Ponzi's Scheme (3 page)

Halfway down the hall, he caught sight of a tired-looking woman with a baby in her arms. Ponzi's rage vanished. He brought his quick march to a halt. “Here, let me help you,” he said in Italian, their shared native tongue.

She explained that she had grown exhausted while waiting to collect $150 on a Ponzi note that had just come due. Ponzi took the note and gently asked her to wait a moment. He returned to the offices of the Securities Exchange Company and emerged a few minutes later, money in hand.

“
Buona fortuna!
” he told her as she walked away. “Good luck.”

She was swallowed up in the crowd just as the ballyhoo man resumed his chants. When he saw Ponzi, the big man turned his come-on into a taunt.

“Ah, Mr. Ponzi!” the man called. “Want to put in two thousand?”

“Mister,” Ponzi shot back, “if you've got two thousand you'd better hang on to it for bail. There'll be a couple of police inspectors down to see you in a few moments.”

Not waiting for a reply, Ponzi whirled around and returned to his office. Soon, Inspector Cavagnaro strode through the door. He wanted to help, but he explained to Ponzi that he had no evidence of wrongdoing by the Old Colony gang. He had no cause for arrest. Still, Ponzi could be pleased that Cavagnaro's presence had put the Old Colony crowd on notice that they were being watched and that Ponzi had friends in high places. That would have to do until the Pinkertons could get busy with their investigation. All Ponzi needed was a little time. He had figured out how to turn this soon-to-be-exhausted gold mine into a permanent mint, one that would make him as rich and respected as the Brahmins who ran this town. At least that was the plan. In the meantime, he could not let anything derail him.

Investors kept pouring into the office the rest of the day, and by the time Ponzi locked the doors after six that night he had taken in more than $200,000. That did not include the receipts from his two dozen similarly overwhelmed branches. It was his best day since he had birthed his brainstorm the previous summer.

As Ponzi sat back in the Locomobile for the ride home to Lexington, the basement-level presses of the
Post
began rumbling to life once more. By coincidence, the newspaper's offices were only a hundred yards away from the Securities Exchange Company, around the corner on Washington Street, a Colonial-era cow path known as Newspaper Row. If he had stayed in the city a few more hours, Ponzi could have picked up a copy of the
Boston Sunday Post
still warm and inky. This time the story about him would be at the very top of the front page, with a headline set in bold type. It would have photos, too, not only of him but also of his wife, his mother, the scene outside 27 School Street, and his fabulous Lexington home.

But the glorious tide that had carried him so far, so fast, was threatening to overwhelm him. The
Post
's Sunday story would not be as flattering as the one that had appeared this morning. It would signal the
Post
's rising doubts about his honesty and rally authorities to intensify their sluggish investigations. Ponzi was about to get a run for his money.

Postcard of S.S.
Vancouver,
the ship that brought Ponzi from Italy to America in 1903.

Peabody Essex Museum

C
HAPTER
T
WO

“I
'M GUILTY.
”

P
onzi's moment of success had been decades in the making. The thirty-eight years that preceded that Saturday in July 1920 were notable mostly for setbacks, misadventures, and persistent failures in pursuit of riches.

He was born March 3, 1882, in Lugo, Italy, an ancient crossroads town populated by merchants and farmers, in a fertile plain sandwiched between Bologna and the Adriatic Sea. Ponzi's parents were living with his widowed maternal grandmother in an apartment at No. 950 Via Codalunga, a curving road lined with three-story stone buildings. It was 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. Stained-glass windows high on the walls allowed only dim shards of light to fall on the narrow wooden pews. Ponzi's parents, Oreste and Imelde Ponzi, brought him there to be baptized, anointing him with names chosen to honor his maternal and paternal grandfathers: Carlo Pietro Giovanni Guglielmo Tebaldo Ponzi.

The family was comfortable but far from wealthy, richer in name and reputation than in savings. Ponzi's father was descended from middle-class tradesmen and hoteliers but he was employed in Lugo as a postman. The work of delivering mail and selling stamps was steady if not glamorous, and the post office was only a short walk from the family's apartment. Ponzi's mother came from significantly more prominent stock—Imelde Ponzi's father was an official of the Civil and Criminal Court of Parma. More notably in the class-conscious world of nineteenth-century Italy, her father, mother, and grandparents all bore the titles
Don
or
Donna—
Don Giovanni, Donna Teresa, Don Antonio, and so on—which placed them among the aristocracy in the duchy of Parma.

Imelde Ponzi doted on her only child, staking her family's future on the little boy who resembled her so strongly, hoping he would restore the family to its former social and financial rank. Throughout Carlo's childhood she 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.

