Dreamers and Deceivers (16 page)

The lawsuit infuriated Ponzi. The company had been his idea alone! Daniels had wanted no part of it. He’d be damned if that furniture salesman would get a single cent.

“This is merely a nuisance suit,” Ponzi told the reporter. “I think Mr. Daniels thinks he can get rich by suing people, rather than by working hard and investing.”

Ponzi was eager to get the reporter off the phone, and off his trail. But then an idea struck him. One of his best—and that was really saying something.

“Tell me, can you come down to our offices?” Ponzi asked. “I’d like to show you what we’re doing here.”

Lexington, Massachusetts

July 24, 1920

It promised to be another glorious summer day. While Ponzi enjoyed breakfast with his wife and mother in the mansion’s dining room, the maid brought in the
Boston Post
.

The front-page headline caused Ponzi to spit out his juice.

DOUBLES THE MONEY WITHIN THREE MONTHS

50 P
ERCENT
I
NTEREST
P
AID IN
45 D
AYS BY
P
ONZI
—H
AS
T
HOUSANDS OF
I
NVESTORS.

As he eagerly turned the pages, absorbing every word of the article, he smiled with delight. He had been wooing the newspaper’s reporters for weeks, and, of course, he had received an important assist from his public relations advisor, William McMasters—but still, he had never expected something this big. The story read:

The proposition has been in operation for nine or ten months, roiling up great wealth 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.

The article pegged Ponzi’s net worth at $8.5 million and reported how his investors—“rich, poor, prominent, and unknown”—had seen their money “doubled, trebled, quadrupled.”

Ponzi concluded that the story couldn’t have been better if he had written it himself. He watched with pride as his mother glanced at the headline, the story, the pictures. He had finally proven himself to her. And to the world.

•  •  •

The next morning Ponzi arrived at his office to find an enormous crowd of people waiting for him. They had been lining up since 6
A.M.
, eager to invest their savings in Ponzi’s can’t-miss strategy.

The
Post
’s story had been picked up by newspapers across the country. Charles Ponzi was now more than just rich—he was famous.

“There’s Ponzi!” someone shouted as the “wizard” arrived in a blue limousine. The sighting led to cheers as dozens of people rushed forward to see the genius in the flesh.

“Ponzi! Ponzi! Ponzi!”

As Ponzi walked through the crowd with his gold-tipped cane, he presented himself as the people’s financial hero and savior.

“I want to see the man who can make a million in six months!” someone shouted, their voice rising over the din.

“That’s me!” Ponzi replied, to laughter. “I’m the man! I’m doing it!”

As he entered his office, he received a phone call from Rose. She told him that reporters and others were standing in front of their house, all hoping to catch a glimpse of him. Someone from the Fox movie company had called to tell her they were going to send a camera over to put Ponzi in the newsreels!

Ponzi took a deep breath and smiled. Everything he’d worked for was now his. That day alone, his offices collected more than $3 million in new investments. It all came from people who were tripping over themselves to give their money to a man they knew solely through a newspaper article.

Boston, Massachusetts

July 26, 1920

What the newspaper gods have given, they now were quickly taking away.

Ponzi was riding in the backseat of his car when the
Boston Post
’s morning edition gave him another surprise. This one was far less pleasant. Top financiers, the paper noted, were now questioning what they called the “Ponzi scheme.”

The article included a devastating quote from Clarence W. Barron,
one of the country’s most acclaimed financial experts. “No man of wide financial or investment experience would look twice at a proposition to take his money upon a simple promise to pay it back at interest of 200 percent annually.”

Barron had checked with the U.S. Post Office and learned that an average of just $8 worth of International Reply Coupons had been redeemed per day over the last several months. If Ponzi was making his money by redeeming these coupons on a wide scale, Barron was wondering why the Post Office had no record of it.

Ponzi was infuriated by the accusations and considered filing a lawsuit against Barron for libel. But first he had to attend an important meeting, one that might well spell the end of everything anyway.

