History's Forgotten Headlines
Ponzi Scheme: The Notorious Namesake
Many know what a Ponzi Scheme is, but why is it called 'a Ponzi Scheme?' On this episode we detail the rise and fall of Mr. Charles Ponzi, and why he is the one who bears the notorious namesake.
Many know what a Ponzi Scheme is, but why is it called 'a Ponzi Scheme?' On this episode we detail the rise and fall of Mr. Charles Ponzi, and why he is the one who bears the notorious namesake.
page three, history's forgotten headlines Ponzi scheme, the notorious namesake. This is history's forgotten. Headlights. Here we revisit some of America's most notorious and shocking murders, scandals and disasters that once made headlines across the world, and now they've not only fallen to back pages, almost been completely forgotten. Everything you're about to hear involve some of the most powerful, wealthy and beloved Americans of their time. Many are lives at triumph and only in tragedy. These are histories, forgotten headline, page three, Ponzi scheme, the notorious namesake,
Speaker 1:okay?
Speaker 2:A Ponzi scheme is defined as investment scam that pays existing investors out of money, invested by new investors giving the appearance of earnings and profits where there are none. You know the phrase Rob Peter to pay Paul? Yeah, that's it. A friend of mine told me that Ponzi schemes or his oldest time, the cavemen were even saying, you give me two rocks today. Two months from now, I'll give you four rocks
Speaker 3:except the promise paid the money,
Speaker 2:but many often wonder or simply don't know. Why is it called a Ponzi scheme? Let's all because of one man and one headline making skate. If you're going to tell the story of the man behind the Ponzi scheme, you have to include one man who literally wrote the book on Ponzi and we were lucky enough to get them.
Speaker 3:Okay. How's that? That's great. Hey, can you hear me okay? Fine.
Speaker 2:That's author Donald Dunn.
Speaker 3:just about everything I'm gonna tell you a is based on a book that I wrote in 1975, which was about about 55 years after Ponzi had pulled off his big scheme. And, uh, the book is called Ponzi the incredible true story of the King of financial cons.
Speaker 2:Don't agreed to speak with us over the phone from his home in Florida, Atlanta to be exact. Remember those? Yeah. Well, Don likely knows this story better than anyone alive today. And he says his fascination of these schemes all started with his love for magic,
Speaker 3:the for what was about
Speaker 2:12 or 13 years old. I started getting interested in doing magic tricks for people. And I guess I learned how easy it is to fool people. So you could say the man behind the Ponzi scheme put off the most notorious financial magic trick of all time. His name is Charles Ponzi. Charles Ponzi. He wasn't the first to run a massive financial scam, nor was he the last, but he carried out his crime with such flair and bravado and that is what will keep his name connected to crime forever.
Speaker 3:His name is the only name of a criminal connected to a particular kind of crime. Everyone knows what a Ponzi scheme is. A, I'd say that's unusual because Ladenburg hello, major kidnapping with these babies, but people don't refer to kidnapping as the Lindenberg still under a lot banks, Bonnie and Clyde, rob banks. But when somebody robs a bank, they don't refer to it as it as a bunny and quiet, but if there's a major scheme swindle as cold a Ponzi.
Speaker 2:So we're going to retrace Ponzi steps and look into how we did it and how we ended up. Let's start from the beginning.
Speaker 3:Charles Ponzi came to this country and they were really nice and as a poor immigrant from Italy and he was penniless
Speaker 2:to understand just how painless it really was. This is where we need the help of judge Mark Kantrowitz. He also wrote about Ponzi and his own book, old whiskey in young women, American true crime of murder, sex in scandal,
Speaker 4:Carl Lau, Pa Tro, Giovanni di Elmo dibbled. Oh, Ponzi. Who was born March 3rd, 18, 82. And I was born in Italy. Obviously the only son of his parents and a very bright young man with a lot of, uh, with a lot of potential. They sent them off to the University of Rome and he quickly gambled away his tuition and lasted there about a year and mom and dad said, well, maybe we should send them to America where the streets align with goal. Then Anji heard that said, that's great. They gave him money to, to make the, to make the voyage and, and to stay here for awhile. And he quickly lost just about all the money gambling on the boat over Ponzi
Speaker 2:came to America in 19. Oh, three through Boston, he was later quoted saying, I landed in this country with$2 and fifty cents in cash and$1,000,000 in hopes. Those hopes never left me on Fonzie. Then found his way to Canada. Easy to say it was a rough start.