When Carlo was a few months old, the family moved south to Rome, but then returned to the north and settled in Parma, a prosperous city halfway between Milan and Bologna, where both Oreste and Imelde were born. Carlo entered Parma's public schools at age five, but when he was ten his parents decided it was time to begin preparing him for the professional life they had mapped out. Oreste and Imelde sent young Carlo to a prestigious private boarding school founded under the auspices of Napoleon's second wife, Princess Marie-Louise, who had ruled the province for thirty years in the early nineteenth century. Ponzi impressed the nuns who taught him, learning to speak fluent French and generally winning good grades. His chief regret was that although the school was not far from his home, he could visit his parents only on occasional weekends and holidays. His loneliness increased when his father died while he was away.

A modest inheritance from his father, supplemented by some money left to him by an aunt, allowed Ponzi to chase his mother's dreams and attend college. If he invested carefully and budgeted wisely, his inheritance would be just enough to cover tuition and living expenses. To his mother's delight, he earned acceptance to the University of Rome, the city's oldest university, founded six centuries earlier in the name of “La Sapienza,” or wisdom. But five hundred miles from home, free from the control of boarding school nuns, Ponzi had other pursuits in mind. He identified with the stories his mother had told of their aristocratic blood, and he gravitated toward a group of wealthy students who lived
la dolce vita.
Ponzi did everything he could to emulate them, adopting their manners and especially their spending habits. Their funds seemed limitless, so he dug ever deeper into his fast-dwindling inheritance to dress in the latest European fashions and pick up restaurant tabs for his friends and the pretty girls they met.

His rich friends considered the university a four-year vacation, and so Ponzi acted as though he could, too. He skipped classes, preferring to sleep away his days. At dusk he roused himself from his boardinghouse bed and roamed the city's fashionable neighborhoods, carousing in cafés, attending the theater, and refining his taste for opera. At midnight he joined the gamblers and thieves in the casinos of Rome's underground. Young, naive, half-drunk, and reckless with money, Ponzi made an appealing mark. At dawn he would trudge to his rooms to sleep, and then the cycle would begin again. Throughout, he assured his mother he was hard at work, making her proud. But the good times could not last. The combination of an exhausted bank account and a thorough disregard for classes killed any chance he had for a degree. Ponzi looked himself over and made a brutally honest self-assessment: He had become a fop. Worse, an impoverished fop. The easy accessibility of money had spoiled him. He had no choice but to leave Rome.

Before he died, Oreste Ponzi had enlisted one of young Carlo's uncles to watch over him. Now, the uncle suggested that the twenty-one-year-old college washout find a job, perhaps as an entry-level clerk. Carlo flatly refused. He considered himself a gentleman, a member of the elite class of his Roman friends. Taking a mundane job would be beneath him. Humiliating, even. The thought of physical labor was not even discussed. Ponzi considered himself a mollycoddle, and no one disagreed. The uncle tried a different tack: “Poor, uneducated Italian boys go to America and make lots of money,” the uncle said. “You have a good education, you are refined and of a good family. You should be able to make a fortune in America easily.” Then Ponzi's uncle spoke the magic words that were luring millions of Europeans across the ocean: “In the United States,” he said, “the streets are actually paved with gold. All you have to do is stoop and pick it up.”

Ponzi knew his mother was disappointed by his Roman holiday. He was ashamed that he had misled her and ignored her advice. Going to America and coming home a rich man would make her proud. Even better, it would satisfy his thirst for a life of leisure and hers for a prominent son. Confident that he would soon be the toast of the New World, after which he would return triumphant to Italy, Ponzi accepted his uncle's suggestion and packed his best clothes. As a send-off, his family provided him with a steamship ticket and two hundred dollars to get established in America and begin collecting his gold. With a blessing from his mother still ringing in his ears, Ponzi went south to Naples. There, on November 3, 1903, he climbed the gangplank of the S.S.
Vancouver,
bound for Boston.

At 430 feet and five thousand tons, the
Vancouver
could carry nearly two thousand immigrants on each two-week transatlantic crossing. Most spent about twenty-five dollars for tickets that entitled them to the crowded misery of steerage—an area deep within the bowels of the
Vancouver,
perhaps seven feet high, as wide as the ship, and about one-third its length. Iron pipes formed small sleeping berths with narrow aisles between them. Most steerage passengers spent the entire journey lying on their berths—outside space for them was severely limited and inevitably located on the worst part of the deck, where the rolling of the ship was most pronounced and the dirt from the smokestack most likely to fall. The food was barely edible, the water often salty, and the only places to eat were shelves or benches alongside the sleeping areas. Toilets were nearby, overused, and poorly ventilated. Within a few days at sea the air in steerage reeked of vomit and waste. Passengers lolled in a seasick stupor on mattresses made from burlap bags filled with seaweed, using life preservers as pillows.

