THERE WERE, HOWEVER, MORE HUMANE ways to mistreat the American working man than to damage his body and perhaps terminate his existence. There were ways to steal from him without affecting his employment at all, especially the man who had a good enough job to have put some money away for his family and the future he was hoping to provide them. An Italian named Carlo Pietro Giovanni Gugliemo Tebaldo Ponzi, sometimes known by the aliases Charles P. Bianchi and Charles Ponei, discovered one of those ways.
Ponzi, who became better known by the Americanized version of his first name, Charles, was born in 1882 in the northern Italian province of Ravenna, the small town of Lugo, in “a decidedly working-class neighborhood; down the street was the ghetto where Lugo’s large Jewish population had been required to live since the 1700s. At the other end of the street was the Church of Pio Suffragio, a gloomy sanctuary filled with baroque stuccos of cherubs and frescoes depicting the deaths of saints.”
No wonder he wanted to get out. Nor is it any wonder that others wanted to get rid of him. As a boy, virtually his sole interest was discovering how much trouble he could cause in the neighborhood, how many little crimes he could commit without getting caught, how many saints he could appall even though they had passed from the realm of the living. Biographer Donald H. Dunn tells us “that relatives weary of paying his fines for gambling, petty theft, and forgery, had put up the money to get the young man out of the country.” It was the United States to which they exiled him, not in hopes of his finding golden streets, but in hopes that American law-enforcement officials would keep him either in line or in prison.
Ponzi felt no guilt about his relatives’ chipping in to get rid of him. In fact, he could not have been happier. Not so his mother. When Carlo was but a child, Mrs. Ponzi “dreamed aloud about the illustrious future she wanted for him, building what he called ‘castles in the air’ in her stories of the glory she hoped he would achieve. A favorite notion was that her smart, pampered boy would follow the example of one of her grandfathers and become a lawyer and perhaps even a judge.” Instead, poor Mrs. Ponzi found her son in need of lawyers and facing judges. As for the “castles in the air” that floated through Ponzi’s dreams, he would build them, all right, but then he tried to sell them—and that was when his problems began. Many years, however, awaited that sorry occasion—and its sorrier results.
In the meantime, Mrs. Ponzi was disconsolate. She had always hoped her son would succeed in Italy. She wanted the family to see him triumphant, to enjoy the neighbors’ envy of her; she wanted to be a witness to his life, not someone who learned about it long-distance in letters. When he was shipped across the ocean, she chose to believe that he was the one who had decided on the voyage, not virtually the entire villaggio of Ravenna. Yes, that was it; he had simply made up his mind to achieve his success on a grander stage than Ravenna. His vision was ambitious; so, too, must be his teatro.
Mrs. Ponzi might have admired her son’s ambition, but no sooner did his boat pull away from the dock than more tears began to flow down her cheeks than her flowered handkerchief could absorb. As for Ponzi, he too felt the immediate sting of absence. Later in life, he would conclude that leaving his mother was the most sorrowful event of his younger days, and in some ways one from which he never fully recovered. Other than that, though, he was pleased with his expulsion—this despite the fact that he passed through Ellis Island in 1903 with but a few dollars, a few shirts and pairs of pants, and a train ticket from New York to Pittsburgh.
But even then, Ponzi’s belief in his ability to fleece his fellow man never wavered. His ambitions far outran his years, and he could realize those ambitions only with the big score, the ultimate scam. In the meantime, like anyone else on the make in the land of liberty, he would work his way up the ladder, mastering a variety of small deceits. Pittsburgh would be his starting point. He had been told that a distant cousin awaited him there, a man who would be able to provide employment, something to get himself started.
But Pittsburgh was not the place for him, and his dissatisfaction was evident after a matter of days. He and his relative did not get along with each other—and, to make things worse, the relative did not, as advertised, have a job for Ponzi. He did not even have any suggestions, other than the steel mills, and these Ponzi would not even consider. Further, the cousin did not have a spare room for him; he told Charles he would have to find somewhere else to stay.