Speaker 4:He's working at a bank in Canada and the bank is, you know, doing a little shady stuff and he probably learned it with reengaged in it, who knows, and he kinda got caught up in it and does a short prison term and it needs to come into America Guy Nice with some Italian immigrants and they accused him of smuggling the immigrants into America and unlawfully whether that's true or not, who knows? He thinking he's gonna get a$50 fine. He winds up getting a jail sentence in it. Landa,
Speaker 2:whether that's true or not, mark brings up a good point. Listen to how don describes Ponzi dealings.
Speaker 3:So he was working as an interpreter in the illegal immigrants.
Speaker 2:Really in regards to his life before the spotlight. We don't know too much about him. That's the reason we really only have his account. Again. He's only known because he was really good at cheating.
Speaker 3:Very little is known about his early life. What, what we do know about Ponzi is said he was a consistent liar. So anything that was brought out about his young, young years in, in Italy, uh, may not be true. He made up his, his background and he, he can, he can say that he had degrees in different areas, but the weather, whether or not he. So he did a, he, he obviously had a golden, a golden tongue,
Speaker 2:but there was one story that appears to be true from ponzis early years, a moment of kindness from the criminal. It happened while he was bouncing around parts of us after his second prison sentence, when he's in his travels to some explosion, a nurse is seriously injured. She needs a skin graft. His, he gets up like 100 inches that is scanned and winds up staying himself in the hospital for three months and 100 inches on a man who's only five feet two inches tall is a lot. Yes, Ponzi was a small man. Anyway, Ponzi ends up finding his way back to Boston and now is when we can cue the upbeat music because it's about to get good. The year is 1917.
Speaker 4:He decides it's going to go to the western parts with his landlady and at the end of the pops they walk across the street, they're waiting at the Boylston Street, Green Line a stop and then in his words, well each spots rose. Marie Inaca, who's like him from Italy for 11, so he's taller than she is. She has this lustrous brown hair and he said to her, he said off her time, space the world and everything else around me except for that girl had ceased to exist. It's kind of like that scene. You have to see the west side story. So the first time Tony Maria spot each other on the dance floor and everything else ceases to be basically Jack, except Tony and Maria as they come together and you know, everything else is very cloudy and that's, and that's. This is long before west side story.
Speaker 2:Now that Ponzi has met the love of his life. They marry within about a year, despite having his bride, he still doesn't really have any money, or at least he doesn't have as much money as what he thought he should. Ponzi is plan starts to take shape. Nineteen, 18.
Speaker 4:It has to say, Hey, I'm a married guy. Now. I may start having a family. He never did, sadly. Uh, but now you know, which for rose, I got to do something for rose. I'm living in poverty, but she shouldn't have to live in poverty and I don't want to live in poverty. Poverty. And then he comes up, he got just scheme and it was through international postal coupons. You know, today we take things for granted. You put a letter in the mail box, you put a stamp on it, it goes somewhere, you want to send the letter to Aa, you want to send the letter to wherever you put the appropriate stamped signed. And it goes to where, you know, that wasn't the case at all times. And back into the early 19 hundreds. It was very bifurcated. And you know, with postal rates are different from here. Then they had the nair, so when Auntie said, I'll go into some country and I'll buy cheap stamps basically, and then I'll go to another country where the stamps are more expensive and then I'll, I'll sell them, you know, and I'll make a profit,
Speaker 2:but that was just the front for ponzis business even took from his wife to make his business appear even more legitimate.
Speaker 3:She was 19 and he was in his thirties when they got married, he wormed his way into the family and one story is that she had some jewelry that he pawned get the money to start to torrented office so he could set up is a security investment scheme, which was what he was calling himself.
Speaker 2:I'm familiar with Boston. Ponzi is older office. It's right next door to the Old City Hall on School Street and right above what is now a starbucks, of course. So now what's 19? Nineteen in Ponzi has an office and a front. Now we just test to use his gift of Gab to make that golden promise.
