Another reason Ponzi escaped reporters’ attention was the extraordinary number of major stories occupying Edwin Grozier’s Post and the city’s other newspapers during the first months of 1920. The national news pages were filled with stories about the Eighteenth and Nineteenth Amendments to the Constitution: Prohibition and women’s suffrage. The liquor ban took effect in January, and the state-by-state battle to ratify women’s voting rights raged into the summer.
Boston was overflowing with local news as well. The city was still recovering from the police strike the previous fall. Reporters were paying close attention to the abundance of rookies on the reconstituted force. Political reporters were taking the measure of Governor Calvin Coolidge, who had made a national name for himself by breaking the strike. Now he was being talked about as a vice presidential candidate.
Roundups of suspected radicals had the city on edge, as shackled foreigners were being held for interrogation and deportation at the emigration station on Deer Island in Boston Harbor. Crime reporters were keeping track of the usual mayhem, devoting an abundance of ink to the April 15 murders of a paymaster and a guard during a robbery in South Braintree, followed by the arrests of two Italian anarchists, Nicola Sacco and Bartolomeo Vanzetti. Sports pages followed Babe Ruth’s first season pounding home runs for the New York Yankees after his stunning sale the previous winter by the Boston Red Sox. The Babe’s move fueled the question of whether New York City might eclipse Boston as the “Hub of the Universe.” Most Bostonians doubted it.
The Post kept its readers abreast of all those stories, while preoccupied by yet another, one that would take a heavy toll.
James Michael Curley was anxious to mount a political comeback. After losing the mayor’s office, he ran for Congress in 1918 but lost again. With another mayoral election approaching, Curley was determined to regain City Hall and its spoils. As he looked around the city to count friends and enemies, he knew the Post would surely be among the latter. Edwin Grozier and his managing editor, Clifton B. Carberry, Boston’s premier political commentator, considered Curley and his machine throwbacks to a corrupt past. They were ready to throw the full weight of the paper against him.
In the spring of 1920, Curley went on the offensive. He publicly and repeatedly accused Grozier of secretly taking money from England to oppose Irish independence. Such a charge, if true, would certainly alienate the Post’s large Irish immigrant readership, which Grozier had assiduously and sincerely courted for decades. Curley took the stage at the St. Patrick’s Day celebration on Boston Common and claimed that he had learned of Grozier’s alleged perfidy several years earlier. In 1917, Curley claimed, he’d discovered that Grozier had purchased a quarter million dollars in city bonds. Curley said the city treasurer had informed him that money for the bonds had come from a draft on a London bank and that the money was “part of an immense propaganda campaign fund spent in this country . . . to influence the American mind in favor of Great Britain.” The money had supposedly come from Lord Northcliffe, a British newspaper baron. In short, Curley was accusing Edwin Grozier of prostituting himself and the Boston Post to betray the cause of Irish independence. Curley’s timing was incendiary: The feared British irregulars, known as the Black and Tans, were just arriving in Ireland to battle the rebels.
Grozier was outraged. The claim was a bald-faced lie from a politician with only a casual regard for the truth, but the publisher feared that his years of support for the Irish would be undermined without an equally fierce response. He sat down in his cubbyhole office on Washington Street and wrote an extraordinary challenge that he published on the front page of his newspaper, headlined in bold type:
A CORDIAL INVITATION TO EX-MAYOR CURLEY
Here Is an Opportunity for Him to Prove His Interesting Charges Against the Boston Post and Edwin A. Grozier, Its Editor
Below that, Grozier recounted Curley’s scurrilous charges, then made his offer: “If Mr. Curley has a scintilla of evidence to back up his charges of improper conduct, I hereby ask him to produce it for free and conspicuous publication in these columns. If he or anyone else can produce proof to show that Edwin A. Grozier or The Boston Post, as conducted by Edwin A. Grozier, ever received at any time, anywhere, anyhow, from Lord Northcliffe or his representative $250,000 or $1, or any sum or other consideration, directly or indirectly, to influence its attitude . . . Edwin A. Grozier will take pleasure in presenting to James M. Curley his entire interest in The Boston Post.” Grozier was betting his fortune, his legacy, everything he had spent three decades building. All to defend the honor of his name and his beloved paper.