After a few weeks of searching for employment and being forced to live in a shabby Italian rooming house, he gave up on Pittsburgh and went back to New York, where he took any work he could find: as a grocery clerk, a road drummer, a factory hand, a dishwasher.
A bright young man, and a quick learner when he applied himself, Ponzi learned to read and write his new language, albeit with the occasional glitch, within a year. It was at about that time that he got a job with another distant relative, this one in Boston. The man, Joe DiCarlo, was cordial, welcoming, and absent an honest bone in his entire body. Now this was a man to whom Charles could look up. “I ship stuff on the railroad for the food companies,” he told the young man, a second cousin of a third cousin, “takin’ it off at this end and splittin’ it up among the stores or movin’ it on east. It’s paperwork mostly. ’Cept now and then I do a little sellin’ of my own.” He winked, then went on to explain that “a crate o’ tomatoes here, a barrel o’ flour there”—would sometimes get lost in transit. “There are ways to cover it up,” DiCarlo told his apprentice, “if you got the right papers. The letter I got says you had enough schoolin’ to be good with numbers. You’ll be helpin’ me.”
Ponzi smiled. He liked the idea of cheating, just on general principles. And he seemed to have a natural gift. He got better and better at it as he improved his command of English, but he also grew more and more disenchanted, for “with his growing skills came growing profits—profits that seemed only to vanish in his employer’s pockets. When he announced in late fall that he was leaving for New York [DiCarlo] nodded understanding.” And likely chuckled. Charles had started out his career as an American con man by being conned himself.
For the next sixteen years, Mrs. Ponzi’s beloved only child grew to manhood, struggling at one small-time con after another. He once stole 5,387 pounds of cheese that he intended to chop into small pieces and sell for 45 cents a pound. But he was quickly arrested, and then just as quickly released when the clerk who had written out his warrant misspelled his last name, making him, according to the letter of the law, a different person from the one who had been charged. The prosecutor was enraged. Ponzi took it as a sign, skipping out of the courtroom.
On another occasion, Ponzi offered to save a failing bank by promising the president money that he did not have and could not possibly obtain. His hope was that he and his partner, through various machinations, could gain control of the bank, operate it for a few months, and then empty it of its contents. Ponzi was undeterred by the fact that he knew no more about how to run a financial institution than he did how to turn a double-play on a baseball field. But he would learn as he went along; his confidence, he was certain, would carry him to skill, and the eventual result of the skill would be a financial windfall.
It did not work out that way. The bank president saw through Ponzi’s ignorance and refused to hire him. Further, certain that the young man’s intentions had been dishonest all along, he called the police. Ponzi barely escaped prison again. He was developing a skill in outrunning the law; so far, he had shown no indications of any others.
In New Orleans, he teamed up with a minister of dubious repute, and the two of them claimed they would rid the city of criminals who were harassing the local businessmen; the city council had only to pay Ponzi’s “secret society” a fee of $10,000. It was a lot of money, but city officials seemed almost ready to hand it over. At the last minute, though, they changed their minds when they discovered that the secret of the secret society was the total of its membership: two—Ponzi and the parson, and neither of them had ever confronted an organized-crime ring before, nor did either possess the know-how or courage to do so. As was the case with the bank, Ponzi had anticipated more on-the-job training, but members of the city council decided not to give the dubious pair of crime-fighters a chance. The two crooks were told that neither their services nor their presence were wanted any longer in New Orleans, and off went the Italian again, separating from his partner at the city limits.
Working his way through the South, Ponzi ended up in Brocton, Alabama, where he once again refused to be discouraged by his ignorance. He came up with a plan to provide the town, small but growing, with electric light and running water. “I have no figures to submit at this time as to the cost of the plan,” he admitted before a meeting of the town council. “I have no money to pay for any of it. What I propose to do is form a corporation and ask each member of this fine community to subscribe to one or more shares of its preferred stock—enough to pay for the cost.” And on he went, doing more to talk himself out of employment in Brocton with every sentence he uttered. The council, most of its members yawning, said it would discuss Ponzi’s offer, but he knew better. Rather than wait for its decision, he thought the wiser course was to hit the road again.
