“Look at Ponzi!” someone yelled, and several hundred people moved toward them. The Ponzis had arrived at a ceremony to dedicate a new orphanage, the Home for Italian Children, for which Ponzi had pledged $100,000 to honor the memory of his wife’s mother, Maria Gnecco. Men, women, and children pressed forward, hoping to touch his hand and thank him for his generosity. Carnival booths dotted the grounds of the orphanage, and Ponzi’s luck still held. He won a doll for Rose and a box of candy he handed to an awestruck child. He climbed into one of the booths to play a role he was born for: carnival barker. At the urging of the crowd, he agreed to pay cash prizes. Soon dimes were pouring into the booth—it was as if Ponzi had reopened the Securities Exchange Company for investments. “Wait a minute,” he merrily called out. “I’ll have to figure out my 50 percent before I begin!”
After he inspected the orphanage, Ponzi’s greatest fun came when someone brought out a nanny goat with a sign around her neck saying BARRON’S GOAT. Ponzi posed for pictures with the confused animal. He told reporters, with his usual smile, “The weather is lovely. So is the home. The people are fine and the press is fairly good.” Narrowing his eyes, he added: “I think that five-million-dollar suit will keep Mr. Barron busy.”
The crowd cheered again as the Ponzis were driven away.
Ponzi got more good publicity that day when a Herald reporter sat down with four Ponzi agents over “their daily banquet of baked lobster” to discuss the tens of thousands of dollars they had made promoting the Securities Exchange Company. “Ponzi has solved the capitalists’ world game,” said one, Pete Brisco, a former waiter who claimed to have made $100,000 in Ponzi profits and fees. “They are trembling with fear of what he is going to do for common men, for all who will share in the great day at hand. His heart is with the people. All he does is for them.”
Ponzi spent a relatively quiet Sunday, August 1, relaxing and talking briefly with the New York moneymen thinking about buying his business. He posed at length for a still photographer and another crew of movie men, this time from Fox Film Company. With the cameras rolling, Rose and Imelde pretended to wish Ponzi well as he left home for a day of work. They stood close together on the front porch of the house, Ponzi’s right arm around Rose, his left arm around his mother. Though the camera could not capture sound, Ponzi improvised a script.
“Well, Mother, it’s time for me to go now,” he sang out. Rose played along.
“When do you think you’ll be home, dear?” she asked. Then she leaned toward him for a good-bye kiss.
“Great!” said the movie man.
When the still photographer was at work, Imelde Ponzi whispered in Italian that it seemed like a dream. She wondered if she would wake up and find the house and their wonderful new life gone.
“That is why we are having the pictures made, mother,” Ponzi answered. “So we can look at them if we find that it is a dream.”
Rose would not have minded if it had all been a dream. When the photographer, Arthur Marr, asked what she thought of her new life, she answered with a touch of melancholy. “It’s a pretty big burden,” she said, “and there are a good many hard things that go with wealth. We used to have such a nice family life, but now there is practically no home life—in spite of the beautiful home we have—and no privacy, and my husband is so busy all the time.”
For much of the day Slocum Road was jammed with cars filled with passengers hoping for a glimpse of Ponzi. Pinkerton guards shooed away the more insistent ones who approached the house on foot. Ponzi spoke a few words to reporters, telling them he hoped to resume his business within a week.
After the film crew left, Ponzi, Rose, and Imelde went for a drive. As they passed by the Lynnway airfield, Ponzi had an inspiration: He wanted to fly. On a whim, Ponzi clambered into a biplane, hired pilot L. W. Tracy, and told him not to do anything tricky. Once they were airborne an exhilarated Ponzi changed his mind. Tracy jumped at the chance to strut his stuff, putting the plane into two loop-the-loops and an “Immelmann turn,” a daring half loop named for a German World War I ace. Tracy also executed a graceful maneuver called a “wingover.” It began like Ponzi’s business, with a dramatic heavenward climb. As the plane soared skyward, the engine stalled, and it seemed to hang motionless for a moment. Then it fell into a frightening nosedive.
