Ponzi's Scheme (21 page)

He will pay you all, and thank you, too, and solicit your funds once more,

And instead of serving you doughnuts and coffee, he'll serve turkeys by the score.

Ponzi's efforts at rebuilding confidence began to gain steam. In the afternoon a group of men appeared at the office of Judge Leveroni and announced their intention to form an association called the Ponzi Alliance. They presented Leveroni with a draft of resolutions for establishment of the alliance, including a pledge of unwavering faith in Ponzi and a promise to pool money on his behalf if needed.

By the time the office closed, Ponzi had paid out another half to three-quarters of a million dollars, but the tenor of the crowd had shifted. There were no flying squads of men breaking through the glass doors this day. Before locking up, Ponzi posted a sign written cheerily in crayon on the side of an old egg crate:
WILL REOPEN FOR BUSINESS THURSDAY MORNING AT NINE O'CLOCK.
But his day was not yet over.

The officers of Hanover Trust had invited Ponzi to join them for a company outing at a resort called the Waters Club. Ponzi eagerly accepted, expecting the same treatment he had received a few days earlier at a bank-sponsored banquet where he was the guest of honor. There, Hanover treasurer William McNary had proposed a toast to the bank's newest director and biggest depositor. “Three cheers for Ponzi, the greatest wizard and financial genius this country has ever known!” said McNary, at fifty-seven a wily veteran of two terms in Congress as well as the rougher precincts of Boston politics and business. The cheers rang in Ponzi's ears, and he basked in the acclaim. He was so tickled he surprised the bankers by picking up the $640 dinner tab.

Each day that he survived the run, Ponzi felt stronger. And each day they failed to put Ponzi out of business, Richard Grozier, Eddie Dunn, and the
Post
staff grew more frustrated. This night, while Ponzi partied with the Hanover bankers, a
Post
reporter cornered Calvin Coolidge at the State House to get the governor's opinion on what should be done about Ponzi. On the strength of his no-right-to-strike response to the Boston police walkout, Coolidge had been nominated seven weeks earlier to be the Republican vice presidential candidate on a ticket headed by Warren Harding. Coolidge's mind was clearly elsewhere. He gave a politician's answer, vague yet authoritative enough to make it the lead of the
Post
's front-page story, set in bold type: “I will direct the attorney general to take action for the purpose of enforcing the law. I have not much knowledge of the affair, but according to the prevailing impression, the matter ought to be investigated by the government.” Of course, Attorney General J. Weston Allen was already investigating, so Coolidge clarified his answer to say he would direct Allen to join the federal and local investigations already under way.

The
Post
's young acting publisher wanted to do more than mouth platitudes; he was ready to claim his inheritance. No longer the Harvard layabout, Richard Grozier had quickly grown into the job foisted upon him by his father's illness. He squared his shoulders, cleared his throat, and exercised the right to speak for his family's newspaper. Richard had watched from the sidelines just four months earlier as his father bet the
Post
against Curley. Now, with the stakes even higher, he did the same against Ponzi.

Richard spent the night preparing the
Post
's first editorial on Ponzi and the frenzy he had caused, topped with the headline
IT CANNOT LAST.
Careful not to cross the line to libel, yet unmistakable in its intent, the editorial began, “Is Mr. Ponzi the ‘wizard' of the foreign exchange market that his alleged profits appear to make him out, or is he running an old game under a new guise? The experience of the ages arouses skepticism that he can do what he claims to have done, and yet all the forces investigating his scheme so far have been unable to prove him guilty of fraud.” The editorial gained steam at the end, concluding that even if Ponzi's postal coupon claims were true, “governments are not going to allow themselves to be mulcted [swindled] on this scale indefinitely, and it must be only a question of a few weeks before the golden goose is killed. There is, of course, still the alternative that possibly there never was any such goose.”

The battle had been fully joined between Richard Grozier and Charles Ponzi. The stakes were nothing less than their reputations and their livelihoods. Only one could survive.

Rose, Ponzi, and Imelde pose for a
Post
photographer outside
their Lexington home on August 1, 1920.

The Boston Globe

C
HAPTER
F
OURTEEN

“E
VEN HIS COWS
COULDN'T GIVE MILK.
”

T
he door to the Bell-in-Hand remained locked at nine the next morning, Thursday, July 29, and nervous whispers passed through the scores of people gathered in Pi Alley. Had Ponzi taken the money and run? Had the bubble burst? But shortly before ten o'clock one of Ponzi's clerks swung open the door to the old tavern and invited all with Ponzi notes inside. Ponzi arrived around eleven, and the appearance of his Locomobile evoked a throaty roar. He stepped from the car, waved to his fans, and ducked inside.

Soon after, Ponzi left School Street to begin another jam-packed day of interviews and meetings, much of the time with his new lawyer, Dan Coakley. He understood that the public was taking its cues from him. If he wanted to retain its support, he needed to model himself on the mallards that seemed to glide effortlessly across the duck pond in the Public Garden. On the surface, he would appear placid and carefree, but below he would churn furiously to prevent being pulled under.

