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Just who was the man whose name has become synonymous with the classic “rob-Peter-to-pay-Paul” scam in which money from new investors is used to reward earlier ones? In December 1919, he was an unknown thirty-eight-year-old, self-educated Italian immigrant with a borrowed two-hundred dollars in his pocket. Six months later, he was Boston’s famed “wizard of finance,” lionized by the public and politicians alike. Based on exclusive interviews with people who knew Charles Ponzi, lent him their money, and exposed him, Donald Dunn’s Ponzi recreates both one of America’s most notorious and colorful financial con artists and the mad money-hungry era in which he thrived.
About the Author
DONALD DUNN, a former longtime Business Week editor, lives in New York.
Read an Excerpt
Almost as soon as August, 1919, gave way to September, a brisk and swirling wind hurried into Boston. It tore the leaves, which had only just begun to turn color, from the maple and sycamore trees in the quiet suburbs. Then it raced through the narrow streets of the business district with force enough to lift the heavy ankle-length skirts of secretaries and shopgirls an inch or two, exposing a glimpse of black stocking to the appraising gaze of nearby males, and all too frequently compounding the mischief by wrapping the unshrouded limb in a sheet of dirty, discarded newspaper blown from the gutter.
If there was one thing that the wind had declared war on, however, it was that popular element of male attire, the straw skimmer. All over town, from North Reading to Randolph, from Cohasset to Lincoln, closet doors were opened and the belovedbut lightweighthats were tucked carefully away on upper shelves to hibernate until the following May.
The instantaneous and mass disappearance of the skimmer made the one worn by Charles Ponzi that windy September day all the more noticeable. It sat atop his head like a crown, and he wore it with an assurance that no wind would dare disturb it. As he strode purposefully along the street, Ponzi even tilted the disc of straw back to a more rakish angle, revealing a flash of sandy hair above his high, lightly furrowed forehead, and adding that much more height to his stature. Today, he wanted every fraction he could obtain. Only five-foot-four, he knew well that he lacked an imposing physical appearancea helpful quality to possess when a man is out to get money.
Charles Ponzi was out to get money. A lot of it. And in the sixteen years that he had been trying to get rich in America, he had learned that any number of things could compensate for limited stature and physical strength. 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 saidfrom 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 hatthat here is a man who, if he is not already successful, will latch onto success at any moment. And then, of course, there was the smile. Always, the smile; for a smiling man is obviously not worriedand who would give money to a worried man?
Ponzi was smiling as he stepped through the doorway of the small Italian restaurant at the corner. Although it was midafternoon, a few candles in wine bottles covered with drippings had already been lit in a vain attempt to dispel the chill of the overcast day. It took a minute for him to focus his eyes in the flickering gloom. Then he saw his uncle, not in his accustomed place behind the massive mahogany bar, but slumped over a thick stack of invoices at one of the tables.
"Uncle John," Ponzi called affectionately.
The older, heavier man looked up, blinking his eyes at the silhouette against the frosted glass door. "Carlo? Is that you?"
"Of course it's me," said Ponzi, moving toward him, arm outstretched and the smile as wide as it could be. "I took the trolley halfway here to see youand let the wind blow me the rest of the way."
His uncle was pumping his hand now. "Well, you lookin' fine," he said. "You ain't been here in a long time. Six months, no? How's Rose? How's she feel? No baby yet?"
Ponzi laughed. He pulled a chair from a table and sat easily, sliding a Murad from its pack and lighting it in the flame of a candle. He drew deeply on the cigarette, then let the smoke glide from his lungs.
"Your niece is fine, just fine. And the babies will come. Give us time. We've been married just over a year."
"Sure, sure, Carlo, I know. But my wifeshe want things fast, like back home. Everybody want the big family."
Ponzi watched his uncle move to the bar and fill two glasses with a deeply red wine. "You have a big family already," he laughed. "There are more Gneccos in Somerville and the rest of Boston than mosquitoes in New Jersey!" He waited for the older man to grin before he added casually: "Besides, I don't want to start raising kids until we're all set financially."
His uncle set one of the glasses before him. "You no working, Carlo?"
Ponzi threw his head back. "I'm working," he said, "on something that is going to make me richand make your niece richin a very short time."
The older man's voice was suspicious. "Carlo, I been in the liquor business, the restaurant business twenty-five years now. I know nothin' else. My English, you know it, it ain't good. But you been sayin' since you marry Rose that soon you be rich. First, you a clerk at that company with exports and you say you be rich"
Ponzi held up his hand. "The only thing J. R. Poole gives its employees is promises. I could have been there fifty years and I never would have gotten my hands on anything besides my salary! Old man Poole sees to that, all right." He gulped the wine, emptying half the glass. "Nobody's going to get a piece of his sardine factory in Maine or his meat plant in Kansas City. I didn't leave my mother in Parma, I didn't come here and knock all over the country, picking up English along with nickels and dimes to eat on, so Poole could have me translate his letters about million-dollar deals into Italian." He paused to look around the restaurant.
