Focus 580; Ponzis Schemes: the True Story of A Financial Legend

In this part of focus 580 we'll be talking about what is very likely one of the most enduring ways that crooks have come up with to separate people from their hard earned money. And we're talking about the Ponzi scheme and its at its most basic it works kind of like this. Early investors are drawn into this game by promises of huge returns and then they are paid with the money of later investors. And you can keep that going for a while but only for so long at some point the whole thing collapses. In this part of focus 580 we've been talking about the man whose name is now associated with the scheme. His name was Charles Ponzi. And for a very brief period of time. And Boston in 1920 he ran a scheme that brought in literally millions of dollars it's estimated that all together he took in something like 13 million dollars and at his peak of success he was taking in more than two million dollars a week and remember this was 19 20 and those days two

million dollars was a lot of money. Our guest for the program is Mitchell zu cough. He's professor of journalism at Boston University former reporter with The Boston Globe and he is the author of a recently published book titled Ponzi scheme the true story of a financial legend. The book is published by Random House and is out now and has a very interesting story so we'll see if we can talk about some of the basics this morning but of course if you want to read the book you can head out to the bookstore and look for it. Also here on the program we would welcome calls in Champaign-Urbana where we are 3 3 3 9 4 5 5. We do also have a toll free line and that was good anywhere that you can hear us. And that is 800 to 2 2 9 4 5 5. Mr. Sue cough Hello. I David. How are you. I'm fine. Problems are right. Mitch thanks very much for talking with us. My plane we pursued I guess one of the basic questions we might ask to start out is is this Charles

Ponzi did not invent the Ponzi scheme he certainly wasn't the first one to do it and probably didn't do anything didn't put any unique wrinkles into it. So the question is why is it that we now that we have come to call this a Ponzi scheme and not has been named after somebody else that's a great question you're absolutely right he was not the first one to do it. It was called as you described earlier robbing Peter to pay Paul for centuries. It is it's one of the oldest schemes on the books. Just 20 years before Ponce he was operating there was a guy named William Franklin Miller who did a similar thing in New York and Boston and we don't call it a miller scheme. The reason we call it a Ponzi scheme is because he was so unique he was so brazen and he was so charismatic and he just became so incredibly popular in such a short period of time that it became associated with him worldwide because of the tremendous skill he used in pulling it off. It wasn't that it was a

particularly new wrinkle. He each one has its own sort of unique characteristics. But it was the power of the personality of himself. He was being enormously charismatic guy. He was charming he was dapper. There's only five foot two but he acted as though he was seven feet tall. I think his popularity was spiked so quickly and was so global that we immediately began to associate it with with him. I think also just personally I think it is something sonorous about Ponzi scheme as opposed to a miller's scheme. There's something about the name I think. Yeah. Well and as you say here over what was really a very short period of time just a period of months between the time that he launched the scheme and the time that it collapsed he became very very well-known and people just lined up around the block to give them to give him their money. And it's it seems that he had a

saying rock star status is quite right but we didn't like it was something that indeed maybe that was it was like that. Exactly I mean in December of 1919 he was completely unknown virtually broke was sitting in the little office in downtown Boston just sort of dreaming up ways to make money. And nine months later everyone was talking about Ponzi and he did have what we would now call rock star status. There were rock stars back then but you know these were the days of some film stars like Valentino. He had Valentino status in 19 by the end of 19 20 by. By the summer you were really talking about this incredible arc of popularity that starts in December or January really of one thousand twenty and peaks in August of 1990. And yet his name remains with us. He came to the United States as relatively young man he came from Italy and his name was Carlo Carli Ponzi. And he came to United States and and we talked a bit about some of his early experiences before we get to Boston in 1900 I guess one of the

things that's really seems to be striking about him is that maybe like a lot of people who came to the United States he had one great dream and that was he wanted to be rich and not just. Rich you want to be really rich. Exactly you want to be as rich as a Rockefeller and. And that was his motivating force. He came here after having not done well in college because he was too busy hanging around with the aristocratic friends and enjoying the nightlife of Rome and his family said you know Carlo with your skills with your you know intelligence and your personality you will truly be the one to find gold in the streets of America. And he bought into it. And when he arrived here in 1983 he truly expected. And he came here with almost literally two dollars and fifty cents in his pocket and xpect it to be rich in no time and be sending money back home. But as so many immigrants found it was not that easy. And he went on literally an odyssey for about 15 years traveling

