will sell you fifteen hundred shares.” They also agreed to make him a director of the bank, in the belief that he could do no harm. But Chmielinski was unaware that Ponzi had already courted the Italian stockholders. With fifteen hundred shares of his own, Ponzi would effectively control the majority he needed.

“Fine,” said Ponzi, swallowing his excitement to avoid tipping his hand. “I’ll take the fifteen hundred shares.”

At the bank’s annual meeting of stockholders on June 8, Ponzi was elected a director of Hanover Trust. The next day, at a meeting of the directors, he won election to the bank’s powerful executive committee. A week later, Ponzi paid $187,500 for fifteen hundred shares of the bank’s newly issued stock. The Hanover Trust Company, which less than a year earlier had denied him a loan for two thousand dollars, had effectively become the Bank of Charles Ponzi.

After so many years of scraping by, Ponzi found he liked the feeling of money passing through his manicured fingers in exchange for a bauble or a building. The more he bought, the more he wanted to buy. As Bostonians became enmeshed in the mania of smashing piggy banks to invest in postal coupons, Ponzi became caught up in the mania of spending their money and making himself the man he had always dreamed of becoming.

He imagined himself a latter-day Count of Monte Cristo, reveling in the parallels he found between his life and the fictional experiences of Edmond Dantès, the title character in Alexandre Dumas’s classic. After fourteen years of false imprisonment, Dantès escaped and found a hidden treasure. He appeared mysteriously to benefit the good, wreak vengeance on his betrayers, and expose the ills of society. In Ponzi’s version, his fourteen-year ordeal spanned the difficult period from his 1903 immigration to his 1917 return to Boston. It included his two prison terms, both of which he considered as unjust as the trumped-up treason sentence suffered by Dantès. But now, if everything went as planned, he envisioned borrowing a page from Dumas’s book. He would use his money, his bank, his businesses, and his savoir faire to upset Boston’s caste system.

The money itself, he averred, was secondary to what it could do. Ponzi declared that he wanted to “test its power. To derive from it the thrill incidental to the accomplishment of things called impossible.”

On the other hand, Ponzi’s favorite phrase became “Wrap it up, please. I’ll take it.” He enjoyed saying it regardless of whether the item was a box of cigars or a building. He grew disappointed if a day passed without a big purchase, and he was feeling that way in mid-June when a car salesman dropped by the School Street office.

“I have a car,” Ponzi told him, testing his visitor’s salesmanship.

“A good car?” the man asked with a hint of sarcasm.

“What do you think? Do you think I drive around in a wheelbarrow?”

Shifting his tack, the salesman said, “I have been told that you own a Hudson.”

“It’s very true.”

“But you need a much larger and more expensive car.”

“What, for instance?” asked Ponzi. “What are you selling, anyway?”

“Locomobiles,” the salesman answered proudly, spreading out a brochure like a magician fanning a deck of cards. Ponzi saw a photo of a dark blue limousine and jumped to the bait. “How much for that?”

“Twelve thousand, six hundred dollars, delivered,” the salesman answered.

“All right,” Ponzi answered, “send it right over.”

The salesman blanched. The car Ponzi had picked was two weeks away from completion, he explained. Like all Locomobiles it was a custom job, in this case for a New York millionaire. That made Ponzi want it all the more.

“Fine!” he said. “Have it downstairs, in front of the door, by July first.”

“But that car is already sold.”

“Listen, young man, I want that car,” Ponzi said. “And when I want something, I am prepared to pay for it. Have that car here by not later than one o’clock on July first, and I will give you a thousand dollars more for it.”

Done deal.

The person least interested in Ponzi’s money was Rose. Though she loved their new home, she missed the simple joys of life in their little apartment in Somerville. Not long out of her teens, she was uncomfortable overseeing a staff as the lady of the house. “The more servants, the less freedom,” she would say. “I like a house where you can talk and not be overheard, where you can say what you like at all times.” And no matter how clean her maid kept things, deep down Rose believed she would have kept them cleaner.

One day Ponzi came home with a glittering diamond bracelet while Rose was entertaining her friend Lillian Mahoney, the wife of Ponzi’s agent Harry Mahoney. Embarrassed by his extravagance, Rose insisted that he return the thousand-dollar bracelet for a refund. Another time, Ponzi brought home a string of lustrous pearls. Again she demurred, but Ponzi thought he could outwit his thrifty wife. He agreed to tell her the price, but then tossed out a number that was only a fraction of the necklace’s true cost. Rose accepted the necklace, and Ponzi thought he’d carried the day. But Rose had the last laugh. Not long after, she quietly returned them for a full refund. Ponzi had better luck with a much different gift: To keep Rose company during his long days at work, Ponzi surprised her with a Boston terrier puppy they named Beauty.