This time, though, it proved to be not so wise after all. Heading north, so far north that he was no longer in the country, he was arrested for forging checks in Montreal. Shortly after regaining his freedom, he found himself in jail down south again in Atlanta, charged with smuggling Italians into the United States illegally. He denied the charge, but the five men who were now residents of America because of Ponzi all testified against him, and to that there was no defense. Writes biographer Mitchell Zuckoff,
Ponzi was given a job in the prison laundry, but his linguistic skills soon won him a transfer to the mail clerk’s office. He impressed his boss, prison record keeper A. C. Aderhold, as smooth, smart, and congenial, a clever young man with a gift for figures who kept error-free books without complaint. The only peculiarity Aderhold noticed was what he called Ponzi’s “obsession for planning financial coups.” Aderhold thought his assistant took so much pleasure from plotting elaborate moneymaking schemes that he might someday put one into play simply to see if it would work.
After four years in the Atlanta Penitentiary, Ponzi was back in the Northeast, and perhaps more upset than he had been at any other time since arriving in the United States. It was not that he had set such corrupt goals for himself and still not achieved any of them; what troubled him was that he still had nothing about which to brag to his mother. He was, at least in one sense, a good Italian boy; he loved his mama, “thin, graying, tiny, but oh, so beautiful still, back in Italy. Someday, someday he would send for her, mail her a prepaid ticket for the finest stateroom on a transatlantic steamer, along with a thousand dollars cash for a new wardrobe and incidental expenses. Charles Ponzi’s mother would come to America like a queen.”
But when?
Seventeen years had now passed since he had last seen her, seventeen years since Ellis Island, and Charles Ponzi, so sure of his prospects when he had come ashore, had yet to make good—or, in his case, to make bad profitably. There had been times when he felt so depressed and desperate that he forced himself into legitimate employment again. “He sold groceries and insurance,” we are told by Donald H. Dunn. “He worked in a factory. He repaired sewing machines. He pressed suits in a tailor shop. He waited on tables in cafes and hotels. His vocabulary grew, but his bankroll did not.”
Especially at his next job, in 1912, working part-time at an Appalachian mining company as a nurse, another position for which he had no qualifications. But although his bankroll remained stagnant, his humanity, barely revealed at all in the past, displayed itself in a manner so courageous and startling as to suggest an incident from a totally different man’s biography. In a life remarkable for a variety of reasons, this was to be the most atypical, and heroic, occurrence of all—excessive in its kindness, almost unendurable in its pain. And impossible to figure out.
A woman named Pearl Gossett, a full-time nurse for the miners, was cooking dinner one night in 1912 when the gas stove on which she was working unexpectedly blew up, leaving her with serious burns on the left side of her torso: arm, shoulder, and breast. A few days later, Ponzi heard about the mishap and asked a Dr. Thomas, who was treating Gossett, about her condition. Thomas told him she was near death; traces of gangrene had begun to appear on the burns, and these would almost certainly prove fatal. Ponzi asked whether anything could be done. The only possibility, Thomas said, was a skin graft, but Thomas had asked almost everyone who worked in both the hospital and the mining company to donate skin, and no one was willing. The doctor was saddened, even angry. If only everyone to whom he had spoken would have parted with one inch, just one tiny square inch of epidermis, Pearl Gossett would survive.
Ponzi wanted to know how much skin she needed altogether.
Forty or fifty inches, Thomas said, a substantial amount which would require numerous donors.
Except in this case. Ponzi told Thomas that he would provide all the required skin himself. Thomas was stunned. Is she a friend of yours? he asked after a few seconds to regain his composure.
Ponzi said he didn’t know her, had never met her. She wasn’t even a paisan. But that wasn’t the issue. How quickly, he wanted to know, did she need the skin?