Throughout the day, depositors continued to seek refunds at the Securities Exchange Company. When they got to the tellers' windows they caught sight of a large revolver lying menacingly on a desk to discourage thoughts of holdups. One young man, sweat dripping down his face, slid a clerk a Ponzi note for ten thousand dollars due to mature into fifteen thousand dollars on Saturday.

“You know,” the clerk told him, “this comes due in two days.”

“I want my principal!” he yelled. “I want my principal!”

He got it and left.

But as the day wore on, the balance began shifting toward investors who were there not to claim early withdrawals but to cash matured notes. By two in the afternoon the line had thinned to a trickle. Just after the four o'clock closing time, a Ponzi agent poked his head outside the door to ask if anyone else wanted his money. No one was there, so he locked the door.

Meanwhile, Ponzi was taking sporadic breaks to touch base with reporters. Some had yet to hear his rags-to-riches tale, and he was happy to oblige, telling the story from his arrival with two dollars and fifty cents to his receipt of the postal coupon from the correspondent in Spain to his stupendous success. When the inevitable question arose about exchanging postal coupons for dollars, Ponzi always demurred: “My secret is, ‘How do I cash the coupons?' That is what I do not tell.” No interview was complete without a tribute to Rose. “And then I found my inspiration,” he told a New York reporter. “She was Rose Gnecco, daughter of a wholesale fruit merchant of Boston, and the fairest and most wonderful woman in all the world. All I have done is because of Rose. She is not only my right arm, but my heart, as well.” Rose herself was dodging the limelight, preferring to support her husband in the privacy of their home.

Occasionally his press agent, William McMasters, would speak for Ponzi, but he fell far short of his employer's deft touch. While Ponzi avoided direct confrontation with authorities, McMasters seemed intent on antagonizing them. He told reporters that Ponzi's rallying cry had become “Let the government probe and be damned.” The
Post
used that comment to justify a Ponzi-bashing headline in the Friday morning paper:
EXPRESSES CONTEMPT FOR INVESTIGATIONS.

Ponzi took a few missteps of his own in his talks with reporters. This day, they came to haunt him in the person of his old nemesis, furniture dealer Joseph Daniels, whose million-dollar lawsuit was still pending. When the courthouse opened, a lawyer for Daniels amended his case to put a claim on Ponzi's stock in Hanover Trust, J. R. Poole Company, the Napoli Macaroni Manufacturing Company, and several other firms. Ponzi had bought some of the stock in other people's names expressly to avoid attachments by Daniels or anyone else, but he had defeated his financial disguise by describing his holdings to reporters. Daniels's case also came before Judge Wait, who ordered a hearing on the motion the following week.

On another front, the county prosecutor, Joseph Pelletier, announced that he was opening an investigation of Ponzi's rival, the Old Colony Foreign Exchange Company and its president, a forty-five-year-old former court stenographer from Georgia named Charles Brightwell. Ponzi had gotten his wish—his competitors were feeling as much heat as he was—but he was too busy to enjoy it.

When he returned home to Slocum Road, Ponzi found a
Post
reporter staking out his house. Ponzi rewarded him with a tantalizing bit of information: He was thinking about selling the Securities Exchange Company for $10 million. “I was in conference with a big banker from New York today,” Ponzi told the
Post
man, “and he made me this offer for my business. I have not decided to accept it or not.” Ponzi would not disclose the man's name or affiliation, but he had in fact received just such an inquiry. Whether it would become reality remained to be seen, but at the moment it was useful in his effort to maintain his credibility. Best of all, Ponzi thought, if he could somehow pull it off he might have found a way to cover his liabilities without robbing his bank.

T
he next morning, Friday, July 30, the
Post
thought it had an even bigger scoop, which it trumpeted in a front-page headline:

E
XTRA
C
OUPON
P
LAN
I
S
E
XPLODED

New York Postmaster Says Not Enough in Whole World to Make Fortune Ponzi Claims

The story—printed entirely in bold type—quoted New York Postmaster Thomas G. Patten as declaring that Ponzi's claims were “impossible” because far too few postal reply coupons existed to create an $8 million fortune. Patten either did not know or did not say how many coupons were in existence worldwide, but he said New York kept only twenty-seven thousand on hand at any time—worth about fourteen hundred dollars—because the demand was so small.

A separate front-page story gave the
Post
an opportunity to vent its growing frustrations at Ponzi's continued survival and prosecutors' apparent inaction. “Federal, state, and local investigations of Ponzi's get-rich-quick scheme failed yesterday to bring any tangible results,” the story derisively began. The
Post
also turned to ridicule, printing its first editorial cartoon about the situation. The paper's celebrated cartoonist, William Norman Ritchie, caricatured Ponzi as a dashing little moneybags with cash bursting from his pockets and a dollar sign for a tie clasp. Surrounding him were stereotypical European officials begging him in fractured English to solve their financial problems. An Italian cartoon figure, with a silly crown and a sash labeling him “King,” implored, “Signor Ponzi, the Old Home Lire Is ina D'Hole. Will You Taka D'Job of Minister of Finance?”