Curley had no evidence; but that was never the point. The wily politician had borrowed a strategy from his friend the pugilist John L. Sullivan: Lead with wild punches to keep a dangerous opponent from delivering an early knockout. Knowing he could not provide proof of his charge, Curley tried to turn Grozier’s invitation to his advantage. He offered to debate the Post publisher at any time or place of Grozier’s choosing on the question of whether Grozier was a paid agent of the British government. Grozier ignored the proposal. It was as if Curley had proposed a debate on whether Grozier beat his wife. No matter what he said, Grozier could not win. Even if he was tempted to try, he was no public speaker, certainly not in Curley’s league.
Grozier could take satisfaction in knowing that all but the most rabid Curley fans would recognize that the Post had carried the day. Curley would surely have produced evidence, humiliated Grozier, and seized the newspaper if he could have. His diversionary tactic of a debate challenge could only be seen as a concession.
Though Grozier won the round on points, the timing of the episode suggests it was a costly victory. Never blessed with robust health, the sixty-year-old Post publisher had spent his entire adult life trying to emulate the dawn-to-midnight work ethic of his newspaper mentor Joseph Pulitzer. In late spring 1920, in the weeks that followed his face-off with Curley, Edwin Grozier suffered a complete physical collapse. He was hospitalized in intensive care, fighting for his life, unable to play any role at the Post. At the same time, the Post’s managing editor was away for the summer. Their roles needed to be filled, and the job fell to the man who held the titles of assistant publisher and assistant editor.
For the first time in his life, at thirty-two, Richard Grozier had a chance to escape his father’s shadow. He was in charge.
As spring gained confidence, so did Ponzi’s investors. By May, the twenty-dollar guppies were still welcome, but more often they were dwarfed by thousand-dollar whales who saw 27 School Street as prime feeding grounds.
Louis and Charlotte Blass had met Ponzi a year earlier, when he was a poor clerk, and had watched from a safe distance as he parlayed his big idea into a moneymaking machine. Knowing that his friends the Blasses had money in the bank, and hoping to separate them from some of it, Ponzi dropped by their home in the Jamaica Plain neighborhood in March. Louis Blass was forty-five, a traveling salesman of cotton waste products who had formerly run a mill in New York. He and his forty-two-year-old wife had emigrated from France seventeen years earlier, and now they were raising two sons and two daughters. The eldest planned to start classes at the Massachusetts Agricultural College in the fall. Ponzi showed them a few reply coupons and described his business, watching as always for the moment their eyes lit up at the sound of 50 percent interest in forty-five days. The Blasses spent weeks thinking about Ponzi’s proposal before plunging in with both feet.
On May 10, the couple showed up at Ponzi’s office with eleven thousand dollars in certified checks, from two emptied bank accounts, plus ten thousand dollars in Liberty bonds. Ponzi accepted the bonds as the equivalent of nine thousand dollars in cash and wrote out the biggest single certificate to date from the Securities Exchange Company: twenty thousand dollars, with thirty thousand dollars due in forty-five days. Louis Blass was so certain of the windfall he began urging his bosses and his customers to follow his lead and invest all they could. His boss, textile merch
ant Sam Finkel, was intrigued enough to inquire about speculation in postal reply coupons during a trip to Washington. He was told it was implausible. He declined to invest and shared that information with Blass, who nevertheless remained confident in his pal Ponzi.