The doctor tried to talk Ponzi out of a procedure that would be so painful to him, but could not. Ponzi demanded an answer to his question. She needs the skin as soon as possible, Dr. Thomas finally conceded.
The donor said he was ready.
One more time: Didn’t he want to think about it some more? the doctor asked. It was such a drastic measure for one man to provide so much skin.
No.
Was there anyone he wanted to notify, any next of kin, close friend?
No one who could possibly come to his side, he said, thinking of his mother.
The doctor nodded, then began striding toward the operating room, telling Ponzi to follow him. Both men cleaned up, prepared for the ordeal ahead of them, and, as soon as he gave one final go-ahead, Ponzi was anesthetized. From Dunn again:
That night, doctors removed seventy-two square inches of skin from his thighs. Ponzi spent the next few weeks in the hospital, bandaged from hip to knee. When he had nearly recuperated, Ponzi got another visit from Dr. Thomas. The nurse needed more skin.
“Go as far as you like,” Ponzi answered.
On November 5, another fifty square inches were taken from his back. He spent most of the next three months in the hospital, battling pain and pleurisy. The donations would leave him with broad white patches of scar tissue on his back and legs. Gossett remained scarred as well, but she recovered.
At the hospital, Ponzi was a savior. Several people there brought him to the attention of various award committees, including the Carnegie Hero Fund, which had been established eight years earlier to honor precisely the kind of civilian valor that Ponzi had just performed. But the fund did not even reply. Neither did other organizations with medals or plaques to present in cases like this. With the exception of a single newspaper article, Ponzi’s remarkable display of selflessness went unacknowledged. It is not known whether Charles sent the article back to Italy.
Others at the hospital were happy to care for Ponzi as he slowly recovered, both at the institution and in their homes, and he was grateful for their kindness. They brought him food, flowers, tiny gifts of all sorts. But kindness is not riches. When he finally healed, at least enough to be on his feet and on the go again, he was back to his old priorities. Perhaps he thought that, after what he had gone through in almost complete anonymity, society finally owed him something, and Ponzi was determined to collect. Regardless, the heroic phase of his life, as brief and inexplicable as it had been, was over.
AN INVESTMENT BANKER NAMED CHARLES W. MORSE had been serving a fifteen-year term in the Atlanta Penitentiary for misappropriation of funds at the time that Ponzi was also incarcerated there. The two of them became friends and often played chess together, with Morse constantly giving Ponzi advice about matters other than the game. “Always have a goal, Charlie, my boy,” was how Morse began the counsel Ponzi found most memorable. “A goal that keeps getting bigger. If you think that a thousand dollars is enough the first time around, an hour later you’ll realize that you might as well go for ten thousand. In another hour, you’ll see that you might as well go for ten million. The risk is the same, isn’t it? If you have the nerve to go for the first bundle, you have the nerve to go all the way.”
Ponzi nodded, thinking it over.
And then, late in 1919, the moment seemed to come.
IT WAS A COMPLICATED IDEA, and it speaks well of Ponzi’s intelligence that he could have figured it out. He would not have been able to do so, however, had it not been for something that had happened almost fourteen years earlier. “In April 1906,” biographer Zuckoff explains succinctly, “representatives of the United States and sixty-two other countries gathered in Rome with the goal of making it easier to send mail across national borders. … A key item on the Rome agenda was to create a way for a person in one country to essentially send a stamped, self-addressed envelope to someone in another.”
The problem, of course, is that stamps cost different amounts of money in different countries, and one nation cannot be expected to accept the postage of another’s at face value, any more than it can be expected to accept another’s currency at face value. But after working through a number of obscure and complex details, and spending numerous hours at the negotiating table, officials in Rome were able to overcome their problems, and the Universal Postal Union was created. All member nations would accept something called the International Reply Coupon of any other member nation. The coupon, as Business Week put it, “could be purchased in one country and redeemed for postage stamps” in another. It might have been, as Zuckoff believes, that a “more mundane and obscure financial instrument [than the International Reply Coupon] is hard to imagine,” but Ponzi could see the possibilities.