But before they plummeted to the ground in a death spiral, the power returned. Tracy steered the plane onto its normal flight path, level with the ground. If only Ponzi could do the same with the Securities Exchange Company. He had experienced the climb and the stall; now he hoped to regain momentum and level things off without crashing. Ponzi enjoyed the trick so much he asked Tracy to do it again. A half hour later Ponzi returned to earth delighted. He paid Tracy thirty dollars, gave him a ten-dollar tip, and declared that he would return another day.
While Ponzi relaxed and took flight, the Post was preparing to publish its biggest and most damaging story yet on the case, from a source Ponzi had never suspected.
William McMasters had been suspicious of his new boss since the previous Monday, when he’d accompanied Ponzi to the meetings with investigators. Several times McMasters had thought he’d heard Ponzi contradict himself from one meeting to the next, as though the fast-talking financier was making it up as he went along. If Ponzi turned out to be a fraud, McMasters feared, his own credibility and career would go down in flames. He was forty-six, with a young wife and a seven-year-old daughter to support. His loyalty was to them, not Ponzi.
McMasters dusted off the skills he had used years earlier as a reporter for the Post, before he’d become a mouthpiece for Fitzgerald, Curley, Coolidge, and now Ponzi. He began nosing around the School Street office, searching for clues to determine whether it was a real investment house or a Peter-to-Paul scheme. By late Saturday he had reached his conclusion. He called Richard Grozier and offered the Post an inside look at Ponzi’s operations that would expose the man and his company as frauds. Grozier had been frustrated for days by the sight of Ponzi’s relentlessly smiling face staring out at him from the pages of his own newspaper, refusing to surrender quietly. Newspapers from around the country had picked up on the Ponzi story, and every day the Post was in danger of losing its lead position. McMasters’s account could be decisive; the Post would have an exclusive its competitors would kill for.
If what McMasters said was true, Grozier told the publicity man, the Post wanted the story and would pay dearly for it. Grozier offered McMasters the fabulous sum of five thousand dollars, with a thousand-dollar bonus if the story were borne out by later developments. The next day, McMasters drove to the Post building on Washington Street and went to work. The story ran the following morning, Monday, August 2, under a headline stripped across the top of page 1, each letter two inches tall:
DECLARES PONZI IS NOW HOPELESSLY INSOLVENT
The subhead explained:
Publicity Expert Employed by “Wizard” Says He Has Not Sufficient Funds to Meet His Notes—States He Has Sent No Money to Europe nor Received Money from Europe Recently
The story, under McMasters’s byline and copyrighted to prevent its immediate theft by the Post’s afternoon competitors, began with a self-congratulatory note: “After this edition of The Boston Post is on the street there will be no further mystery about Charles Ponzi. He is unbalanced on one subject: his financial operations. He thinks he is worth millions. He is hopelessly insolvent. Nobody will deny it after reading this story.” McMasters went on to assert that Ponzi was at least $2 million in debt, had sent no money recently to Europe, and had never earned a dollar from operations outside the United States. McMasters also claimed that Ponzi had bribed a policeman for a gun permit and paid leg breakers to keep stories out of the newspapers.
He quoted banker Simon Swig as questioning Ponzi’s sanity and denounced “Wall Street ‘experts’ who never did anything like it themselves offering ‘sure-thing’ explanations of his ‘operations.’ ” McMasters made Pelletier out to be something of a hero, claiming
that the district attorney had said at their meeting, “See here, Ponzi, I think your scheme is crooked.” To explain why he had gone to the newspaper, McMasters raised the banner of altruism: “As a publicity man, my first duty is to the public.” He wrote nothing about the money Grozier had paid him.
Editorial cartoon by William Norman Ritchie in The Boston Post, August 3, 1920.
The Boston Globe
CHAPTER FIFTEEN
“YOU DISCOVERED THE MONEY!”
Anxious investors began gathering in Pi Alley at six-thirty Monday morning, more than two hours before the doors would open at the Securities Exchange Company. The wound had reopened. Ponzi’s success in restoring confidence had been undone by McMasters’s story in the Post. More people than any day the previous week clamored for refunds. The alley soon overflowed. People spilled around the corner into Court Square, next to City Hall. A large detail of police turned out to assist the Pinkertons, some of the officers mounted, some on foot, and a couple on a nearby roof with field glasses, watching for pickpockets.