around the country having adventures and misadventures all in pursuit of this great wealth. You know his you say he knocked around the United States and Canada. He did a lot had a lot of different jobs. His lifestyle certainly didn't meet with his hopes or expectations. He one point went to Canada and was involved he worked in a bank where there was a big fraud although I guess he wasn't personally involved in that but he was guilty of was found guilty of and was sent to jail for. Fraud. Yes the Kennedy experience really with seminal and is essential in understanding policy this is the first place that I believe he witnessed the Ponzi schemer rob Peter to all scheme in action. The bank where he was working was running just such a thing with its own depositors offering very high rates of return on investment by using the investments the deposits of other depositors. So he was witnessing this. And then when it was collapsing Yes he was looking for some money to get back to America. He passed a bad check and it resulted in a couple years in prison for him where he

also learned that you know deep while he learned one that he didn't want to go back to prison although it wasn't to be that easy. He also learned that people with connections people who made money were always treated differently in North America. It was not about family connections it was about how much you had. This was a key time for him. And also he never wants to go back to prison after this. This this Montreal misadventure. He did what he did when he came back who was trying to come back in the United States. He was traveling with some fellow talian immigrants one of whom had been implicated in this bank scale we talked about. And so he was arrested again coming back to United States and ended up into a federal penitentiary in Atlanta exactly for smuggling emergency he really he took the fall because he was the only one who spoke clear English. And it was it was not a great charge against him but he took a very hard fall yes as you say back into prison in a federal penitentiary in Atlanta

where he had to spend a couple more years. And yet what I was incredibly struck by in when researching poncy story that after he gets out of prison it's very sort of back to back misadventures bad luck bad judgment on his part certainly. He goes to a small mining camp in a block in Alabama and does something remarkable. He donates he seems a woman's life a woman he barely knows by donating the skin off his own back and his own legs. When she's horribly burned in a kerosene accident he's you know some people would be after 4 or so years in prison would be bitter it would be self motivated be selfish. Hunter is a really interesting guy. He enjoyed giving as much as he did getting and no episode proves it more I think than the burn victim. That's a remarkable story of a recall in the book that he go. He's talking think the stories he's talking with this woman's doctor about what the doctor needs to do and the doctor says well I need a

bunch of human skin and if I could just get together a number of people who would each give me a little patch then I could do it but I would need to have all these people in Ponce said well you don't need to do that. I'll give you as much as you need take a take it off me. And that seems just as a surprising thing for him to do as you say particularly for someone it will you know it wasn't HIS SISTER It wasn't a cousin it was it was someone who was completely unrelated to him. Exactly and then you tell the story well because that's exactly how it was. This was this was such a revealing thing of of of poncy character of his nature. I mean it carried through right up to the height of his popularity when he became a new man. He loved the idea of making other people rich he was somewhat naive and he was maybe a little bit you know sort of willing to dupe himself as much as he was duping other people. Because he got so much joy out of it he was delighted at being the the hero to this burn victim pro Gossett. And even though he suffered horribly he went through several operations suffered pleurisy in the

Monia And you know while he was recovering actually his latest plan at that moment to become rich fell by the wayside. So he suffered horribly for it but it gave him tremendous joy and was always for the rest of his life a point of pride. Our guest in this hour of focus 580 Michel's who cough He is professor of journalism at Boston University. He is a former newspaper reporter he worked for The Boston Globe in fact was a finalist for the Pulitzer Prize and also want to number of other honors for his work as a journalist. He's the author of a newly published book that is the story of Charles Ponzi. The man from whom we get the name Ponzi scheme although as we said beginning the program he he didn't invent it he wasn't the person one to do it. But when he did it he was he was so brazen he was so flamboyant he became such a well-known public figure over a very short period of time that his name got attached to it and the book is Ponzi scheme the true story of a financial legend. And the book is published by Random

House. But as we mentioned he had these couple of experiences in in prison he was in prison in Canada he was trying to get back to the United States and ended up in jail again. He he knocked around some in the south in the American South. There is this this episode we just talked about finally hands up in Boston and that is where the the great scheme takes place Rives there and probably not very long after he does he meets a very attractive young woman and she certainly was her picture is in the book. Rose Necco you know was and he was just totally smitten. And so now he's in he's still in this. This the search of this great dream you know he still wants to get rich. And he he sees her and apparently immediately decides this is the woman I'm going to marry. And then he proposes and she says yes. Couldn't resist the charms hip pumping was motivated and really sort of understand poncy have to understand his relationship to two women. First he was desperately desirous of pleasing his mother. His mother was an enormous force in his life who was telling