Especially in the wake of an event that was totally unforeseen when the Universal Postal Union was created. One of the results of the Great War was that the economies of most European nations had taken a pounding, and as a result were left with money worth considerably less than it had been before the fighting broke out. One day, Ponzi was reading an article about different currency values in the paper; at the same time, there lay on his desk a coupon from Spain which he planned to use to send a publication called Trader’s Guide for a businessman in Barcelona. He was just about to go to the post office when it occurred to him that, because of the war, the Spanish International Reply Coupon was no longer worth what it had been earlier. So instead of mailing the Trader’s Guide, Ponzi decided to do some math. It wasn’t easy.
Zuckoff again:
The coupon had cost the Spaniard thirty centavos, or roughly six cents. After a penny processing fee, it could be exchanged in the United States for a stamp worth five cents. Ponzi knew that the Spanish monetary unit, the peseta, had been devalued after the war, so he began figuring how many pesetas he could buy for a dollar. Using exchange rates published in Boston newspapers, Ponzi concluded that a dollar was worth six and two-thirds pesetas. Because there were one hundred centavos to a peseta, Ponzi calculated that a dollar was worth 666 centavos. If each International Reply Coupon cost thirty centavos, a dollar could buy twenty-two of the coupons in Spain. If Ponzi brought them to the United States, those twenty-two coupons would be worth five cents each, or a total of a dollar and ten cents. By redeeming them in Boston rather than Barcelona, Ponzi would earn a profit before expenses of ten cents, on each dollar’s worth of coupons he bought in Spain and redeemed in the United States.
Through a friend in Italy, Ponzi knew that the lira, his homeland’s basic monetary unit, had been even more thoroughly devastated than the centavo, and his manipulations could earn three times as much money as would be provided by wheeling and dealing in Spain. “Sixty-six coupons purchased in Rome for a dollar,” writes Donald H. Dunn, “would be worth $3.30 in Boston. Ponzi’s mind reeled at the thought—he was looking at profits of $2.30 on every dollar spent, or 230 percent, before expenses. Other countries might have even more devalued currencies, and the profits would be even more astronomical. One example was Austria. … If redeemed in the United States, Ponzi’s initial thousand-dollar investment [in Austria] would yield stamps worth more than twenty-five thousand dollars.”
There were complications to work out, of course, even more mind-bending than those that had already presented themselves; but after a few days Ponzi believed he had unbent them sufficiently and was left with nothing more than one final complication: how to get enough money to buy the coupons in bulk—and therefore make profits in bulk. It did not bother him that, so far, what he was proposing to do was legal.
He started a firm called the Securities Exchange Company, which had just the right sound to him. Respectable, trustworthy, and accurate; the company was, after all, exchanging securities. He rented a suite at a prestigious location, the Niles Office Building in downtown Boston, and set up shop. He was unable to afford either the office or the furniture; he had to borrow the money for both. But thanks to a loan from a friend, the office was ready for business in a few days, and its occupant, as he had always been at the start of one of his ventures, was once again optimistic. This time there was reason.
A mere five feet, four inches tall, the little man never lost the bravado of one much larger. Dunn compiled a list of what he believed to be Ponzi’s principal attributes: “A confident tone of voice, for example; a tone that indicated its owner knew precisely what he was doing at all times. A dapper appearance, too; an appearance that said—from the well-shined shoes, the pristine celluloid collar above the tightly knotted tie with its small diamond stickpin perfectly centered, the casual breast-pocket handkerchief, and the rakish straw hat—that here is a man who, if he is not already successful, will latch on to success at any moment.”
And he had better latch on to some quickly. Ponzi’s first bill for the office and furniture rental would be due in less than a month, and right now he could not even make a down payment on either. He needed a client, and he needed him fast.