"Look, Uncle John, you've got this place of your own. You know you don't get rich working for other people."
The older man sighed. "Sure, sure," he said softly. "I got my own place. I make the good money. Then 'long come the goddamn prohibition! Carlo, how I make the money when I don't sell the liquor no more? You tell me that, hah?"
Ponzi shook his head. All over the country, restaurant owners and liquor distributors were pondering the same question. His uncle, like others, had talked many times of wholesaling foodstuffs to other restaurants. But the profit margins on food were a fraction of the ones on liquor. And the business was highly competitive, with massive problems of spoilage, agricultural shortages, and slow distribution. Ponzi was well acquainted with the difficulties in selling food. His first job after marrying twenty-year-old Rose Gnecco had been to assist her father and brothers in their business of supplying fruits and vegetables to the pushcart vendors and stands that dotted Boston. Within a year, the Gnecco Brothers operation was bankrupt.
Ponzi's uncle remembered, too, suddenly. "You had the chance to run a business, Carlo, with the fruits and vegetables. You would make the big money, you said."
"What about the time I got the three carloads of matches at half-price?" Ponzi snapped. He smiled over his glass and drained it. "I ordered them, knowing our company didn't have the money to pay for them when they'd arrive. But then I sold them before we took deliveryand got cash in advance. We made eight hundred dollars! That's the way to do business!"
"But suppose you ain't found a buyer so soon? How you pay for 'em when they come?"
Ponzi shook his head, laughing. "You never think that way, Uncle John. You just know you're going to find a buyerand you do. When Rose's father put the company into bankruptcy, I told the judge that if he'd let me have the six thousand dollars we still had left, I could double it in a year. Then I could pay off the eleven thousand we owed. I could have done it!"
He went to the bar and stretched for the wine, returning to fill the two glasses precisely to the brim. Then he sat across the table from his uncle and looked straight into his eyes.
"The judge wouldn't let me have the money," he said softly. "He decided it made more sense to pay our creditors fifty cents on the dollar. The judge was stupid, Uncle John. I could have doubled that money. I could have doubled it then, and if I had it today, I could double it now."
"Carlo," said the older man thoughtfully, "you got a new business idea, no?"
The straw skimmer tilted back once more as Charles Ponzi nodded his head slowly, forcefully. He did not want to be rushed. He wanted another glass of wineor twoto go down his uncle's gullet and befuddle his brain before the latest Ponzi plan was laid out before him. He stalled for time.
"Years ago, when I first came to this country, Uncle John, I swore that I would be as wealthy as the Carnegies! The Mellons! The Rockefellers! I nearly made my fortuneseveral timesbut it always slipped away. This time it won't."
"Carlo, my boy, my niece's husband, my nephew," his uncle sighed, "how many times now you make this speech to me?"
"Why, not more than once a week, Uncle John," he answered brightly, hoping for a laugh in responseand getting one. "But"
"But this time she is different? Yes? And how many times I hear that?"
Now Ponzi laughed. "Enough, obviously, so that you can tell me what I'm going to say before I say it." He made his tone sincere. "But, Uncle, this is serious. I'm in business, an important business that's all my own. There are no brothers to share the profits with, no bosses to keep the beef and give me the watery gravy. Look, let me show you"
He reached into his inside pocket for a sheet of stationery. With the deft, practiced movements of a stage conjurer, he unfolded it and slid it onto the table. His grin reappeared as the portly restaurant owner leaned forward to look.
"Here," said Ponzi, spinning the sheet of expensive, watermarked paper around. "This says The Trader's Guide. And, underneathyou like the way the lettering curves?this says, Published by the Bostonian Advertising & Publishing Company. Then the address, 27 School Street, Boston. Rose told you I had an office? I took space on the second floor of the Niles Building."
"Hmm-mm," grunted the older man. "By the Parker House, no?"
"And I can look right into the windows at city hall. The Five-Cent Savings Bank is right next door. That should prove this is a real business venture, don't you think, Uncle?"
"Isn't it?" The voice was wary.
"Wait until you hear the details, that's all. Then you make up your mind."
His uncle nodded, leaning forward.