Ponzi’s regular trips to a North End jewelry store led to a friendship with jeweler Alphonso Ciullo. It came in handy one morning when Ponzi was dealing with yet another visit from a pair of postal inspectors. Postal authorities had remained frustrated in their attempts to prove that Ponzi was doing something illegal, but they continued to examine his claims, including the recent statements printed in the Traveler about building his business by trading in reply coupons.

“Where do you buy them?” one inspector inquired.

“I am not telling that,” Ponzi answered. “I will merely say that they can be profitably bought in any country having a depreciated paper currency.”

“For instance?” the inspector wanted to know, setting a trap.

“For instance,” Ponzi answered, “Italy, France, Rumania, Greece, and so forth.”

“Exactly,” the inspector said, thinking he had caught Ponzi in a lie. “Now we have information that Italy, France, and Rumania have withdrawn from the postal agreement and stopped the sale of coupons . . .”

Ponzi parried as best he could, but the inspectors seemed to be gaining the upper hand. Just then Ciullo walked up the stairs at 27 School Street with a fat envelope.

“Charlie,” Ciullo said, “I have just received this package of coupons from Italy.” Ciullo wanted to know if Ponzi could transform them into cash. Scarcely believing his luck, Ponzi took the envelope and dumped out three hundred International Reply Coupons. He smiled. The inspectors pounced.

“Where did you get them?” one demanded of Ciullo.

“I got them from my uncle in Italy,” the jeweler answered, not knowing what was going on.

“Who is he?” the inspector asked.

“He is a postmaster in a small town,” Ciullo said.

“When did you receive them?”

“This morning.”

“How?”

“By mail,” Ciullo said.

The inspector examined the envelope and saw that it had been mailed from Italy in May and had only just arrived.

“Well,” Ponzi said, his voice tinged with sarcasm. “I hope you are satisfied now that somebody else beside myself can buy coupons in Italy.”

The inspectors turned tail and left.

And all the while, larger waves of investors kept crashing on Ponzi’s shores.

John Elbye of Everett bought a certificate for fifty dollars on June 10, and then his wife put up the same amount the next day. That gave John confidence, so he came back five days later with one hundred dollars. Five days after that he got up his real nerve and plunged in for a thousand dollars. Ernesto Giovino of Boston topped that with eleven hundred dollars on June 11. Giuseppe Albano of Boston deposited two hundred dollars on June 14 and came back two days later to add two hundred more. Catherine Callahan of Cambridge brought in a hundred dollars on June 18, and Samuel Goldstein of Charlestown put in double that the same day. Fred Drener of New Bedford could spare only fifty dollars on June 19. Harry Ash of Roxbury invested four hundred dollars on June 21, while Michael Kennedy of Somerville came in to collect his 50 percent interest on the $175 he had invested forty-five days earlier. He then took the whole $262.50 and bought another Ponzi note.

That same day, the first day of the hot summer of 1920, an unassuming man with a prominent nose and marquee-sized forehead came to 27 School Street from his office around the corner. With two hundred dollars in cash, he bought the 9,641st certificate issued by the Securities Exchange Company. A clerk wrote the man’s name on the certificate in graceful script: Principio A. Santosuosso. But nobody called him that. To his friends and colleagues at the Boston Post, where he worked as a reporter, he was simply “P.A.”

Post employees from newsboys to pressmen had been lining up in recent weeks to buy Ponzi notes. There was little doubt that word would spread to a well-liked reporter like Santosuosso. But his visit to 27 School Street was personal, not professional. He was twenty-nine, unmarried, the sole supporter of his widowed mother and his unmarried younger sister, both of whom lived with him in East Boston. The three hundred dollars he was due on August 5 would be a welcome addition to their household finances. If he thought the stream of people hoping to strike it rich at 27 School Street might make a good story for the Post, he mentally filed it away and returned to work.

The soaring number of new investments made Ponzi rethink his plan to take Rose on a second honeymoon to meet his mother in Italy. Although he fancied himself Boston’s Count of Monte Cristo, Ponzi knew that his sudden success made some people wonder if he modeled himself after a more recent literary character, J. Rufus Wallingford, the creation of author George Randolph Chester.

Chester’s 1908 novel Get-Rich-Quick Wallingford: The Cheerful Account of the Rise and Fall of an American Business Buccaneer, had become embedded in popular culture with help from a long-running 1910 Broadway play written by George M. Cohan. Wallingford is a consummate con artist who fleeces investors with a scheme based on items even more mundane than postal coupons: carpet tacks. Wallingford is ultimately undone by a small oversight and sent to jail, but he is rescued at the last minute by his devoted wife and a businessman whom Wallingford had swindled. The businessman forgives Wallingford because “you’re only the logical development of the American tendency to ‘get there’ no matter how. It is the national weakness, the national menace, and you’re only an exaggerated molecule in it.” The businessman then hires Wallingford as an executive.