By ten o’clock several thousand men and women stood in line, shoving and swaying and surging and sweating in the rising heat. Newsboys with armloads of Posts roamed through the horde, doing brisk business. Some onlookers loitered in the street just for the spectacle. A few said they were holding on to the notes and their faith in Ponzi. Those who did want their money had to suffer the slow progress to the entrance to the Bell-in-Hand, then through a rear door to a stairway, then through labyrinthine hallways to the Securities Exchange Company. Clerks brought them a dozen at a time through the boarded-up front door—there had been no time to replace the glass that had been shattered the week before—and soon they emerged with checks for their money drawn on Ponzi’s Hanover Trust accounts. The wait proved too much for several women, who fainted from exhaustion in the poorly ventilated building and were carried outside to be revived. Soon Ponzi’s clerks began pulling women from the line and leading them up a side entrance into 27 School Street.
Speculators returned to work, buying not-yet-matured Ponzi notes at a discount, in most cases paying 90 percent of the original investment. Among them were several Ponzi agents, whose lucrative 10 percent commissions had dried up the moment Ponzi had stopped taking investments. One was Ricardo Bogni, the South End bricklayer who had initially invested after Ponzi had assured his wife that she could bet her shoes on his business. Bogni roamed the alley, eventually buying nineteen notes for a little more than seven thousand dollars before he ran out of cash. He could have made a quick buck standing in line himself and cashing them at a teller’s window, but Bogni had complete faith in Ponzi. He was certain he would make a killing once they matured. Several of Ponzi’s branches in other cities experienced miniature versions of the Boston run, though most closed and advised investors to travel to School Street for their money.
The uproar and the allegations by McMasters proved too much for Roberto de Masellis, the foreign exchange expert Ponzi had hired a month earlier to improve his accounting system. De Masellis gathered his belongings and walked out. But Lucy Meli and the rest of the Ponzi staff remained at their posts, fighting their own doubts and fatigue, expressing confidence in their boss, and paying claims as fast as they could.
Ponzi arrived shortly before eleven, and his appearance quieted the crowd. The reception was a far cry from the cheers he had grown accustomed to, but it was a sign that although they were frightened, his investors had not lost all faith. He strutted into his office as unruffled as ever, twirling his snappy walking stick like a drum major, as though his biggest concern was where to eat lunch. Reporters trailed him like goslings as he walked through his office offering hearty “good mornings” to his staff. When he reached his desk, Ponzi tossed his straw boater onto it and declared, “My hat is in the ring.”
As the reporters fired questions about McMasters, the investigation, and the run, Ponzi responded true to form. “As far as being insolvent, I absolutely deny the allegation,” he said, beaming his grin at his inquisitors. “People have admired me for my nerve. My smile, which has become so well known through cartoons and photographs, is prompted by a clear conscience. A run does not affect my serenity because I have the money to back it.” He slyly noted that he doubted there was a single bank in the city that could withstand such relentless withdrawals without bleeding to death.
Ponzi said McMasters knew nothing about his business beyond insignificant advertising matters. He suggested that McMasters was motivated by Ponzi’s demand that he account for money Ponzi had given him to place newspaper ads announcing the suspension of investments. If not that, Ponzi said, McMasters was the tool of powerful men out to destroy him. “There is a desire to embarrass the investigators, a desire to turn public opinion against me,” he continued. “Should I be able to realize my dreams, such a realization would mean the downfall of an autocratic clique which has been able to prey upon the credulity of the people.” Casting himself as David against the Goliath of established bankers and business interests, Ponzi declared, “The issue now at stake is an issue between a man who wants to do all he can for the people and men who want to take as much as they can from the people without giving adequate return.”
He picked apart McMasters’s allegations one by one. Ponzi insisted that Pelletier had never called his business “crooked” and called on the district attorney to dispute McMasters’s claim. He branded Swig’s comments to McMasters lies, and showed receipts for money orders sent abroad to show he had indeed engaged in foreign transactions. He vehemently denied that he had bribed a police officer for a gun permit. Ponzi scoffed at the suggestion that he had followed McMasters’s advice when meeting with investigators, saying, “My dog follows me, never goes ahead.” Ponzi downplayed the likelihood of a libel suit against his former publicity agent—“McMasters hasn’t got anything”—but said he would talk to his lawyers about suing the Post.