him as a boy you are going to restore this family to its former greatness. And he talked about how she would build castles in the air for him. And the second woman as you describe was Rose when he fell in love with Rose. All he wanted was to drape her in diamonds and furs put her in a big house make her like the Boston Brahmins who ruled this town. And instead you know the funny thing the odd thing I guess ironically is that all Paul Roze wanted was its poncy home for dinner. He was in love with him. She was charmed by him. And she called him her ideal. And he was a bit older than she was and they had a lovely lovely time together. But that was not enough for him. It was insisting that he wanted to see her as rich as any woman in Boston. It sounds like is his attempts to to make money so he would have the lifestyle to which he would like to become accustomed. There in Boston he still had some of the same problems that he had had before not very successful Her parents had a wholesale

vegetable business and he tried to get in there and help them because he was not doing well and and it went out of business. Anyway he racked up a lot of debts. So he was really in a tough spot. And then he got this idea which now sounds a little crazy but he got this idea and it's a little bit difficult to explain in a sense because it involves something called the International replied coupon which is as far as I know there is no such thing and I actually know that they still this that or really this still exists. Here's the here's what it what it is. Explanation. Yeah. Basically in an international PI coupon is a way to buy a certificate that entitle you to get a stamp in any country in the world. And people would use them they would close them especially back then when writing to someone in a foreign country because it was a it was a polite thing to do if you were writing to your mother in Italy and you wanted to write back to you don't enclose a dollar for a stamp. She'd have to turn that into lira and go to the post office. You just include an I.R.S.

and she brings it with her return letter to the post office and then gets the stamp and gives it back to you. Ponzi realized and this is the most amazing thing. And she realized that hey what he had come up with was totally legal and theoretically possible if you could buy these I are seized in countries in Europe where the currencies were depressed bring them over here and trade them in. Over here in America. You could turn enormous profits. And it was true on a very small scale. If you bought a and I or C in Italy whose currency was depressed after World War 1 you could get twice as many or five times as many at different points here in America. It was arbitrage. It was with currency traders on Wall Street do every day in smaller increments. And so he realized in this summer really of 1919 that if he could get enough money together to buy these

IRS sees involved bring him back here turn him into cash. He would be rich. He would have every one of those dreams we discussed come true and it was legal. This is a legal currency was kind of an international postage currency. Of course the problem was and maybe we will get into this a little bit more but the problem was that while indeed the plan was legal and possible in theory that as a large scale operation it was not practical and maybe. In fact not possible and that and going into it he didn't really he didn't really know that he didn't realize that he didn't really even have a plan for how he was going to do it he just had this idea and said wow that's great. I can make a million dollars I can make millions of dollars that way without really quite understanding or having a plan for how he was actually going to do it and make it work. You're absolutely right David. You know I've said he had about one third of a brilliant idea.

And the other two thirds were of course that's where the rubber hits the road was. How am I going to a year so in theory it was great but how we're going to carry it out and then help me to turn it into cash. We're never you know we're never really part of his calculations and he knew this on some level. He was willing to be sort of self dissent deceiving. But at the same time as he is starting to put this plan with operation I learned he was quietly secretly being treated for all service for the first time in his life. It was eating him up inside because he knew he had one third of a brilliant plan any he was desperate to find the other two thirds. But by that time things had gotten out of hand. Things had gotten away from him. Well I have a caller to bring into the conversation will continue to tell more of the story of what happens to Charles Ponzi as we talk with Mitchell. Zuko off about his book puns these scheme questions are welcome. People want to call in and talk with our guest. The number 3 3 3 9 4 5 5 toll free 800

to 2 2 9 4 5 5 Certainly people are welcome to call we just ask people to be brief as I try to mention their from time to time just to keep the program moving getting as many people as possible but anyone who is listening is welcome to call. We do have someone right here in Urbana on line one. Hello. Hello. Yeah I found it rather amusing that the federal inspectors a few of the federal inspectors who were sent to check up on it actually bought in as investors. My question is did need trying to get legitimate. Did you try and buy a bank or something later on a legitimate business. If he did I say you're right on both counts. First though the federal investigators. Three quarters of the Boston police force became Ponzi investors at the height of the system Attorney-General's invested as well so he was you know he was convincing to even people who were out there investigate him. And yes when he was raking in all this money and he hadn't figured out a way to turn the coupons into cash he did indeed.

