After being released on bond on August 13, 1920, Ponzi marches through downtown Boston, certain that he has suffered only a temporary setback.
Boston Public Library, Print Department
CHAPTER SEVENTEEN
“I’M NOT THE MAN.”
While Baldwin spent the day linking past to present, Ponzi plotted ways to soften the previous day’s blows: the freeze on his accounts, the bankruptcy filing, the attorney general’s accusations, and the call for his investors to report to the State House. He ordered the offices of the Securities Exchange Company closed until further notice and spent the morning in Lexington, where he assessed the damage, girded for battle, and listened to a summer thunderstorm. He was determined to make some thunder of his own rather than surrender without a fight.
In the meantime, the officers of Hanover Trust tried desperately to balance their books. They calculated that Ponzi had overdrawn his account by $441,778, a potentially devastating dip into the red that could send the bank to its death. Treasurer McNary decided on the only course of action he thought possible to save the bank: He would use part of Ponzi’s $1.5 million certificate of deposit to cover the overdraft. Ponzi would not have gained access to that money until August 27—thirty days after he gave notice that he wanted to withdraw the money—but this was an emergency and McNary made up the rules as he went along. After returning Ponzi’s checking account to zero, McNary made out a new certificate of deposit to Ponzi with a balance of $1,058,222, having deducted the amount of the overdraft from the certificate.
Before the latest uproar, Ponzi had agreed to return this day to the weekly luncheon of the Kiwanis Club. This time, though, the club’s president had arranged a “battle royal” between Ponzi and a celebrated psychic named Joseph Dunninger, a friend of Harry Houdini’s and Thomas Edison’s. The club advertised that the mind reader would “throw the X-ray of clairvoyancy on the subtle brain of the little Italian and reveal what he found to the audience.” So many people hoped to hear Ponzi’s secret formula that the Kiwanians oversold the Hotel Bellevue ballroom and had to feed guests in shifts.
The afternoon was slipping away and still the show had not begun. Ponzi hated to disappoint his public, so at two forty-five he climbed onto a table, cigarette holder dangling from his fingers, and agreed to take questions. Before he could begin, someone called out, “Three cheers for Ponzi!” The crowd answered with gusto. Ponzi then regaled the room with his version of his rise from obscurity and poverty to fame and, apparently, fortune, tailoring his story to fit some of the latest developments. He said he obtained reply coupons directly from foreign governments, and that was why his activities were not reflected on the published tallies of how many coupons were issued in recent years. Ponzi also said those governments had profited from the deals, and that was why he had to keep his overseas contacts confidential. He vowed to reopen by Saturday, smiled incessantly, and needled the attorney general: “He has a good job, but mine is better.” The audience roared. Ponzi got the same response when he paid mock respects to “my opponents, the bankers.”
Finally it was time to pit Ponzi against Dunninger, wizard against wizard. First, Dunninger agreed to lower the stakes by promising not to reveal Ponzi’s business secrets. The mystic asked Ponzi to write a sentence on a piece of paper and place it in his pocket.
“First,” said Dunninger, “is the letter ‘I.’ ”
“Correct,” agreed Ponzi.
“The next letter is ‘P,’ ” said Dunninger.
“Correct,” Ponzi repeated.
Encouraged, Dunninger claimed to have received a vision of the complete sentence in Ponzi’s pocket: “I propose to apply to banking the principle of giving the people full value for the use of their money.” It was, indeed, what Ponzi had written, and the audience left the ballroom satisfied and enthralled at the magic they had witnessed. It was 1920, and anything seemed possible.
While Ponzi cavorted with the Kiwanians, offers of money flooded his offices. Hundreds of letters arrived at 27 School Street containing checks in amounts from twenty-five to ten thousand dollars, that last sum from a man in Savannah, Georgia. But Ponzi’s clerks sent them all back on his orders. Ponzi spoke only briefly with reporters, using them to send a message to his investors: Hang on and do not cooperate with the attorney general. Nevertheless, about a hundred Ponzi note holders turned up at the State House.
Pride continued to refine his calculations, while federal prosecutor Dan Gallagher and Attorney General J. Weston Allen held one meeting after another to plot their next moves. Meanwhile, Bank Commissioner Allen took aim at a more established institution than Ponzi: the Hanover Trust Company.