"When I rented the office, I planned to do the same kind of thing I was doing at Poole's," Ponzi began. "You know, find buyers in this country for foreign concerns with goods to sell. Or work the other way around. But how could I make the contacts? Mail a circular to thousands of companies here and overseasbut every one would cost me at least five cents, with printing and postage. Too much. Understand?"
He did not wait for his uncle's slow nod. "Then I thought of putting an advertisement about my company in one of the journals read by merchants all over the world. And this is where I hit on something! The leading journal wants five hundred dollars for a one-page notice, and it only goes to fifty thousand readers!"
"Carlo, I no understand. You go too fast."
"Not at all, not at all," Ponzi said, bringing a pencil from his pocket. "Every month this magazine is mailed to fifty thousand peoplethe same people every monthwho pay to get it. And the publisher charges advertisers five hundred dollars a page! But I thought it should be possible to create a journal that would go to more peoplesay, two hundred thousand all over the world. And a journal that would not charge advertisers so much money. Why, they'd come flocking to me!
"So, Uncle, I have created The Trader's Guide." He touched the letterhead proudly and began speaking even more quickly. "Now my plan is to get the names of two hundred thousand businessmen overseas from the Bureau of Commerce and the Consular Service. They'll give me all the names I want, free. And I'll mail half of them a loose-leaf binder, free of charge. I've already picked it outan inexpensive cover with screw posts. Once the readers have the binders, every six months I'll mail them inserts that contain reading matter and advertisements. See, everybody won't get the same magazine. For one thing, it will be printed in different languagesI think English, French, Italian, German, Spanish, and Portuguese will be enough. And, another thing, businessmen in Iceland wouldn't be interested in electric fans any more than a Mexican would be interested in fur coats. Each will get what he wants, free."
Ponzi's uncle stared at the figures scribbled on the letterhead. $500. $50,000. $200,000. He glanced up. "You give everything free? You give free?"
"Everything but the advertising," Ponzi said jubilantly, rushing on. "Don't you see? When journals go out each month to readers, the old issues get thrown away. If a company pays five hundred dollars for an ad every month, it costs them six thousand dollars a year. But my Trader's Guide is a permanent reference book, and each reader gets new pages of interest to him every now and then. So he keeps it. For five hundred dollars, my advertisers get more than twice as many readers, and they get permanent display!"
The restaurant was silent now, except for the buzzing of a half-dozen weary flies. Ponzi stared into his uncle's eyes, waiting.
"But, Carlo, you know nothin' 'bout this kind of business. How you sell"
"Easily! For every page of reading matter, I'll sell three pages of advertising. If other journals can do itand they are doing itthere is no reason why I can't. Don't you see, I have more to offer, for the same money. For less money, in fact. My selling arguments cannot be beaten, Uncle John. They can't even be matched."
"How much you think you make with this?"
Ponzi's pencil flew across the paper. "One issue will cost about thirty-five cents. That's with fifty pages of reading matter and a hundred and fifty pages of advertising. The ads will bring in seventy-five thousand dollars, and a hundred thousand copies will cost only thirty-five thousand dollars to print and mail. Figure office expenses and such, and the first issue will have a net margin of fifteen thousand dollars profit in six months. Toss in another five thousand dollars worth of ads I can sell on the cover. And after the initial expenses are taken care of, the net should get better every six months." He drew a breath. "Well?"
His uncle's finger tapped the penciled figures. "On the paper, Carlo, it sound fine. But up here" he tapped his damp forehead "it no sound right." He waved his hand to cut off Ponzi's protest. "For Rose, I like to help you. But now I save every damn penny. In January, when the prohibition really start, I need it."
"If I gave you half interest in the Guide for five thousand dollars"
A roar of laughter rumbled suddenly from the older man's stomach. "I know the liquor business, the restaurant. That's all. What you give me for five thousand dollars? You pu tmy name there on the paper? I no need that, Carlo. I got trouble already."
Ponzi reached out, carefully lifted the letterhead, folded it, and returned it to his pocket. With a flourish, he snapped his shirt cuffs an inch below his jacket sleeves. His voice was jocular, steady, brimful of confidence.
"I'll tell Rose you're in good health, Uncle John."
"Fine," his uncle said, but Ponzi had already turned his back and was moving easily toward the door. The heavy-set, balding Italian watched him go, trying to remember what his nephew had said earlier. Something about almost making a fortune since coming to America, but having it slip away. Was it true? The young man how old was he now? thirty-five certainly talked as if he stood always on the edge of something big, something important. But when Rose had first brought him home to meet her relatives, several weeks after her music teacher introduced them at Pops concert, he had been so vague and yet at the same time so boastful about his past accomplishments that everyone had found it hard to determine precisely how and where Charles Ponzi had spend the years between 1903 and 1917.