Most of the
Vancouver
's passengers were from the south of Italy, which had withered economically since the country's unification in 1861. They were young laborers like Giuseppe Venditto, who had twelve dollars in his pocket and the address of a cousin in Ohio, and domestic servants like the widow Lauretta Zarella, who boarded the ship with her two teenage daughters, nine dollars, and a plan to join her son in Providence. A few were from Greece, others from Austria and Russia. Several dozen Portuguese boarded when the ship stopped in the Azores. To pass the empty days at sea, they traded rumors of America, thought of their families back home, and wondered what awaited them.

Ponzi had almost nothing to do with them. Not only was he from the ostensibly more cultured north of Italy, he was among the more privileged travelers. He and sixty-four other passengers had paid an extra twenty dollars for more comfortable berths in the
Vancouver
's second-class cabins, though he would forever claim he had traveled to America first-class. While the human sardines in steerage suffered, Ponzi spent the passage continuing his college ways, buying drinks and gallantly tipping waiters. Ponzi's biggest expense was gambling. A cardsharp caught sight of the bushy-tailed young fellow with the ready billfold and invited him for a friendly game. By the time they were through, Ponzi's two-hundred-dollar stake had been reduced to two dollars and fifty cents, even less than most of the unfortunates in steerage.

The ship entered Boston Harbor on November 17, greeted by a steady drizzle and an icy east wind that whipped the dirty waters into a liquid mountain of whitecaps. The
Vancouver
's captain eased the ship to the Dominion Line's dock in East Boston, where the nearby Splendor Macaroni Company and a fish-glue plant provided the immigrants with their first smells of the new land. Before disembarking, the first- and second-class passengers underwent immigration inspections—only the steerage passengers would be held in quarantine. Ponzi stretched the truth and identified himself to the inspector as a student, but he admitted that he was down to his last few dollars. To gain legal entry into America, he vowed that he was not a polygamist, a cripple, or otherwise infirm, and that he had never been held in prison or a poorhouse.

Having satisfied the inspector, Ponzi strolled jelly-legged down the gangplank wearing his best suit, with spats fastened to his shoes. Despite his nearly empty pockets and his rain-soaked clothes, Ponzi thought he looked “like a million dollars just out of the mint.” He imagined that he cut the figure of a young gentleman from a fine family, perhaps the son of wealthy parents visiting Boston on a pleasure tour before taking his rightful place in Roman society. His excitement ebbed the moment he stepped onto U.S. soil. No gold awaited him. On the ground from the pier to Marginal Street in the distance was sticky, black mud, an inch deep wherever he stood, stretching as far as he could see. It was certain to ruin his spats.

H
aving anticipated the possibility that young Carlo would leave the ship broke—he had been stranded before, on much shorter trips—his mother and uncle had provided him with prepaid train fare to Pittsburgh. There he could spend a few days with a distant relative—“some fifth cousin of some third cousin of ours,” Ponzi called him. But even before he reached Pittsburgh two days after landing, Ponzi was feeling tricked. He was hungry to the point of starving, alone, and down to a few coins. He began wishing he had never heard of America. He spoke no English, had no marketable skills, and considered it a source of pride that he had never worked a day in his life.

America did not seem terribly welcoming, either. The trip to Pittsburgh took him through New York, and when he bolted off the train in search of a meal during a stopover he ran smack into the arms of an Irish policeman. Ponzi lacked the language to explain that he was running because he was hungry, not because he had stolen something, and it was only through the intervention of an Italian bootblack that Ponzi avoided a night in jail. Once in Pittsburgh, Ponzi spent only a short time with his relative before finding a bed in an Italian rooming house and beginning a life of hand-to-mouth hardship. He considered writing home for help, but he could not bear the thought of disappointing his mother again. So he set off in the footsteps of millions of immigrants before him.

For the next four years, Ponzi worked as a grocery clerk, a road drummer, a factory hand, and a dishwasher. He repaired sewing machines, pressed shirts, painted signs, sold insurance, and waited tables. He rarely lasted long—sometimes he was fired, sometimes he quit in disgust, and other times he quit to avoid being fired. He rambled up and down the East Coast, staying close to the ocean to ease his homesickness. He cadged meals and slept in parks when he could not afford a bed. One time in New York he saved a bit of money but blew it all on a two-week spree at Coney Island, the beachside amusement park where a young immigrant could forget his troubles on the Steeplechase ride, roam the “Electric Eden” of Luna Park, or chase girls in the dance hall at Stauch's restaurant. But that was a brief respite. His silken clothes fell to shreds and his years of the good life became a receding memory.