Speaker 3:His skin was based on simply a promise that if you gave him your money in six months time, he would give it back to double or triple that. He does it with such provato and in that day when there was no television sets, he did all by word of mouth, simply promising, I will give you 100 percent return on your money and people without any, any his suspicions. Said, all right, that sounds good. Here's my money. And it just, his scheme grew by word of mouth,
Speaker 4:just like they rushed Bernie madoff. Bernie, please take my money. You know, you're so brilliant. You know you're given these unheard of returns, you know, so please take my money. So Ponce, please take my Monday. So like any Ponzi type of scheme, you know, you get all this money and then, and then you keep getting money and in the new money you get helps pay off the old debt. So we have to run 90 day someone comes and says, okay, fine. See I gave you$100. You owe me$140. Now a lot of people said let it ride, you know, it takes$140 and just reinvested. In fact, there's no$140. That's a figment of everybody's imagination. So some people took the money, they took$140. So that money, that hundred$40 came from subsequent investors. So the next person it's, you know, comes into Deloitte. He had taken my money pines, he takes their hundred dollars and uses add hundred dollars to pay you off, you know, the earlier investors you know, but people aren't giving$100 or people are given$100 out. A lot of people are giving them a lot of money,
Speaker 3:old habits. And so people started lining up, presented their money and the Boston paper post editor of the post says let's do a story about it. And they actually did a story saying Charles Ponzi who have something called the security as a company is doubling money. That was the, that was the first story that we're above it. And there was nothing in the story saying, you know, it could be a scheme. They just said he's doubling your mind and that started people even more. That men, six months later, he had taken in about$3,000,000,
Speaker 4:but it wasn't just the money that made besides the fancy suits and the gold headed cane. Ponzi also bought a a mansion in
Speaker 2:a Boston suburb with air conditioning and a heated swimming pool. Again, this is the early 19 hundreds and it was also reported that at his peak he was making about$250,000 a day.
Speaker 3:He hired himself, a press agent who announced that Charles Ponzi, he would be glad to speak in front of various organizations, have a banker and industrialists investors. He would be glad to speak about what his system that he had found two double people's money and he. He was not. It was not hiding. Oh, most people who run a Ponzi scheme have a basic idea that they will start small. The money will come in, they will package up that money and they will take off somewhere in this scheme. Well, and with them having disappeared a Ponzi because he was so confident in his own ability. Just to get out of everything, he decided not to take all of the investments that came in. He did not hide away in a trunk. He went down to the local banks in Boston and he put all this money in different banks and the. He had them give them a certificate of deposit, so he was walking around with his, with his gold headed cane. He hired a very expensive limousine and at any time he could reach into his pocket and pull out a piece of paper is eight. I have a million dollars on deposit in the local bank. Why should I hide this? This is all part of the ego that certain certain people have and I'm sure that they have the feeling that with this kind of money at my disposal, I can hire the greatest lawyers. So nothing has ever been to happened.
Speaker 2:Believe it or not, this scheme only goes on for less than a year. About December 19, 19 to June 19, 20, and then one day the police come to visit Ponzi at his office.
Speaker 4:So the police that. Yeah, we better look into it all. No one's complaining, you know, we should look into it. So a couple couple of police officers go to speak to ponce and they become investors at the conclusion of speaking with ponce. So everybody's happy with ponce and you thought
Speaker 2:that was going to be his fault and not so fast. This is Charles Ponzi. We're talking about here, very newspaper that had already done a feature on the overnight success, kept asking questions and kept digging.
Speaker 4:The Boston post starts doing a newspaper article about it and then they come to the conclusion the numbers don't add up. You know, if you invest$140 basically on foreign stamps. No, that's not going to grow 40 percent in 90 days or however many days. So the Boston posters around ran the mass and instead it's just a house of cards and then they publish that and then it hits the fan, they say and then all of a sudden there's a rush on poor Mr Ponce. He to a, you know, a positive, we want our money, you know, and no one's giving Ponzi money. Now they just want all want their mining.
Speaker 3:And as soon as the funds is coveralls that says, Church turning off of the fountain, as soon as more money is coming in, then you can afford to pay back those that you were promised.
Speaker 4:People literally will lining up, you know, they're lining up the staff. There was so many people, the line went from the street up five floors to two ponds, this office there, then out and then down the street and then down that alleyway. So Ponzi being the guy made sure that women and pregnant women got to the front of the line here we go out and give them refresh meds. You know, it's just a salesman to the end
Speaker 3:curtain for their investments. Old people that was a piece of paper saying you don't sign a promissory notes. Uh, and then said, I promise on June 10th, I will pay you back$200. Well, if you, if you give us some money, that kind of a note and you can give them the$200 a, that's, that's against the law.