To settle all doubts about the company’s legitimacy, McMasters had suggested that Ponzi sit down with the state district attorney and federal investigators and offer to put himself through an audit.

McMasters knew there was something funny about Ponzi’s numbers and suspected the Ponzi would never agree to official scrutiny. But, to McMaster’s surprise, a suddenly jovial Ponzi was all too happy to oblige.

Now, sitting across the table from the DA and other officials, Ponzi came right to the point. He said he welcomed an examination of his operation. He had broken no laws.

Pressed for how his company could possibly be providing such returns to investors, Ponzi shook his head. “That I cannot tell you,” he replied. “I cannot give away my secrets to my competitors.”

As his client spoke, smoothly and confidently, calmly answering question after question, McMasters became even more skeptical. Several times Ponzi had seemed to contradict himself. McMasters wondered if he was the only one who had noticed.

“Mr. Ponzi, if you can do these things that you claim, you will be the greatest Italian who ever came to America,” one of the officials told him.

Ponzi smiled. “Don’t forget Columbus!”

Everyone laughed.

“The real question facing you,” Ponzi observed, “is whether or not I have the money to meet my outstanding notes. Isn’t that right?”

The district attorney conceded that was so.

“Well, then, may I make one request?” he asked.

“What is it?”

“Instead of having multiple auditors from multiple state and federal agencies auditing my company’s books, could the various officials settle on just one?”

•  •  •

The next day Ponzi closed his offices as the public audit got under way. But that didn’t stop people from lining up outside. McMasters watched as a few of the investors asked for their money back—and Ponzi happily obliged. But most of them, McMasters observed, seemed inclined to wait out the audit. They still believed in the wizard who could make them a fortune.

“I’ve given back more than two million,” Ponzi told McMasters. “But people still trust me! There are thousands out there who know I keep my promises, who are hanging on to millions of dollars of notes!”

McMasters was not among them. At Ponzi’s office, he had begun to examine receipts and accounting slips. Then he went house to house and shop to shop, interviewing various investors. They showed him ticket stubs that indicated how much Ponzi owed them. And then he started to add up the sums.

As he met with hopeful citizens who had given everything they had to this man, a disturbing realization haunted McMasters: Charles Ponzi was hopelessly insolvent.

Boston, Massachusetts

August 2, 1920

The lines outside Ponzi’s office circled the block. McMasters had witnessed this scene before, although under vastly different circumstances. Instead of joyful crowds eager to hand over their hard-earned money, people now looked terrified and angry. Some were in tears. A few had even fainted.

All of them seemed to have read the
Post
’s front-page article that morning, a story written by William McMasters himself, who was now a
former
employee of Charles Ponzi. Although he’d been paid $5,000 to
write the piece, he had done it primarily to clear his conscience and tell the people of Boston the God’s honest truth.

The headline said it all:

DECLARES PONZI IS NOW HOPELESSLY INSOLVENT

P
UBLICITY
E
XPERT
E
MPLOYED BY
“W
IZARD
” S
AYS
H
E
H
AS
N
OT
S
UFFICIENT
F
UNDS TO
M
EET
H
IS
N
OTES

Ponzi responded to the story immediately. Showing up at his office, he denied the allegations and offered to pay off the investors who were circling the block. He also said he would sue the
Post
for $5 million.

“The issue now at stake is an issue between a man who wants to do all he can for the people and men who want to take as much money as they can from the people without giving adequate return!” Ponzi declared.

His former client’s manufactured fury did not faze McMasters. He’d been around Ponzi long enough to know it was all a bluff—the last, desperate act of a failing showman.

Boston, Massachusetts

August 3, 1920

Ponzi greeted the reporters who were now watching his every step with his customary grin. “Well, they didn’t break me yesterday,” he said. “And they won’t break me today.” He told them that he was going to sue McMasters for $2,000.

“How are your newspapers selling?” Ponzi yelled out. “I ought to have a commission!”