As midnight approached, Herb Baldwin’s copyrighted story rolled off the Post presses with a cannon’s roar:
CANADIAN “PONSI” SERVED JAIL TERM
Montreal Police, Jail Warden and Others Declare That Charles Ponzi of Boston and Charles Ponsi of Montreal Who Was Sentenced to Two and Half Years in Jail for Forgery on Italian Bank Are One and the Same Man
State Authorities Now Active and Promise at Least One Arrest in Case Soon
The headline writer had nailed it, though in his excitement he’d overstated the “promise” of an impending arrest. The story said only that one or more arrests were expected “momentarily,” and no state officials were quoted, even anonymously, making such a claim. Baldwin also overstepped a bit, making it seem as though Ponzi’s forgery conviction was directly related to Zarossi’s scheme of swindling his depositors by stealing money they intended for their relatives in Italy. Despite those minor missteps, Baldwin’s story was as damaging as Ponzi had feared it would be when Santosuosso had first called to inquire about his Montreal past. For the moment, though, Ponzi refused to acknowledge it.
An hour after midnight, another Post reporter, Harold Wheeler, rushed to Lexington with a copy of the August 11 Post still warm and redolent of ink. Hours remained before it would hit the streets, and Grozier and Dunn wanted Ponzi’s reaction to Baldy’s scoop. Whatever Ponzi said could be added to a later edition; the Post was driving the story forward, and its leaders did not want to cede the next news break—Ponzi’s response—to the afternoon papers.
Wheeler made his way past the guards who surrounded the Slocum Road house and handed Ponzi the paper. Ponzi read Baldy’s story slowly, deliberately, with a poker face. Wheeler studied him as he read, but could see no reaction—not a muscle in his face moved, nor did his eyes betray the gravity of the situation. When he had finished, Ponzi shrugged his shoulders.
“I’m not the man,” he said. “It does not concern me.”
“We think this is the truth,” Wheeler answered, “and we’re going to print it.”
“Then you are going to get the presses ripped out of your building,” Ponzi threatened.
If Ponzi imagined that the Post would retract its story, by dawn he knew that any such hope was false. He met reporters again on his front porch at eight in the morning, dressed in a silk bathrobe with his Colt .25-caliber in the pocket. Seeming on the verge of coming unglued, he pulled it out and explained to the startled reporters that he intended to use it for self-protection against two men he had noticed loitering near his house.
Asked about the Post story, Ponzi seemed uncertain about the best approach. He began with a rambling, awkward statement referring to himself in the third person that sounded like the start of a confession about his Montreal past. “If the statements printed in certain morning papers are true,” he said, “I feel that either he is one of many who have made some mistake and paid for it, or that he paid for some mistake of another, and a perusal of the records there might hide a deeper motive than it would be expedient to establish at the present time.” Ponzi then took a shot at the Post: “It is evident that some of the local papers are endeavoring to hurt him for purposes which are as clear to him as they are to the public.” Suddenly he interrupted himself and began a new statement. After starting and stopping two more times, Ponzi got into the
Locomobile and went to Boston to meet with his lawyers.
By noon, Ponzi was ready to meet the press once again. The reporters were admitted into Daniel McIsaac’s imposing law offices on the tenth floor of the Pemberton Square building known as Barristers’ Hall. They found Ponzi seated behind a large desk, hunched down in a chair, looking smaller than they had ever seen him. His gold cigarette holder dangled from his hand. The reporters looked for his smile, but it was gone.
“The statement that I am about to make I should probably have made before, in view of the notoriety given me by the press,” he began, a stenographer recording his every word. “However, I felt that my past had no bearing on the present situation. If several years ago I sinned—if I made a mistake and paid for it—I had every reason to believe that society owed me another chance.
“I am not the first one to commit a sin. I am not the only one, even in the city of Boston. And when I see others who have been under the same circumstances years ago and are today occupying prominent positions I do not see why I should be made an exception to the general rule and become an object of persecution on the part of either the authorities, the press or the public.”
He paused and turned to McIsaac. They spoke for several minutes about one of Ponzi’s former prison mates, not in Montreal but in Atlanta, a man who had enjoyed the support not only of President Taft but also the very same Clarence Barron who had helped lead the charge against Ponzi. To speak of “Ice King” Charles Morse, Ponzi would also have to disclose his own prison term in Atlanta, but at the moment that seemed the least of his concerns. McIsaac gave him the go-ahead.
