Ponzi's Scheme (31 page)

P. A. Santosuosso left the
Post
a year after the Ponzi story to launch a weekly newspaper called the
Italian News.
He chose a sly location for his new business, one he knew would be available—196 Hanover Street, the empty office of Ponzi's North End branch. On the tenth anniversary of the
Italian News,
Santosuosso was presented with a purse of gold coins by Boston's Italian-American community. He gave the money to the Home for Italian Children, the orphanage that had never received the $100,000 donation promised by Ponzi.

R
ichard Grozier remained in daily control of the
Post
while his father continued his convalescence. Clear proof that Edwin Grozier had placed his newspaper in steady hands came in May 1921, when the
Post
's investigation of Ponzi was awarded the Pulitzer Prize gold medal for public service, the highest honor in American journalism. The occasion marked the first time the Pulitzer—endowed by Edwin Grozier's mentor at the New York
World—
had gone to a Boston newspaper.

The
Post
made news of the prize its lead page 1 story on May 30, 1921, under a headline as big and bold as the ones it had used nine months earlier to assail Ponzi. The story, rich in self-congratulation, recounted the long odds and lonely road the
Post
had faced at the start of its campaign, including the support Ponzi enjoyed from public officials, police, other newspapers, and, most of all, readers. The story told how the paper had been swamped with letters of protest in the early days of its Ponzi coverage, and how many staffers in the
Post
newsroom feared that taking on Ponzi would mean the paper's death. Finally, the story detailed Richard Grozier's unwavering “courage and fine sense of newspaper honor” and hailed him for having “stuck to his guns when the outlook was dark indeed.”

The young acting editor tried to deflect the attention. He ordered his reporter to write that, as far as Richard Grozier was concerned, he “had merely been carrying out the general instructions which had been given to him by his chief, the editor and publisher, Mr. Edwin A. Grozier, his father.” Richard then heaped praise on
Post
editors and reporters for “securing evidence of Ponzi's past career in Montreal and elsewhere which pricked the bubble and exposed the fraud.”

In a signed editorial two days later, Edwin Grozier set the record straight. He bestowed upon his son the approval Richard had long craved, doing so in the way they both knew best: in black ink on a newspaper page. Edwin Grozier disclosed that he had been away from Boston and incommunicado during the entire episode, and that his managing editor had also been absent the previous summer from Newspaper Row.

“The entire office, editorial, business, and mechanical, was in the sole charge and responsibility of my son, Mr. Richard Grozier,” Edwin Grozier wrote with evident pride. “It is to him personally, assisted by an exceptionally loyal staff, that the entire credit . . . was due.” In closing, Edwin Grozier offered a rare, awkward window into his emotions: “We encounter in this life many difficulties and many compensating pleasures, and not the least of the latter in my case is to publicly give credit where credit is fairly due in this important and conspicuous case.”

Edwin Grozier's homage to his son was ratified soon after when Richard Grozier was profiled as a newspaper hero on the cover of
Editor & Publisher,
a highly regarded trade magazine. It said the judges of the Pulitzer had honored Richard for “public spirit, courage, and persistence.” The deans who had tried to kick him out of Harvard must have been surprised.

Edwin Grozier never regained his health. For the next three years, he was confined to his home while Richard ran the
Post.
When Edwin Grozier died in 1924, his will named Richard as the paper's new owner and offered some final fatherly words of advice: “I urge my son, in whose integrity and ability I have full confidence, to conduct
The Boston Post
.
.
.
not as a mere money-making enterprise, but primarily and zealously in the interests of the people of Boston and New England.”

In his first few years as editor and publisher, Richard exceeded his father's high expectations, continuing the
Post
's aggressive news coverage and driving circulation up above 600,000 copies a day—50 percent more than at the height of his father's reign. In 1929, when he was forty-two, Richard married a beautiful secretary at the
Post,
Margaret “Peggy” Murphy. In quick succession they had two sons, Richard Jr. and David. But in 1933, Peggy Grozier died giving birth to a daughter, Mary. Richard Grozier fell into a paralyzing depression from which he never recovered.