He bought a bank and had over Trust which was right around the corner from him. He bought a Macaroni Company he invested in all kinds of legitimate businesses an import export company where he had worked when he first came to Boston. So he very much was hoping and you know right up to the end that he could Coolidge out of it and pay off all of his investors you know that there are two parts. This brings up a great point. Thank you for the call. If there are two parts of the scam is take the money and run the Ponzi. Never had the Enron part in him. He had no intention of running in there's all kinds of evidence if you never wanted to swindle people and run and disappear. And so buying the bank taking in investors as you know investigators as investors is all part of this evidence of a guy who truly believed he could somehow pull it off. Do you have a copy actual presentation he musta had a terrific pitch.

You know it's funny. He the nature of his pitch there is none survive. Little pieces of of his pitch do survive in accounts of the day. But he wrote beautifully you have an unpublished autobiography and he was very very smart he was sort of a natural born salesman and when he told all of the people who came to work for him was never sell them hard. It was a treat. It was the first soft sell. If he said we have such a fantastic product here we have such an increased incredible offer that we don't need to be carnival barkers. We don't need to say Step right up we don't need to be P.T. Barnum just quietly offer them the money and they'll come running. And he was so right. Well thank you. All right thank you both. Others indeed are welcome. 3 3 3 9 4 5 5 toll free 800 2 2 2 9 4 5 5. Once he had the idea and you explained how it was he thought this could be made to work. Then what he would need obviously make it work was some money.

Yes. And he for it he figured well I'm going to have to borrow this and he knew that there would be little chance that a bank would give him the money. And then he thought well maybe I could find one or two people who would give me the enough money and he tried to go around and pitch it to individuals and. Nobody nobody apparently thought would work or thought it was good enough risk. And then he hits on this idea that maybe what he could do is to get small amounts of money from a lot of people. Yes that's exactly right. You know so again it demonstrates this is not designed to be a pure scheme he thought he could carry it out. And it just happened that his only access to money was by going public by taking in what ever people willing to trust him with with the promise of a 50 percent return in 45 days which was such a great return that he sort of suspected people would come running and they did. And so people did start lining up for food to trade their cash for what he thought were soon called Ponzi notes and they started coming in to his little operation down on School Street here in downtown Boston.

And they left him with small amounts of money just enough to have stood out. Let me put my toe into the waters come back and see if you can actually do this. And when 45 days came on he had not figured out how to turn the cash into coupons in the coupons back into more cash so he had two choices. He could either abandon this idea this this hold this one third brilliant idea or he could keep the ball Ronie rolling. Keep the music playing and that's what he did into the hope he would figure out the right way to end it. Well. At that point the only way to do it was by borrowing the old robbing Peter to pay Paul that he had seen at the bank in Montreal and as soon as soon as he started doing that he took a turn in his behavior that they'd be paying for really for the rest of his life. And I guess that was that as the money started to roll in he kind of liked the idea of having the money meant after all that's what he had always wanted and he started to

live like a rich man. He bought a big house and he bought a lot of life clothes and he bought expensive cars and pretty much I guess the buy thing thing that he wanted if he ever he you know I've been in the mansion in Lexington. He ended up buying the bank. As we discussed and this is the bank that it had returned him down for a loan. And so interesting he bought jewelry for for Rose and she took it back it was too horny too is too too fancy for her and she was not an ostentatious person. But yes he started living large and you know and he looked fantastic in these dapper Palm Beach suits with the straw hat on his head and a lock a cane him like a wood chain with a gold tip. And he became publicly the man he had always dreamed of being. And I suppose that that just helped sell him in the product because of his lonely was he charismatic but he looked prosperous he looked like a very rich successful guy and I'm sure that people looked at him and said well look at that he's a living example of what it is that he's

offering to us. And really you know after all if you if you say to somebody look I have a deal for you if you give me $100 in 45 days I will give you back one hundred fifty that at the. The appeal of that and there were plenty of people who were trying to sell various you know things like this get rich quick schemes I'm sure that the appeal for that was so great. That's why it is that you had these people literally lined up down the block just waiting to get in the door so that they could give him the money. Exactly right and and he was you know the caller actually made this point. He was the best salesman as you say because of how he looked but also there was something he did near the end at the height of this that was just brilliant. He was walking around downtown Boston and in one of these beautiful suits he kept a 1.5 million dollar certificate of deposit made out to him. And if anybody questioned him or anybody sort of wondered about him he would just wave this one and

a half million dollars a ticket and say look I have all the money I could ever need. You know I'm doing this because I want I want to maybe run for politics I want to be in office. And I truly just want to share the wonders of the wealth that I have started to enjoy my family is enjoying so that made him a fabulous salesman for his own product. Yeah. And it's remarkable how quickly this took off. This was the proverbial snowball rolling down the hill big as as you said we're only talking about here a period of months a bout six months or something like that. And at the beginning when he first started out selling the Ponzi notes maybe he sold you know first maybe he sold a couple thousand dollars worth and then pretty soon he was selling tens of thousands and then hundreds of thousands and then millions of dollars and it just happened that it it just did indeed snowball and it went that that fast. He was the right man at the right moment. And and people responded.