Enter Ettore Giberti, a grocer from the Boston suburb of Revere at whose store Charles and his wife and mother-substitute Rose, née Gnecco, bought their food. Giberti had heard Ponzi brag about the investment opportunities of International Reply Coupons until the subject rang in his ears. Sometimes, he had to admit, he wished Mrs. Ponzi did more of the shopping, but perhaps it was his good fortune that Charles was the customer after all. Giberti, who had a wife, a son, and a net worth of $1,200, was worried about the future. He wanted his boy to go to college, and, God willing, there would be other sons, and perhaps even a daughter or two. Such a joy they would be—but such an expense. And then there was his wife, whom he wanted to see wearing nothing but the finest clothes. As for himself, he wanted to retire before he was an old man, to enjoy life before infirmity caught up with him. Twelve hundred dollars would simply not do, and Giberti could not see a way to make a significant improvement in his financial standing without playing the stock market, which to him was the same thing as gambling. He could not afford to “play” with money that had such important tasks ahead of it.
Finally, he decided to go to the Niles Building and let Ponzi make his pitch with proper documentation in suitable surroundings. Giberti’s knock on the door was to Ponzi more than just the sound of opportunity: it was the sound of a fortune about to begin building. With a thumping heart, Ponzi admitted his first customer.
At first, the conversation did not go well. Despite the glib banter he had previously displayed in Giberti’s grocery, the dialogue now was different: the grocer was no longer just a food vendor but a potential client, and Ponzi had not yet had any practice in polishing his spiel to the point of making a sale. He feared he was being much too complicated in his explanation of International Reply Coupons, that he was losing Giberti, who had in fact begun squirming in his chair, giving the appearance of a man who would much rather be slicing a rib roast.
So, in a burst of enthusiasm—and irrationality—Ponzi offered Giberti a fifty-percent return on his investment. Just blurted it out. Giberti was astonished. So was Ponzi. Had he really promised fifty percent?! Was he crazy? Fifty percent was, of course, a possibility, given the vagaries of different countries’ exchange rates, but to promise it was quite another matter. As for Giberti, he might have been just a grocer but, like Ponzi, he followed the investment news in the papers and was aware that a fifty-percent profit on an investment was not only out of the ordinary but, as far as he knew, outside the realm of possibility.
Yet Ponzi was his customer, his friend, neighbor; the grocer trusted him. He sat in his chair for what seemed to Ponzi the rest of the afternoon—thinking, calculating, squirming even more than before. Then, despite how fantastic the coupons sounded, or more likely because of that, Giberti, a cautious man with his money, decided to hold on to it; he would not make the investment. He thanked his countryman for his time, then prepared to leave.
Ponzi panicked. His first sale, and he was about to lose it. But he was nothing if not a quick thinker. He rose from his desk and, before Giberti could depart, he not only assured him of a fifty-percent return on his money, he offered him employment as the first sales agent for the Securities Exchange Company. Giberti was dumbfounded. What did he know about selling International Reply Coupons?
Charles Ponzi, huckster by trade and instinct, pooh-poohed him. He knew what it meant to be a sales agent; he had spent much of his life selling, often the “castles in the air” about which his mother had fantasized—but selling nonetheless. He would teach Giberti what to do, and, before Giberti could decline, Ponzi started in on him, spending the next hour or so instructing his first employee in the intricacies of the scam that had not yet become a scam, giving him information about the product and advice about persuading others to buy: “salesmanship and psychology,” he kept repeating; those were the key words, “salesmanship and psychology.”
Giberti began warming to the offer. Yes, he wanted the best for his children, but he wanted the best for himself too; and salesman sounded a lot better than butcher.
Ponzi then assured him that he was in the perfect position to sell the coupons. Dozens of people came into his shop every day; if they trusted his judgment on what cut of meat to buy, why wouldn’t they also believe him when he suggested an investment? All right, so it was a bit of a reach, but for his trouble, Ponzi said, Giberti would receive a commission of ten percent on each sale. How could he possibly lose? Even if the International Reply Coupons turned out to be a bust—and Ponzi assured him there was no chance of that—he now had a second job that required almost nothing in the way of additional time and effort.