Speaker 4:We had the run on Ponzi. Ponzi obviously could not, you know, Yo, you know a lot of money and he couldn't make dough went in before you. Now it ponds. These being charged both state and federal relay for his crimes.
Speaker 3:The government says deposit the bad. He has been using the mail to defraud. People
Speaker 2:charged with 86 counts of mail fraud to be exact. Remember that part when Don mentions Ponzi felt he was so rich, he could buy the best attorneys. Well, Ponzi decided to represent himself.
Speaker 3:When you have a$3,000,000 in the bank, it's easy, the easy to define lawyers, it will represent you, but if, if you don't want to give them any of that$3,000,000, they say he was interested in getting the money and keeping it. The arrogance is such that, you know, I know what I'm doing. I, I will. I will get out of this one way or another.
Speaker 2:That wasn't the case. Ponzi was eventually found guilty on both federal and state charges. You serve two separate prison sentences in Ponzi found himself out of prison for an appeal. And if you think he decided to lay low, well you're wrong, and he decides that it's a little cold in Boston. I Love Boston. Let me go down to Florida. And here's what he finds in Florida. This land speculation.
Speaker 3:Yes. We printed up some certificates, a man name the company after his wife and was trying to sell these shares in the swamp land.
Speaker 2:The problem was Ponzi was selling the swamp land as pristine land and that is illegal, another fraud. So Ponzi is convicted. Once again, only this time he's deported back to Italy. He wasn't heard from for years, essentially disappearing. But then he suddenly resurfaced and the ones king of financial crimes had fallen far from his throne.
Speaker 3:He ended up going to South America, working for the airline, and then he kind of disappears for awhile until he. He surfaces. He was very sick and he was at a charity ward at a hospital and that's where he passed away, supposedly stilled dreaming of going back to America and getting together with his wife, bows. But he died in the charity ward. I think there was like$67 left in the account that they used the first funeral. Wow.
Speaker 2:As for rose, the love of his life turns out, as far as we know, don is the only person to ever interview the former wife of Charles Ponzi. I say former because. Well, she did stick with him through all his legal troubles and prison time. She finally divorced him when he was deported. And remember when Ponzi described a love story between the two. Sadly, that didn't seem to be a mutual feeling in the end. When don spoke to rose, she was in her seventies and she to appeared to have been played by Ponzi.
Speaker 3:Everybody was suing his. He has money in a way. And I'd say until rose, his wife. Uh, so when I started researching this story, I found out the rose was living in Florida. He was living near estate where Al Capone had lit. So I assumed it. Rose also had some kind of an estate there and she was secretly have had this money. So when I went down, of course to Florida, uh, I found out that Paul Ireland in 1920 was, of course very exclusive these days it's builds up like any other suburb. And I found out that rose and her husband actually we're living in a small apartment, builds over a garage. Rose's husband at the time was running the concession stand at a dog racing track, you know, I was very good. She was not living in luxury like a millionaire's wife would. They were very ordinary middle class people. When I interviewed her later on, she says that all that he left her with was his 80 year old mother to take care of. So she, she was, she was not a happy. His wife was not happy. Uh, he, he wrote her Ponzi, wrote her letters from jail, going how much he loved her and how he looked forward to getting out of jail and making everything right. But, uh, I'm not sure that she believed in me anymore. I think that as a young 19 year old woman, maybe she had been swept off her feet by the fact that you know this, this pending was guy one day he shows up with a limousine and one would take her on an airplane rides, so I think she was probably swept off her feet,
Speaker 2:tells me that he has sold the rights to his book for it to be made into a movie so far, and if you're curious, don himself has made a lot of money off his book.
Speaker 3:After working on the book for a couple of years, I have decided that you'd get a lot richer if you run a Ponzi scheme. The if you write a book about it,
Speaker 2:Ponzi did write a book about himself. You can actually find online. It's titled The rise of Mr. Ponzi, the autobiography of a financial genius
Speaker 3:course talks about his entire life. How much of it is true? Nobody knows.
Speaker 2:I suppose. We'll never know and we'll leave you with that. I'm just not. Or the headlines maybe forgotten. Just don't forget about us.