And people just could not get enough of him and once people want a gimme and he also knew that every time he paid off an investor with again the money of other investors of course he knew he had created a fantastic salesman and somebody walking home with two hundred and fifty dollars were a hundred and fifty dollars from a hundred dollar investment wanted to tell the world wait do you hear what I did. What a genius I am. I just made 50 bucks by giving my money to Ponzi for 45 days. If you said Where's his office. And yes they filled the streets and there's a there's a scene in July by July of one thousand twenty when literally people are just pressing against each other. Hundreds and hundreds of them desperate desperate to invest with Ponza. And there you also as you say the the business grew and grew very fast so it got to the point where Ponzi couldn't he couldn't do the work himself and he had to hire office staff and he hired salesman and. He had an office and that also sounds like that grew very fast.

It did and in fact he opened branches all over the northeast and it was getting telegrams from people across the country saying hey can I open an Oklahoma City bureau and open a Californian. And so you it was it was growing like Topsy it was just people couldn't wait to be part of this because this man just had that ability to convince you I am the answer to your dreams. And so yes certainly by the summer it was growing out of control and literally the money was pouring into his downtown office so fast they couldn't even count it all quickly or restored or they threw it into wire baskets almost like waste paper basket to be counted a leader. And just you know said Well we just will deal with it later in the end of the day. You use the very end as close to a million dollars a day for you. Yeah. Our guest maybe. Very quickly on introduce again we're a little bit past the midpoint of this hour. Is Mitchell Zuko off. He's teaches journalism at Boston University and is also a former newspaper reporter who worked at the Boston Globe and won a lot of awards for his work he was a

finalist for the Pulitzer Prize. His new book The one that tells the story that we are sketching out here this morning is titled Ponzi scheme the true story of a financial legend it's published by Random House and it does tell them about the life of Charles Ponzi the man who over this short period of time in Boston in 1920 launched this scheme took in literally millions of dollars before it all collapsed and was became so famous so well-known that is why today we call this kind of scheme the Ponzi. Scheme and it's a really interesting story. So if you want to read more you head out to the bookstore and take a look at and of course questions here are welcome. 3 3 3 9 4 5 5 toll free 800 to 2 2 9 4 5 5. We talked earlier about the fact that you know initially Ponzi had this idea. He thought that he could make money doing this way. Doing this buying these. These coupons and buying them in one place where the value of the currency was low and then he could take it to another place

where it was worth a little bit more. Exchange the coupons for that currency and then in the process make money and as you said theoretically that could work. The problem was that also as you said he had a. A third of a good idea that he really didn't know. He really didn't have a plan for making it work. And when he launched the scheme initially the money started to come in and he still didn't know how it was going to work but he realized that if he could continue to get people to give him money that he could pay the early investors with the money from later investors and that sort of the basic of the whole of the whole deal. If there had to have been some point and you also talked about the fact that you know he's making a lot of money and he was enjoying spending. But there had to be some point at which he thought he realized this simply wasn't going to work. There was no way that he could actually make it work the way that he thought. And then maybe also at that point he started thinking that he could invest in legitimate business and eventually everything would work out OK. I guess the central question is at any time did Charles Ponzi

think that he was committing a crime. That's a great question. I wouldn't say he thought he was committing a crime. I think he thought he was playing a bit fast and loose. But he was so convinced that he his intents was good as he always said his intentions were good. And so if he had stopped to think about it he would know that what he was doing was not on the level. But I don't think he thought of it in terms of as a crime. He felt that he talks a lot in his autobiography and at the time about how business ethics. You know it was a time when when when rogues and rascals really abounded in America and he was sort of doing what so many of them had done he was playing a little fast and loose you know shaving things in his eyes but committing a crime. No I don't think he ever thought he was doing that. You have to remember Boston in 1920 he was really a city that had been shaped by by a