Yet neither the
Post
's stories to date nor its latest scoop about the New York postmaster's assertion seemed to be having any lasting effect. If anything, Ponzi appeared to be gaining more fans. Fewer than forty people were waiting when the Bell-in-Hand doors opened. Ponzi was still bound by his agreement not to accept new investments, but the bleeding had stopped. The run was over.

The swing in momentum could be read in several of the city's other newspapers, which seemed to delight in the possibility that the
Post
had been wrong and Ponzi was on the level. The
Boston Traveler
ran a sports column that compared Ponzi to Babe Ruth, written as a letter to the Home Run King. “Give half that pedestal to Charlie Ponzi. Great pair, Ruth and Ponzi,” it read. “Ponzi is a lot like you, Babe. The bankers are said to be trying to retire him with the banks full. Just like trying to retire you with the bases full, hey Babe?” Even better for Ponzi, the afternoon
Boston American
quoted a North End banker as saying that Ponzi's business “is honorable and it certainly presents no legal objections.” A separate story allowed a New York importer to expound at length about how he had figured out Ponzi's secret formula for wealth. “For an expert in foreign exchange, there is not the slightest mystery about the operation by Mr. Ponzi,” said the self-proclaimed authority, E. H. Newfield of the importing firm E. Luca Manoussa.

But the
Post
did have at least one important ally: Clarence Barron. In the Friday edition of his
Boston News Bureau
circular and in several public statements, Barron intensified his attack, strongly suggesting that Ponzi was engaged in a Peter-to-Paul scheme. He also criticized the authorities for the slow pace of their investigations. But what burned Ponzi most was Barron's suggestion that Ponzi was exploiting his own people, Italian immigrants. Ponzi was certain he had been libeled. He immediately ordered his lawyers to file a $5 million lawsuit against Barron that included attachments against his home in Boston and his beloved farm on the South Shore. “I tied him up so thoroughly,” Ponzi boasted, “even his cows couldn't give milk.”

Barron would not back down. Late in the day he intensified his criticism while leaving himself open to charges of condescending bigotry. “If there is anybody in this country requiring protection at the present time it is the humble Italian immigrant,” he said. “These poor people from Italy, who are children in finance, come to this country, and many of them take out citizenship papers. They can then be put into the trenches and made to give up their lives in defence of this country. Are we to do nothing to protect their savings and their hard-earned dollars?” He repeated his challenges to prosecutors and scoffed at Ponzi's lawsuit: “Ponzi or anyone else in his class may pile their attachments on me as high as Bunker Hill Monument and I shall still be found answering to the best of my ability the financial problems that are properly put to me.”

Ponzi immediately shot back with a measured yet biting response: “From the several articles published by Mr. Barron, I derive that he considers himself an authority on international finance, also that he is prejudiced, and that he is openly hostile to me,” Ponzi said in a statement handed to reporters. “His allusion implies a decided contempt toward the Italian race, which is uncalled for and unjustifiable.” After scolding Barron for forgetting, or never learning, the rules of polite society, Ponzi raised the banner of immigrant pride, borrowing from Curley's playbook on ethnic politics. “If his allusion did not offend millions of my countrymen I would never even have noticed it, but since the allusion is plainly offensive and misleading, I wish to remind him that banking had its origin in Italy and that the bill of exchange was devised by Italians. It is not surprising, therefore, that I, an Italian by birth and educated in Italy, should have come from Italy with perhaps a deeper knowledge of foreign exchange, foreign customs, and foreign commerce far superior than the knowledge Mr. Barron has, ever did have, or ever will have.” To demonstrate that his interest was principle rather than principal, Ponzi promised that if he won the suit, the $5 million would go to charity.

Proof that Ponzi's man-of-the-people pose was working came that afternoon. With the temperature approaching eighty degrees, Ponzi stepped outside the downtown branch of Hanover Trust onto Washington Street, planning to walk a few blocks to the bank's North End branch. His appearance on the street caused a stir. As he walked toward the market district, several dozen people fell in step behind him. With each block he covered, more followers walked in his wake. By the time the financial pied piper had reached the North End, his entourage numbered more than a hundred. They called his name and hailed him as a hero. They urged him to resume taking investments. The bolder among them grasped his hand for a congratulatory shake. Some shouted “Ponzi for mayor!” But that seemed too modest to others, who cried, “Ponzi for governor!”

The shouts of encouragement rattled around Ponzi's brain. Afterward, he gleefully told reporters he was thinking about using his wealth to support a “wet” candidate who would oppose Prohibition. But Ponzi preferred the role of king to kingmaker, and soon he mused about running for office—once he got citizenship, of course—as a friend to the workingman.

“I am not a Red or an extreme Socialist,” he told a reporter for the
New York Times.
“But I do believe that the average man ought to have his chance to live in the right way. I am advocating that so-much-abused term, ‘American standard.' I believe every man should have the opportunity to live a decent, wholesome life, and that he should be able by his industry not only to have enough to live comfortably, but to be able to have enough to take care of him during his old age and meanwhile, to give his children enough education so they may avail themselves of the opportunities which present themselves.”