Reporters marveled at his unflappable calm, but Ponzi knew what they didn’t: One always had to look the part. Besides, as he’d learned years ago from Charles Morse in that Atlanta prison, a rich man could escape serious consequences.

Still, he felt the pressure. The ulcer was still there. Although many people were sticking by him, the run on his company from worried investors had now reached $400,000. Despite his public protestations, Charles Ponzi knew that he would soon be out of money.

Lexington, Massachusetts

August 8, 1920

Ponzi was still wearing his bathrobe and had not left the mansion all day. Rose was pacing back and forth in tears. She had never wanted this life in the first place. Her worst fears did not involve losing the house or the money, but losing her husband. She didn’t want him to go to jail. She still believed in him.

She shared that sentiment with the reporter who came to visit them that Sunday. “I would much rather that he was a bricklayer working eight hours each day,” she told him.

As his wife fretted, Ponzi told the reporter his life story—from his idyllic youth in Italy, to his journey to America, and then on to Canada, where he was involved in “confidential investigations.” From there, Ponzi said, he was “sent south” to Atlanta and Alabama before making his way back to Boston.

As the reporter took notes, he couldn’t help but notice that Ponzi had glossed over several years of his life.

Later that day, Ponzi received a telephone call from the reporter.

“Mr. Ponzi, a telegram has just come into our office from a reporter in Montreal. It seems that a man named Charles Ponzi, aka Bianchi, was once arrested for forgery there.”

The reporter paused, then asked, “Are you that man?”

Ponzi scoffed. “Ridiculous!” A strong denial, he knew from experience, could buy him some much-needed time. The public audit of his books would be completed any day now. Maybe by some miracle the auditor would believe his claims of solvency and he could figure out how to make all of this work.

The
Post
reporter persisted. “But weren’t you in Canada around that time?”

“What difference does it make?” Ponzi asked.

“This man worked at Banco Zarossi,” the reporter said. “Did you work at that bank?”

“I might have,” Ponzi said, hanging up the phone.

Reporters surrounded him now, everywhere he went. They hung on his every word. Many regular citizens did, too—convinced that he was
a David standing up to the Goliath of the moneyed elites and corrupt authorities. People were still coming to his office with money to invest, including a group of immigrants who had pooled together $100,000.

“After I am proved on the level,” Ponzi vowed, “I will demand that the authorities be investigated.”

Boston, Massachusetts

August 12, 1920

Officials at the local jail thought Charles Ponzi was a marvel. He was still confident and smiling, even though he was under arrest and most of the city of Boston, indeed most of the country, now knew he was a con man.

On the day of his arrest, Ponzi told reporters, “I am not going to flee, but will stay here and face the music. I am going to prove that I’m on the level now.” Other wealthy men had made similar claims and gotten away with their crimes. Perhaps, Ponzi thought, he could do the same.

Dressed in a dark, chalk-striped suit and polished shoes, Ponzi had his driver take him to the authorities, where he turned himself in.

“I have done nothing wrong,” he assured them.

“But you agreed to accept the auditors’ figures?” they asked him.

“Yes,” he replied. “I have agreed.”

New mug shots were taken at the Boston jail, and Ponzi was formally charged with scheming to use the mail to defraud investors, but he was a portrait of resolve. “The man’s nerve is iron,” a jailer later told reporters.

Ponzi would not admit defeat. Never. “No man is ever licked,” he said, “unless he wants to be. And I don’t intend to stay licked. Not as long as there is a flickering spark of life left in me.”

The last few days had been especially unkind to him. First came the allegations in the
Boston Post
that Ponzi had been imprisoned in Canada for forging checks. The story included his mug shot, dispelling any lingering doubts about his malfeasance, even among the most loyal Ponzi acolytes. The revelations about his prison record horrified Ponzi, but not for the obvious reasons. He was more worried about Rose’s reaction to finding out he’d lied to her for so many years.