mayor James Michael Curley who was one of the great rogues of of early American politics of early 20th century a century politics a man who on a $10000 salary built you know a hundred thousand dollar home Tesh in the Jamaica Way in Boston. You know there were plenty of people who were shaving things and and were doing just fine and were being celebrated and being elected to Congress or the mayoralty here. So HOMSI I think saw himself as you know taking he saw those opportunities and he took them I think is one rogue one said Well let's see we have another caller here that we can talk to someone in Bloomington Illinois not too far away from us on our toll free line. Lie number four. Hello. Yeah hi my name's Bob I'm calling from Bloomington. I'm in my car so I laugh I question hang up and I apologize if you've already discussed this but I

didn't catch the first part of the program. Am I right that after upon the was convicted he was in jail for a few years and then he got out and he went to Florida and with engaged in a real estate scheme down there I'll hang up and listen to your answer thanks to you. Yes in fact you're absolutely right. He didn't after he after things didn't go as he planned and he had to pay a price for it. He did go down to Florida because the land boom was in sort of the waning days of the big Florida land boom and he opened up a company called the char pon land syndicate char pond Stanley for Charles Ponzi and decided to sell land down there. And of course this some of this land had the unfortunate property of being underwater which made it hard to build houses on. But yeah that's absolutely part of the Ponzi story. And he did as you say mean eventually the thing collapsed. He was convicted he spent time in jail after that. I think you spent some time in Europe. He ended up

in South America. Oh yeah and really die destitute. Yeah. It's again these these stories unfortunately don't end well with the people who carry them out. Yeah he did. He had seventy five dollars to his name just enough to bury him. But as I say in the book you know the it's always so I found remarkable was one thing he never lost was Rose's love with love of his his wife. They after he left the country they they went their separate ways to some extent. But she still loved him. And the letters that they exchanged back and forth that incredibly The family kept all these years and shared with me were incredibly beautiful. Some of it's almost poetry a love story between these two people who are really the saddest thing to me is that I have his ambitions been a little bit more modest. He could have had a beautiful life with her but because he was who you was

he responded that one of the exit that I wonder about and I want to have you talk a bit about is what at the time what sort of regulatory structures there would have been to apply what to what he was doing because for example there was no FCC there was no Securities Exchange Commission that didn't come along until 1934. Now there must have been banking regulators or someone. Who would that would cover what it was that he was doing. You weren't but did you make a good point because what ultimately benefited Ponzi at least briefly was that nobody was quite sure where you know he fell into the regulatory scheme. You know there were of course fraud laws on the books both state and federal but people weren't sure he was committing a fraud. He wasn't quite a bank although the banking commissioner here in Massachusetts took an interest in it because it was a financial operation. But it was a huge hole in the regulatory structure because he wasn't doing anything obviously wrong. He was paying

people back you know he was making a promise 50 percent and he was carrying it out. So no it wasn't an obvious fraud. The regulatory structure that existed really had no way to deal with Ponzi and that's why he was able to prosper even as long as he did them it's amazing how that even almost to the end he was working really hard to maintain people's confidence and did indeed pay off a lot of people and at some point even said to people whose whose notes were not yet due he said OK if you want to come down here I'll give you your money back I'll give you your. He wouldn't. He was not going to give them the interest because it wasn't due yet but he said your principal just come on down I'll give it back. Can he do that. Absolutely and you know he felt that this is a period when you know because there was a lot of scrutiny on him led by the Boston Post newspaper which really was a bit of a hero in the story. You know Ponzi was feeling the pressure and there was a bit of a run on his operation and yes he absolutely stood up and said I'll give you your money back I'm I'm here to make

good. And that only increased people's confidence. Each day he paid back more of this money. More people wanted to invest with them. You know in the midst of this is a great episode when you know he's under scrutiny and he's feeling the pressure and he's walking down the street and people are falling into line behind him is almost like a drum major at a parade and somebody calls out you ponce you're the greatest Italian of them all and policies are you know Columbus or Marconi Columbus discovered America Marconi discovered radio and the voice calls back from the crowd. But you discovered the money and it was you know he was a hero to these people. He considered himself only the third most important. Yeah. Think one big piece here that we really haven't talked about and you just touched on it is is how it was that the whole thing on Ravel then and I suppose in part you would say well sooner or later these games there's a point comes at which they collapse they can't keep going. But he had a lot of problems with this particular newspaper The