He hired a nurse, Helen Doherty, to care for his children, and he married her the next year. But it did little to mend what his children called his broken heart. He became increasingly housebound, overseeing the
Post
from his Cambridge mansion. He read to his children, taught them chess, and occasionally he would take walks with his sons around the Cambridge reservoir. But as the years passed he ventured out less and withdrew further into his sadness. When depression finally consumed him, his family had him committed to McLean Hospital, where he died in 1946. He was fifty-nine. Of all the tributes he received, it is likely Richard Grozier would have been most touched by a plaque presented to his widow by the printers in the
Post
's composing room, the very men he was most concerned about losing money during Ponzi's run. Inscribed on the plaque were expressions of sorrow and “deep gratitude for the fairness and generosity of Mr. Grozier as an employer and our admiration for his qualities as a man.”

Richard Grozier's long, slow decline took a heavy toll on the newspaper. By the early 1950s, the
Post
was struggling to survive. Joseph P. Kennedy, the father of a young U.S. senator with presidential aspirations, offered to buy the
Post
and the
Globe,
but only if he could own both. The
Globe
was not for sale, and so the
Post
limped further into debt. The paper eventually fell into the hands of an arrogant, shady operator named John Fox, who never paid the Grozier family the $4 million he had promised. By the mid-1950s, nothing was left of the paper Edwin and Richard Grozier had built. The
Post
published its last edition on October 4, 1956.

The
Boston Globe
bought the
Post
's library and its name, lest someone try to capitalize on the paper's glory days. Indeed, during the thirty-five years between the
Post
's winning the Pulitzer for the Ponzi story and the paper's demise, it held an enviable distinction: No other Boston newspaper was awarded the gold medal for public service.

W
hile Ponzi was serving his federal prison term, Massachusetts authorities pressed forward with plans to try him on state charges. Ponzi fought the efforts, claiming double jeopardy, but the state prevailed. In October 1922 he was back in court, his small frame thinner and his dark hair grayer than in his heyday. But he still had style, flashing his grin for reporters and sauntering into court in a blue serge suit, a dark tie, and gray spats. His fine clothes notwithstanding, Ponzi was too broke to hire a lawyer, so he acted as his own advocate, in a strange way fulfilling his mother's dream that he would follow their ancestors into the legal profession. To the dismay of his prosecutors, Ponzi proved remarkably able, grilling witnesses for the state and charming the jury. The crux of his defense was simple yet clever: A promise of profits is not larceny, it is merely a promise; when it comes to investments, promises may be broken when circumstances change. Rose was a courtroom fixture, leaning over the rail each morning to kiss her husband and wish him luck.

For six weeks, the all-male jury—a leather sorter, a rubber worker, an engineer, and assorted other workingmen—heard the extraordinary story of Ponzi and the Securities Exchange Company. To hedge their bets, the prosecutors decided to try Ponzi on only a dozen of the indictments against him, six for larceny, five for being an accessory before the fact to larceny, and one for conspiracy to commit larceny. Among the star witnesses were disbarred lawyer Dan Coakley and Ponzi's former bookkeeper Lucy Meli. Ponzi gently guided her through an account that roamed from their early days in the School Street office to the chaos of August 1920. Meli had faced some legal threats as well, but they had been dropped after it became clear that she had suffered investment losses of her own as a result of her blind faith in Ponzi.

Rose took the stand at one point, weeping as she told her version of the meteoric rise and fall. Ponzi testified in his own defense, regaling the jury with his life story and insisting that he had done just what he had advertised, trading in International Reply Coupons purchased in Europe by his agent Lionello Sarti. Under questioning he acknowledged that he had no proof, claiming that he had destroyed all correspondence with Sarti. One of Ponzi's investors, Carmela Ottavi, was called to the stand by prosecutors but ended up benefiting Ponzi. During Ponzi's cross-examination, she declared firmly that she still believed in him, despite her losses. He thanked her.

By the end of the trial, the jury was sold. Ponzi and his co-defendants were all found innocent. When the foreman called out the final “not guilty,” Ponzi bowed his head and began to sob. Rose rushed to him and threw her arms around his neck. Together they wept for joy. Massachusetts officials dropped the cases against his agents, but they were not finished with Ponzi—with the
Post
egging them on, prosecutors immediately began making plans for trial on the remaining ten indictments.