He had just one request for his investors: “Come and get your money, but come in an orderly way. I may run out of check books, but I shall not run out of money.
“Let me tell you this,” he added. “I am going to meet all my outstanding obligations and meet them with funds which I have in banks right here in Boston. And when that is done, I shall have millions left.” With a sweep of his hand, Ponzi signaled that the half-hour interview was over. Afterward, one of the reporters marveled how Ponzi, at the center of a firestorm, could remain “as calm and undisturbed as a mill pond.”
Ponzi’s line about leading his dog inspired his personal poet, James Francis Morelli, to write an impassioned poem about McMasters titled “Charles Ponzi Says: ‘My Dog Never Leads Me.’ ” It began:
He bit the hand that fed him so well, the miserable, contemptible cur.
While with Ponzi he lived on the fat of the land, and returned nothing but a slur.
“Hopelessly Insolvent” are the words he used to imperil the Ponzi investor.
“Millions of Dollars” was the immediate reply of the “people’s proud protector.”
As the day wore on and more investors received their money, Ponzi’s popularity began to return. The only disturbance occurred when police and Ponzi’s Pinkerton guards shut the doors at two o’clock and told the remaining investors to come back the next day, figuring it would take several more hours to pay the investors already inside the building. Several men grabbed planks from the alley to use as a battering ram, but they were quickly repelled by a flying squad of officers. The only arrest was a notorious West End pickpocket named Harry Dwyer who had been working the crowd.
Ponzi was heartened by scores of telegrams offering support and money. Gary Johnson of Houston wrote: “Recent news dispatches state you will reopen and extend business to other cities. You will remember me as a fellow worker and friend in Wichita Falls. If you are opening in Texas would like to represent you. Are channels now open for further investments? If so, will invest my savings with you. Reply [at] my expense.”
Just after four o’c
lock, Ponzi wandered outside to buy the afternoon papers, generously tipping the first newsboy he came across. As he did, someone in the crowd yelled, “You’re the greatest Italian in history!”
“No,” Ponzi answered with a laugh. “I am the third greatest. Christopher Columbus discovered America and Marconi discovered the wireless.”
The fan cried out, “You discovered the money!”
Before Ponzi could respond, a clerk directed his attention to an elderly woman who was crying. Rose Perchek had two notes worth $450, but the lines were too long for her to get inside before the doors closed. Ponzi wrapped an arm around her shoulders and led her through the mob. As they walked into the building a man with a freshly fat lip grabbed Ponzi by the arm.
“Mr. Ponzi,” he said, “one of your men is assaulting people outside. He shoved me in the face. Look. You hadn’t ought to allow such business. Are you going to let them maul people?”
“I am very, very sorry,” Ponzi said. “He hasn’t any business to be rough.” He calmed the man and continued into his office with Mrs. Perchek.
“Now, madam,” he asked, “what will you have, cash or check?”
She asked meekly for cash, so Ponzi pulled a thick roll of bills from his pocket and paid her.
“Now,” he told her, winking to the crowd of investors waiting for their money, “you have the money and I’m broke.”
Meanwhile, Edwin Pride continued his audit, as he had been doing almost nonstop for three days. Pride caused a small stir when he told reporters that he had so far found nothing to suggest that Ponzi had violated any laws, but his work on the mass of index-card files was far from finished. With no real movement on the probe, Pelletier and Attorney General Allen traded barbs over Allen’s takeover of the case, with each suggesting the other had not been cooperative. Another ripple resulted when Boston’s chief postal inspector, Hal Mosby, said Ponzi had written a letter telling one of his investors to come get his money. Mosby suggested that the government could immediately suspend Ponzi’s operations based on its belief that Ponzi had used the mails in a scheme to defraud. But with Pride’s report still pending and Ponzi paying all claims, no investigator wanted to step out on that limb. As a Globe reporter wrote that night, it remained an open question whether Ponzi was “wiping Peter’s nose with Paul’s handkerchief.”
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