Post the Boston Post and the editor of The Post who was I guess from right from the beginning or nearly from the getting very suspicious of Ponzi and what he was doing and somehow believe that it couldn't possibly be honest that there had to be something wrong with this. And the paper spent putting a lot of resources in trying to investigate him and indeed eventually turned up the fact that he had done time for the forged check in. And that he had this prison record which caused at least some people to have some doubts about whether or not he was a solid guy. That's right. You know this is a really fun fine for me being an old newspaper man. I was delighted to find the role that the post it played in this and Richard Groser the young editor publisher of The Post the acting editor and publisher he was kind of a ne'er do well himself he had never kind of come out of the shadow of his father who really ran in on the paper. And then in the spring of 1991 his father took horribly ill and was completely incapacitated. Richard had to take over the family

business completely untested guy. And yes from the very start he suspected that Ponzi couldn't possibly be doing what he said he was doing. And so Richard took it upon really bet the farm when all the other newspapers in Boston were scared to go after Ponzi because they thought well if you legitimate he'll sue us he'll own our presses. He'll you know he'll take us down. Richard Gross you're been his inheritance and in which was the Boston Post that Ponzi was not legit. And he led the investigation that they did as you say turn up these things about Ponzi is passed. Detail the how. International reply coupons couldn't possibly be used the way Ponzi said he was using them. They simply weren't enough in existence there weren't enough being printed to yield the kind of profits Ponzi was talking about. And so it really this summer of 1986 characterized by a battle of nerves and wills between Richard Crozier and Troels Ponzi and not over dramatised but only one of them could survive and they both knew it.

Yeah and this was as you point out it was a time when a lot of the other newspapers were writing very favorable articles about him they were writing these glowing portraits of him of his wife of his family life of the fact that he think at one point I remember somebody maybe that was just just reflecting popular sentiment this was after Ponzi brought his mother over from Italy and someone said you know no guy who is he who knows that he might be at risk of going to jail is going to be. His mother from Italy. Somehow this this family this very rosy sort of picture of the family was also another one of the selling points and that was that was a kind of a thing that the other newspapers there in the Boston really helped to create. Oh indeed they did the pictures from the day and I read all the newspaper accounts. You know if you see a picture of a man sitting next to you is is a 70 something year old mother and his wife who and his mother who you hadn't seen in 17 years and brings her over here. You know that's a picture of trust. You know this

is not a guy who's looking to take the money and run. And so absolutely the other papers saw themselves as popularizers of puns these efforts. And you know there's some of them with the small people papers The Boston Herald in the Boston traveler who said hey you know this guy wants to make this blue collar guy who were our main customers rich or if we turn on him then our readers will turn on us. So they they championed him own stock. Someone else here in the champagne County this is lie number one. Hello. Yeah you started talking about the climate in Boston with the Mayor Curley in that sort of stuff it just seems to me that what we need is a big dose of you know things about the Roaring Twenties the myth of social mobility means you were just sort of getting to that the people wanted to believe this desperately and it generally wasn't true. I mean there were a lot of fortunes made but most of them were made early where you had had to have your connections

and you were shaking somebody down in some way and he he watched people flaunt their wealth and conspicuous consumption and all that but he he didn't realize that it wasn't really true. And. The will to believe was palpable in that time and as a sexy surprise that it was at the beginning of the 20s I thought it was a little bit later. And so. He crashed before everyone else. In some ways but there was just a lot of that going along and I kind of heard a glimmer of that every now and again but there was real no I don't know if you don't know I have it. I think I absolutely do and in fact I point out in the book that the climate in the time that we operated in is an enormous part of the story. And indeed you know for first I have to say I think there are a lot of parallels to today. I think there are you know there's still a desire and a belief that the you know social mobility and riches are available to anyone with just a good idea and a will to

work. And I you know I look at the 20s and say that that makes this the era of the dawn of modern America. This is a time when people didn't believe everybody could get rich or just if the world were one stock market is starting to rev up. The papers are filled with stories about four men sort of discovering something getting rich or women marrying the wealthy son of an industrialist and suddenly being to the Manor so absolutely this. This is an enormous enormous factor in the culture. And and you know I call policies rise and fall of the first roar of the 1920s because that was the time that was characterized by so much of this. And yes absolutely for most people for most Americans it was completely an illusion. It was completely their belief stoked by media accounts stoked by the new Both the the talky and then later the talking movies. I portray and Richman as she is in

you know with beautiful women. And it was leaking there you know it was who is sort of you know firing their desires. So you make an excellent point. And yes I certainly see the time she was operating in as an enormous factor in his in his rise you know bubble economy comes to mind and right I am glad you went on and made below the modern parallel because I think that's extremely true and this isn't just a historical chapter this is an ongoing part of the American mythology it seems to me saying absolutely with you know if I can just elaborate on the African. Sure. The you know there's a wonderful new book I mow somebody else's book Conspiracy of Fools about the Enron collapse and Kurt Eichenwald who's with The New York Times writer has characterized that as a giant Ponzi scheme. You know the desire to sort of create something enormous out of nothing and then fudge the facts when it really comes down to it to keep the ball