In the meantime, Ponzi was returned to the Plymouth jail to complete his federal sentence. While there, he faced surgery at Massachusetts General Hospital for the painful ulcers that had tormented him for years. Doctors warned him that he might not survive, so he sat in his cell and wrote Rose a passionate letter to be opened only in case of his death. “I do hope that I may live,” he wrote, “because as long as I have you, life seems sweet regardless of our present sorrows. . . . I am leaving you forever, but I am bringing with me a most wonderful recollection of your wonderful self, and I am leaving with you kisses of lips which will close with your name firmly impressed upon them, and with a smile of eternal love for you.” Ponzi survived the surgery, and Rose eventually opened the letter. She saved it among her treasures, along with several dozen other letters he wrote to her over the years.

Though Ponzi's health improved after the surgery, even more trouble lay ahead.

I
n August 1924, Ponzi was released from the Plymouth jail, having served nearly four years of his five-year federal sentence, with the remainder waived for good behavior. He spent several months as a free man, enjoying his reunion with Rose. But by November, the state had him back on trial, this time on five of the remaining indictments. Once again Ponzi acted capably as his own lawyer, and the case ended with the jury hopelessly deadlocked. Still the state was not finished. A third trial on state charges was held in February 1925, and Ponzi's luck ran out. The state prosecutors had learned from their errors at the earlier trials, and they had honed their responses to Ponzi's arguments. When the jury foreman pronounced the verdict “guilty,” Ponzi took the news stoically. Rose burst into tears. As she left the courtroom she collapsed, injuring herself when her head slammed against the stone floor.

Several months later, Ponzi was sentenced to seven to nine years in state prison as “a common and notorious thief.” The sentence was stayed pending Ponzi's appeal, and he remained free on bail. Granted that reprieve, Ponzi began plotting his comeback, determined to repay all his creditors and regain his fortune.

For a few months he earned money doing a vaudeville act—a corny reprise of the impromptu stage show he had done at Keith's Theater—but he knew the real money was in large-scale investments. In September 1925 he and Rose headed south to a huckster's version of paradise, joining the tail end of the Florida land boom.

To avoid unwanted scrutiny, he at first adopted the alias Charles Borelli. But his ego could not quite stand the anonymity. He named his company the Charpon Land Syndicate—“Charpon” being an abbreviation of his real name. When Ponzi's true identity was revealed, he decided to make the most of his notoriety. He offered investors a better return than from the Securities Exchange Company: 200 percent in sixty days. The promise of such immense profits was based on Ponzi's far-fetched plan to sell ten million tiny lots of property around Jacksonville.

With money borrowed from his few remaining friends, Ponzi began the scheme by buying a hundred acres of land for forty dollars an acre. The property was in an area Jacksonville officials called “desolate and lonely,” and at least some of it was waterlogged. Ponzi named it the Rose Maria tract after his wife. The Oreste and Imelde tracts would follow to honor his parents. He divided each acre into twenty-three puny lots he planned to sell for ten dollars each. That meant every acre would yield a profit of $190, or nearly 500 percent of Ponzi's original investment. Ponzi also intended to sell shares in his new company for investors more focused on profits than land. But his impossible dream was short-lived. Goaded into action by newspaper reports, Florida and Massachusetts officials quickly shut down the Charpon Land Syndicate. Ponzi beat charges of land fraud but was sentenced to a year in jail for violating Florida's securities laws. He was allowed to remain free pending an appeal.

Two months later, in June 1926, a dejected Ponzi decided he could not bear a return to prison. With Massachusetts authorities clamoring to bring him north to begin his seven- to nine-year prison term, and the yearlong Florida sentence looming as well, he disappeared. Eluding a nationwide manhunt, Ponzi made his way to Tampa, where he hoped to land a berth on an Italian freighter at the port. For several days he waited, and then he spotted a ship fittingly called the
Sic Vos Non Vobis.
The ship's name translates from the Latin as “Thus not for yourselves,” a phrase used by the poet Virgil to decry those who profit unduly from the labors of others.