Ponzi had already decided that he would not take the money and run, but he wanted to be certain that no one had any reason to suspect him. Leaving the country was something Wallingford would do. So Ponzi canceled his and Rose’s trip to Italy and wired more than five thousand dollars to his mother with instructions that she sail to Boston, first class, as soon as possible. Her only child had struck it rich, and he wanted her to come live with him and his wife. Rose worried that Imelde Ponzi might not like America or, worse, her daughter-in-law. But having lost her parents, and knowing how badly Ponzi missed his mother, Rose accepted the change in plans and began preparing for the arrival of the elder Mrs. Ponzi.

With money rolling in, and the pace increasing from week to week, Ponzi knew that he and his staff of amateur money minders needed professional help. He looked no further than his old acquaintance Roberto de Masellis, manager of the foreign banking department at the Fidelity Trust Company, who two years earlier had planted the seed in Ponzi’s mind about fluctuating currency values. Ponzi took de Masellis to dinner at the Copley Plaza, where he described the business of buying postal reply coupons and redeeming them in countries with favorable exchange rates. De Masellis thought Ponzi seemed an honest man with a logical business plan. Practical, even. De Masellis knew nothing about reply coupons, but he had always believed profits could be found in rising and falling currency rates with the right medium of exchange and the money to pull it off in a big way. Based on how well Ponzi dressed, it seemed to de Masellis that his dinner companion had discovered the magic formula.

Ponzi told de Masellis that he should come to work at the Securities Exchange Company as a financial “efficiency expert” who would create a system more comprehensive, or at least less primitive, than the index-card file. To seal the deal, Ponzi agreed to pay de Masellis the princely salary of a thousand dollars a month. In addition, he would deposit ten thousand dollars in de Masellis’s name at the International Trust Company, “in case the business stopped or if the rate of exchange became normal and spoiled the investments.” De Masellis was delighted. He agreed to begin work July 1.

De Masellis was hardly the only business expert Ponzi convinced. On June 30, Ponzi invited into his office a representative from the respected credit reporting firm the Bradstreet Company. A stamp of approval from Bradstreet would be a huge boon to Ponzi, and he got it. After hearing Ponzi’s account of his enormous success, the company issued a report that outlined the business and concluded authoritatively, “Mr. Ponzi bears a favorable personal reputation.”

Despite talking a good game with de Masellis and the Bradstreet Company, Ponzi was searching more desperately than ever for a way to turn a profit. And he still had not completely given up on International Reply Coupons. As a last-ditch effort, he tried to enlist Henry Chmielinski, president of Hanover Trust, in an effort to obtain coupons from Poland, where Chmielinski maintained ties with government officials. Ponzi promised that they would both reap profits from the deal.

“Henry,” Ponzi told him, “this is your chance of a lifetime to clean up some real dough.”

Chmielinski tried to do as Ponzi instructed, but the deal—implausible to begin with—fell through. With it went Ponzi’s last hope of turning postal coupons into cash. “I was left high and dry,” he reflected, “with no coupons and no profits in sight, and no way of meeting my notes, except by the time-honored custom of robbing Peter to pay Paul. It was a case of either sink or swim, and . . . I didn’t want to sink. Not just yet, in any event.”

In the meantime, Ponzi’s popularity kept soaring. When Ponzi and Lucy Meli tallied the investments from June, they could scarcely believe their eyes. Ponzi knew that deposits had been coming in so fast that his clerks had filled wastebaskets with greenbacks when the cash drawers had overflowed. But no one could have predicted the astonishing total: In June alone, the Securities Exchange Company had taken in more than $2.5 million from seventy-eight hundred customers.

Just as Ponzi was giving up on reply coupons, postal authorities in Washington were finally awakening from their torpor. They prepared an order, to be issued July 2, prohibiting post offices from redeeming more than fifty cents’ worth of International Reply Coupons per person at one time. The order made no mention of Ponzi, but it was a clear sign that postal officials still believed he was somehow trafficking in postal coupons. In that sense, postal officials were on a par with Ponzi’s investors, who fervently believed that Ponzi had a secret method of turning coupons into cash.

In the meantime, Ponzi continued playing the role of wealthy benefactor. On June 30, he gave a ten-thousand-dollar loan to his brother-in-law George Bertoldi, who was married to Rose’s sister Theresa, to buy a note that would be worth fifteen thousand dollars by mid-August. Ponzi also decided to square old debts. The failure of his late father-in-law’s wholesale fruit business eighteen months earlier had resulted in losses of about eight thousand dollars to creditors. At the time, that had been a world of money to Ponzi. But now, he collected more in an hour. He paid all Gnecco Brothers’ creditors, in full, with a smile.

But Ponzi’s grin was about to be sorely tested by another old creditor, one who had already been repaid but who wanted to collect far more.