When Giberti finally left Ponzi’s office, careful not to have made a firm commitment, he was nonetheless smiling. Two weeks later, in January 1920, he returned positively exuberant. So far, in addition to the money Giberti himself had invested, he had talked eighteen of his customers into handing over at least a portion of their savings to the Securities Exchange Company—and he was just getting the hang of it! The result was that, in addition to his own profits, Giberti was able to present $1,770 to Ponzi.
SEC was officially in business. More than that, it was about to become the thriving enterprise of which Ponzi and the two women who depended on him, his wife and mother, always knew he was capable.
Or was it?
MUCH TO HIS SURPRISE, PONZI suddenly had competition. The Old Colony Foreign Exchange Company had not only joined SEC in figuring out how to make money on International Reply Coupons, but had taken a suite of offices in the Niles Building—and in what Ponzi thought was an inexcusable display of effrontery, had done so on the same floor as his own firm. So appalled was Ponzi that he went to see a fellow Italian on the police force, expressing his fear that people would think these Old Colony impostors, whoever they happened to be, were somehow associated with him, and that such an association could only damage SEC’s reputation.
As a favor to his countryman, the cop looked cursorily into Old Colony’s methods and the dividends it paid to its investors and determined that its practices, at least so far as he could tell, were perfectly legitimate: Old Colony, providing exactly the same opportunity that the Securities Exchange Company was providing, had done nothing to break the law. And that is the important point to realize at this stage in the development of the Ponzi scheme, a point that too many historians ignore. Such investments as were being accepted in International Reply Coupons were not against the law. It was beginning to look as if, with ultimate irony, Ponzi would be able to line at least his own street with gold and not break the law. Who would have guessed!
He was still worried, though, about the competition from Old Colony. He assured his friend on the force that the company would eventually turn crooked, and pleaded with him to keep an eye on them. The cop said he would. What he did not say was that he would also keep an eye on Ponzi. There was something about the business of both firms that did not smell right to him, nor to other authorities who were starting to become suspicious by the returns the companies offered and, in fact, had in a few cases already paid. They started to gather information, ask questions of clients.
No sooner had Ponzi begun to fret about Old Colony than all eyes in the Boston financial community suddenly turned toward the newer firm. It had taken out an ad in Boston newspapers, summarized as follows by historian Michael E. Parrish:
For every $10 invested with the firm for ninety days, it promised $15 back. … Potential customers were told that Old Colony intended to buy International Postal Union money orders in some foreign currencies and later redeem them in others, reaping profits from the daily and often substantial fluctuations in exchange rates from country to country. Old Colony assured the curious that its activities were perfectly legal and that all who entrusted their funds to the firm would become very rich, very soon.
A ten-dollar investment would bring fifteen dollars in return? Old Colony was promising fifty percent! Ponzi had, of course, made precisely the same guarantee, but he had done so in private, in a face-to-face conversation; he could easily talk the neighborhood butcher into waiting another week or two for his dividends if need be, offering arcane but impressive-sounding explanations for the delay. Then he could pay him back out of future investments—which was, of course, precisely the course of action that would lead Ponzi down the road to thiefdom.
But it was something else altogether to make a public vow of such riches. It was, among other things, too much pressure to place on SEC, which would now have to match Old Colony’s figure in just as public a manner, or tumble to the status of also-ran. Ponzi was livid. Had these Old Colony swindlers done their homework? Rates of exchange on foreign currency were constantly varying, and although they were just as constantly favoring Americans, and would continue to favor them for years to come, the percentages were sure to fluctuate. A fifty-percent return simply could not be guaranteed on a regular basis.
Nonetheless, Ponzi authorized his newest salesman, Charles Ritucci, who worked out of the newly opened Plymouth, Massachusetts, office, to print flyers in English, Italian, and Portuguese and paste them onto store windows all over town:
Securities Exchange Company, No. 27,
School Street, Boston, Mass.