With more investors came more salesmen. Ponzi brought in his brother-in-law Rinaldo Boselli, who was married to Rose’s sister Mary; and his friends Harry Mahoney and Henry Neilson, among others, and by the end of the month the Securities Exchange Company had more than three dozen employees. Neilson’s route to a job with Ponzi was typical. A Danish immigrant who worked as a forty-five-dollar-a-week meat cutter in Somerville, he had met the finance wizard socially the previous year at the home of a friend of his, Ponzi’s landlord, Anders Larsen. They stayed in touch, and when Larsen and his wife, Karen, invested five thousand dollars with Ponzi, Neilson and his wife, Hilda, took a chance with two thousand. The Neilsons made their first investment on May 18, then got so excited by the expected profits that they returned twice more within the next week, adding another thirty-four hundred dollars. Ponzi appreciated Henry Neilson’s confidence, not to mention the thirty-six-year-old Dane’s dashing looks and smooth manner. Ponzi knew a natural salesman when he saw one. So Ponzi hired Neilson to work in the office, explaining the system to would-be investors. Ponzi knew that customers were comforted when they heard salesmen honestly utter the words “Why, I have several thousand dollars of my family’s own money invested here.”
Another new salesman was Charles Ritucci, who ran the Plymouth office for Ponzi. He learned quickly from his boss’s enterprising nature, printing flyers in English, Italian, and Portuguese, then pasting them on store windows. They read:
Securities Exchange Company, No. 27, School Street, Boston, Mass.
NOTICE
Do you want to get rich quick? See our agent, Charles Ritucci, 3011/2 Court Street, Upstairs in Plymouth Theatre Building, who will explain how you can get fifty percent profit on your investment, payable forty-five days from date of investment. Our bank office in Plymouth opens every night from 6 to 8. Yours truly, Securities Exchange Company.
Investors could not help but throw money at such a sure thing. Ponzi began opening new bank accounts, including one at the North End branch of the Hanover Trust Company, where he deposited sixty thousand dollars on May 24 at the urging of the bank’s manager, an ambitious young man named Charles Pizzi. Pizzi was tired of seeing his depositors withdraw their money to invest with Ponzi.
Meanwhile, Lucy Meli had begun an index-card system so the company could, for the first time, keep track of the names and addresses of investors, the number of the certificate each was given, the amounts invested, and the due dates of payments. As a courtesy and a confidence builder, she followed up by sending postcards to investors a few days before their notes came due, to let them know the company stood behind its promises. The card file was soon overflowing. In May alone, 1,525 investors placed more than $440,000 in Ponzi’s care. They all wanted to see how, as Ponzi put it, “A little dollar could start on a journey across the ocean and return home in six weeks, married and with a couple of kids.”
As May drew to a close and his bubble kept expanding, Ponzi faced a decision: Admit defeat and return what money he could; flee with Rose and a small fortune of a few hundred thousand dollars; or plant his feet and keep the ball rolling.
If flight or surrender crossed his mind, Ponzi refused to acknowledge it. His ambition to succeed was blinding, his superficial success intoxicating. “The average man is never satisfied with what he has,” Ponzi reflected. “He does not realize when he is well off. If he has a shirt, he wants two. If he is single, he wants a wife. If he is married, he wants a harem. . . . He is always reaching for the moon and stepping off into space.”
Publicly admitting that he had not been able to perfect the alchemy of coupons for cash would have carried too heavy a cost for him to bear. At the moment, authorities were only vaguely focused on him. But the large number of police who were Ponzi investors would surely lead to swift and severe punishment the moment they learned that some or all of their money was gone. He would suffer, too, a crushing loss of faith among his in-laws and perhaps even his wife. The Gneccos and the Donderos had poured their life savings and inheritances into the Securities Exchange Company—the depositor lists included eight Gneccos and ten Donderos. After the recent losses of Rose’s parents and the failure of Gnecco Brothers, it looked as though Ponzi would be their deliverance. He took what might be viewed as a tentative step toward flight by making plans to sail with Rose to Italy on July 1 to visit his mother, whom he had not seen for seventeen years. But there was little chance he would not return, if he took the trip at all.
“What was I going to do? Proclaim my insolvency and face prosecution, or keep up the bluff and trust to luck?” he wondered rhetorically. “I kept up the bluff, hoping that I might eventually hit upon some workable plan to pay all of my creditors in full.” Privately, he abandoned the self-sustaining fiction that postal reply coupons might yield millions and accepted the fact that he was redeeming his certificates with money derived from new investors. Robbing Peter to pay Paul. “Not only couldn’t I pay the promised 50 percent return,” he lamented, “but I couldn’t even refund the principal at more than seventy-five cents on the dollar.”