rolling. This is very much still with us today and whether it's you know on the scale of Enron which is what the seventh or eighth largest company in the country at one point down to what you might get over the Internet in solicitations to you know get rich quick. So these these forces are still very very real within our culture our culture. Yeah. And it certainly I'm sure that once Ponzi. Company collapsed and it was revealed to be a fraud that didn't somehow discourage other people from trying to do the same thing or or individual investors from lining up and wanting to trying to give their money to somebody else. You know he just said it. You're absolutely right David he he just sort of made people think Well OK he had a problem but somebody else will get it right somebody else will fix upon these mistakes. And absolutely if the Ponzi is fall didn't do anything to stop other people from copying him they're more today in fact. I tell people my dad is a retired New York City schoolteacher and recently his retirement forth sent him a warning to all the

retirees in the system that to watch out for scams aimed at retirees. The number one scam of the list was the Ponzi scheme. And so no it didn't stop people at all. Actually a little story as a prologue to establish something about what the atmosphere was like in a story that doesn't have anything to do with Charles Ponzi and yet I think it's a great story. Thank you. This is the story where you talk about the fact that this are also taking place in 1920. There was a guy he was going door to door house selling what he said was a double your money machine. And he you you cite one example where he comes someone he comes in the person's door woman lets him in he comes in to demonstrate this machine. He takes his machine and he takes $100 bill and a blank piece of paper the same size as the hundred and cry. Sit in the machine and lights flash and pretty soon two hundred dollar bills come out. Well the woman says proudly Hey that's pretty good. Give him some money to buy this. And he leaves. And when she

unwrapped the package she realizes that what she's bought is just a plain box and that there was the way this was received was there was at least as somebody and I think that was it was somebody who was a a newspaper reporter writing about that has said well obviously he had a real divide. He had a real money machine. But the Swindle was that he just sold her the box and if he just came back and sold her a genuine moneymaking machine there would be no problem. And that's just that's it's just a hilarious story because it shows. The fact that here at least with somebody else who believed Well the problem here was not exist not the guy was crooked. Well he was great but not not crooked in the fact that the machine was a fake. It was crooked in the fact that he wasn't willing to give the real machine to anybody how wrong of him doing it. Only been more generous with this incredible machine. Right you wouldn't be in jail. Oh foolish Yeah yeah you know it's funny when I came across that story I was doing my research

and I came across and I said Boy does this characterize the time or what. And you know we can laugh about it and I think it is a funny story absolutely that's why I included it. But you know there are versions of that and it's it's sad in a way there are things still going on today just like that we're in retrospect people are being duped. People allow themselves to be duped because there are two sides of human nature is the side that says this is too good to be true. And then there's the other side that says this is too good to miss. And it just takes the right salesman Sometimes the right circumstances to tip the scales over to the devil on that other shoulder that says you know maybe it's too good to be true but boy if if if I miss out on this I'll never get such a great opportunity again. And that's what we've been down the path and it's just I think it's sort of revealing of human nature as it is of a particular time and again that reflects back.

The man himself and that that he had the quality and I suppose that's the quality that con men have of inspiring confidence in the people that they're trying to take advantage of something about them the way that they present themselves. Their charisma their something that they radiate is is good enough so that they can persuade people that whatever the scheme is that they're trying to sell that it's on the level and it's going to work. You know there's the play the music man Henry Hill. You know that's a character that's who Ponzi was the guy coming to town. I don't know where and convinced everybody would. The one thing you did was you know it is for the kids to be in a band. And he was the guy to supply it. And then you know it takes a certain personality if you or I were the one selling band to two Midwestern farmers then you know in the 1920s they might have thrown us out. But Henry Hill is Charles Ponzi comes in just the right touch just the right personality if throwing money at it. Yeah. And well it's a it's a really fascinating story and particularly I think that it's

fascinating to read when things started to come apart how it is that Ponzi ran around trying to put out the fires here and there and really believed just about until the very end that that he could pull it off he could make it work. And that's that's maybe the part of the story we haven't talked very much about but is is there too so if if. Hopefully now if people are intrigued and they want to read the book go look for it again it's Ponzi scheme published by Random House by our guest mentioned Zuko off. He's professor of journalism at Boston University he's a former reporter for The Boston Globe. Thanks very much for talking with us. Thank you so much for having me David.