NOTICE
Do you want to get rich quick? See our agent, Charles Ritucci, 301½ 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.
SEC and Old Colony, the two little firms on the same floor of a Boston office building, were paying the highest dividends of any companies in the country, more than United States Steel, more than Ford Motor, more than J. P. Morgan. Even in capitalism’s homeland and primary feeding ground, it didn’t seem to be the kind of thing that could last.
It might have been Old Colony that took out the first ads, but it was Charles Ponzi and the Securities Exchange Company that seemed most to benefit from them, perhaps because Ponzi had started making money for his clients before Old Colony, and just as likely because he was such a charmer that neither prospective clients nor hard-bitten newspapermen could resist him. Journalists, in particular, found themselves captivated by the dashing little fellow, and Ponzi delighted in the power he so deftly wielded over them.
That power was never more clearly demonstrated than on a day in the early summer of 1920. A reporter for the Boston Post made an appointment with Ponzi to talk about a lawsuit filed by Joseph Daniels, a furniture dealer and once a friend of Ponzi, who had loaned him the money to make the initial payments on his office and furniture. Ponzi had repaid him in full, but now that the Securities Exchange Company had become such a success, he was suing for more. It was a fool’s mission; Daniels had absolutely no case against Ponzi and would have been advised so by every lawyer he had consulted, if he had bothered to seek counsel in the first place. The most for which Daniels could hope was publicity as an annoyance.
Nonetheless, Ponzi was happy to talk about the matter, was happy to talk about anything with the press, and invited the Post reporter to his home. By the time the interview was over, the reporter had fallen completely under Ponzi’s spell, the result of which was that he ended up writing a story that resembled a press release more than an exposé.
DOUBLES THE MONEY WITHIN THREE MONTHS
50 Per Cent Interest Paid in 45 Days by Ponzi—Has Thousands of Investors
Deals in International Coupons Taking Advantage of Low Rates of Exchange
A proposition fathered by Charles Ponzi, as head of the Securities Exchange Company at 27 School Street, where one may get 50 percent in 90 days, on any amount invested, is causing interest throughout Boston.
Yesterday his offices were crowded with people trying to loan him money on his personal note.
The proposition has been in operation for nine or ten months, rolling up much money for the man behind it and rolling up much money for the thousands of men and women who are tumbling over themselves to entrust him with their money on no other security than his personal note, and the authorities have not been able to discover a single illegal thing about it.
Ponzi, starting last October or November with hardly a “shoe-string,” to so speak, is today rated as worth $8,500,000—purchaser of business blocks, trust companies, estates, and motor cars. His investors—and they run the gamut of society, rich men and women, poor men and women, unknown and prominent—have seen their money doubled, trebled, quadrupled.
“The story went on merrily from there,” writes Mitchell Zuckoff, “liberally and generously recounting the Horatio Alger version of [Ponzi’s] life.” As for poor Joseph Daniels, even though the story was supposed to be about him and the victimization he claimed to have suffered, he was not even mentioned in the article, his name appearing not so much as a single time—making him feel even more victimized than before. The reporter had, according to his lights, stumbled across a much better story than a small-stakes lawsuit from an undoubtedly jealous plaintiff. He had, rather, found an immigrant who had in turn found the American dream, a poor boy from Italy who had scrambled through almost two decades of insulting employment now amassing a fortune for both himself and those who had believed in him.
Profits were tumbling over profits. There was no apparent end in sight. According to one account, people begged him to take their money, inundated him with it; “Ponzi literally couldn’t bank it fast enough. It was packed into shoe boxes and stuffed in desk drawers. In April he took in $120,000 … and in July over $6 million.” Most of the money was legitimately, if precariously, invested. The remainder, save for $100,000, was spent on a rich man’s necessities: house and furnishings, car and clothes. The $100,000 was a gift to an orphanage.
As of June 1920, Charles Ponzi was America’s financial wizard nonpareil. But the year had more than six months to go; and, as Ponzi had already discovered, a lot of money can change hands in a short period of time.