He consoled himself with a story of a spectacular failure by a fellow Italian that had turned into unparalleled success: “Four centuries before, Columbus had started out from Spain on what he thought was the western route to Asia and the East Indies. On the way over he had discovered America. He didn’t know it was there, and nobody else knew it, except the Indians. Yet, he ran smack right into it.” With characteristic self-aggrandizement, Ponzi assessed his attributes—determination, luck, and unlimited confidence in his ability to exploit both—and concluded that he was a spiritual heir to Columbus.
Once he decided to stick it out, Ponzi began making the most of his newfound status. A rented apartment in a two-family house in Somerville was no place for a budding Rockefeller and his lovely wife. So Ponzi began searching for a grand house to buy, ideally in a moneyed suburb like the society enclave of Cambridge or the bankers’ colony of Winchester. He had already bought himself a car, a cream-colored Hudson coupe, so the commute would be no bother. But he and Rose disagreed about what kind of house to buy. He wanted a mansion, but she wanted a home, not “a big place with great rooms and secret passages.”
Eventually they were steered to Lexington, a dozen miles northwest as the crow flies from 27 School Street. The town prided itself on the two-and-a-half-acre Lexington Battle Green, where the war for independence began with the “shot heard round the world” on April 19, 1775. Since then, Lexington had matured into understated affluence, a home for literary luminaries and comfortable business owners, dotted with stately homes on swaths of land.
Their focus swiftly became a vacant house on Slocum Road, a half mile from the town center. Built seven years earlier, the yellow stucco house had little in common with the white clapboard Colonials popular in town. Situated close to the quiet street, impressive without being overwhelming, the house featured a columned portico and wooden porch at the front entrance, flanked on one side by a round sunroom and on the other by an archway leading to a carport, beyond which was a quaint carriage house. Above the portico was a balcony with a low railing and a flagpole poking out like a ship’s prow. Dor-mers sat atop the slate roof, and the windows in the sunroom and the second-floor bedrooms were shielded by striped awnings that snapped and flapped in the spring breeze. The two-acre grounds had grown unruly from lack of care, but through an arbor to the left of the house were a tennis court and a stone fountain in fine shape.
When he first saw the house, Ponzi was unimpressed. “Oh, this won’t do,” he sniffed, preferring something more in keeping with his new status. But Rose was smitten. It had the makings of a real home, not a cloistered mansion. Ponzi relented and began negotiating the sale. The home had been built by Ri
chard Engstrom and his wife, Anne, Swedish immigrants who had run into money troubles and had moved out the previous October. The Engstroms had spent between forty and fifty thousand dollars on the house, but the best offer they had received to date was twenty-five thousand, which they had flatly rejected. The Engstroms had never heard of Ponzi—not surprising, considering the absence of publicity for his business and the lack of branches in affluent towns like Lexington. But their lawyer, J. C. Thompson, told the Engstroms that the new bidder for the house was a good prospect who had made “barrels of money.”
Ponzi craved acceptance as much as he loved making deals. He tried to do both with the purchase of the house. He twice invited Richard Engstrom and his lawyer to dinner at the Copley Plaza Hotel and the Boston City Club. Engstrom was not interested. Rebuffed, Ponzi began playing hardball, offering twenty-five thousand dollars, the same amount Engstrom had already rejected. When Engstrom said no, Ponzi raised his offer to twenty-nine thousand. Knowing how much Rose wanted the place, he allowed himself to be pushed up to thirty-nine thousand, but on one condition: the seller would have to become an investor in the Securities Exchange Company.
When they passed the papers on May 28, Ponzi paid for the house with nine thousand dollars in cash plus an orange-colored Securities Exchange Company certificate for twenty thousand dollars, payable as thirty thousand dollars on July 12. Engstrom’s lawyer was worried. For security, he persuaded Ponzi to put up a thirty-thousand-dollar certificate of deposit at the Tremont Trust Company, payable to Engstrom in case of a problem with the Securities Exchange Company certificate.
Ponzi's Scheme Page 13
