1920 swindler left victims, imitators
The Boston Globe
11/22/99
By Charles Stein, Globe Staff
Seventh in a series
Charles Ponzi did something few other criminals - not Al Capone or Jesse James - could manage: He got his name attached to his crime.
Ponzi, who fleeced Bostonians out of millions in 1920, did not invent what has come to be known as a Ponzi scheme, a scam in which early investors are paid with money from new investors. The con had been around for years, maybe centuries. But Ponzi did it on such a grand scale, with such flair and in such full view of the world and the media, that he earned his place in criminal history. ''He was a celebrity and that only enticed more people into his scheme,'' says William Galvin, Massachusetts secretary of state, who spends part of his time trying to protect investors from modern-day Ponzi imitators.
Ponzi may have already been a crook when he left Italy in 1903 at age 20 for America. He participated in scams everywhere from Providence to Montreal, where he wound up in prison for his efforts. But Ponzi's ambition was as big as his adopted country. He knew he was destined to be rich. He just needed the right idea.
For Ponzi, the right idea turned out to be stamps, actually a type of foreign stamps called International Reply Coupons. Through some quirk in the laws, the coupons could be purchased overseas for a penny or two and redeemed in the United States for 6 cents. In theory, you could buy enough of the stamps to make huge profits. In practice, Ponzi only needed the stamps for a cover story.
''There was enough truth in the story to bring in the gullible,'' says Galvin.
Ponzi set up an office at 27 School St. and created a firm called the Securities and Exchange Company, a name meant to instill confidence in potential investors. Then he made his offer: Investors who bought into the company would get a 50 percent return on their money in 45 days; a 100 percent return in 90 days. Banks at the time paid 5 percent interest annually.
(This article was available free on the net at the URL below but was taken down. It is available from archives.
The complete article may be purchased at http://www.boston.com/globe/search/ for $1.50 after 6pm EST.)Original URL http://www.boston.com/dailyglobe2/326/metro/1920_swindler_left_victims_imitators+.shtml
Summary:
A Boston Post reporter, smelling a rat, began to do some background checking into Ponzi, digging up a criminal record and picture of him in prison. As the program Ponzi claimed to be involved in to generate the large returns was not real, he couldn't pay back investors as they came in increasing numbers asking for their money back.
To make a long story short, he spent more than a decade in jail. According to the Boston Globe article, "while he was in prison his mother died. When he got out his wife divorced him and the government deported him to Italy. He died in the charity ward of a Brazilian hospital in 1949. The last picture of Ponzi, taken in the hospital, showed him with a big smile on his face."
There have been many "Ponzi's" both before and since the time that Charles Ponzi conned people out of large sums of money. He and others took advantage of two well-known human weaknesses; laziness and greed. Advertise a scheme that takes little to no effort and offer a large enough return and people will throw caution and common sense to the wind and throw money at promoters. If they took a little time to do a proper due diligence, they wouldn't invest. Ah, but that takes effort and might spoil the dream.
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