“Charles W. Morse, at one time a prominent banker, was also convicted in the United States court,” Ponzi said, “and sentenced to fifteen years in Atlanta, Georgia. I know it because I was there with him. Released after serving a very small part of his sentence, he has been out occupying for three years a position greater than he occupied before. He is a banker, mingles with bankers, deals with the United States government, and associates with the most respectable men in the United States.
“I do not mean in any way to imply that he is not deserving the respect of the public. But I merely ask, if he is as deserving why shouldn’t I be?”
Ponzi paused again to let that sink in. Then, to lighten the mood, he gave a half smile and announced to the reporters surrounding him: “A new paragraph.”
“The Montreal records,” he continued, “show that a man of my description was convicted of forging in 1908 and sentenced to three years in the penitentiary of Saint Vincent de Paul, and served twenty months. That is all that the public in general cares to know. However, I feel that it is also very important for the people at large to know that, although I am the man who was convicted and sentenced for that crime, I am not the man who perpetrated that crime.”
Grasping for a life preserver, Ponzi spun a fanciful tale in which he claimed to have taken the blame for a forgery committed by his former boss Zarossi, who had been enticed into the illegal act by an extortionist. Ponzi said he’d acted to save Zarossi because his boss had a wife and four children. Halfway through the complicated story, Ponzi’s lawyer, McIsaac, had heard enough; he put on his coat and hat and said he would be back later.
“I am not trying to pose as a hero,” Ponzi insisted even as he did just that. He claimed that at least two other men in Boston could vouch for his story, though he declined to name them.
Having opened the door on his second conviction, Ponzi felt compelled to address it. Again he assumed the pose of a wrong-place-at-the-wrong-time Samaritan.
“My next unfortunate experience,” he began, “did not come of my own volition, but happened as a consequence of my first mistake. Released from prison without a friend, without a dollar, and without credentials—they didn’t give me anything—I tried to earn a living as best I could. Within ten days of my release I was asked to escort five Italians into the United States. I did not smuggle them in. I crossed the border on a train—openly—and was placed immediately under arrest. I didn’t dodge the consequences and I pleaded guilty. I expected leniency in view of the fact that the crime was only a misdemeanor and not a felony and that I didn’t resist conviction. Yet I was sentenced to two years at the federal prison at Atlanta, Georgia, and my sentence was the maximum ever imposed for a similar offense.
“There isn’t much more to be said. The public knows the facts and whether the same are such to make me unworthy of their confidence is for them to decide.”
Ponzi then announced that he would resign, at least temporarily, as a director of the Hanover Trust. He displayed a measure of optimism, however, by insisting that the disclosures about his past would not prevent him from paying off all Ponzi notes “within the course of a few days.”
When he had finished his statement, Ponzi waved off the reporters’ questions. He slumped back in the chair. The sparkling energy that had made him a star was spent.
Before the reporters left, Ponzi added two codas that in many ways were the truest parts of his confession. First Ponzi told the reporters that he worried that news of his prison record would lead to his deportation. But even that was not his greatest fear.
Not knowing that his mother had secretly told Rose about his prison past before their marriage, Ponzi said his biggest regret, the biggest mistake of his life, was not having told his wife about his time behind bars. His eyes filled with tears at the thought of losing Rose. Somehow, Ponzi said, he hoped to keep his prison record from her at least a little longer. He told the reporters he had ordered all the newspapers kept out of their house. “I want to keep all this news from my wife,” Ponzi said. “It would kill her.”
“My nerves can’t last forever,” Ponzi added before the last reporter filed out. “I’ve got to go rest. I’m not going to give out any more statements for a while. I’m going to keep away from people—not come downtown.”
If Ponzi thought the worst part of the day was over, he was mistaken. The next blow came at one forty-five in the afternoon, when Bank Commissioner Joseph Allen posted a notice on the door of the main branch of Hanover Trust. Above his signature, the sign read: “Under the authority vested in me by law, I hereby take possession of the property and Business of the Hanover Trust Company.” It was the most dramatic act in the arsenal of a banking regulator, and it was the first time Allen had used the power since taking office six months earlier.
The examination Allen had ordered of the bank’s books had revealed problems that went far deeper than Ponzi’s overdraft. Under its president, Henry Chmielinski, and its treasurer, William McNary, Hanover Trust had exhausted its reserves and issued unsafe and illegal loans. Loans to companies with connections to bank insiders exceeded legal limits, and in some cases the accounts of those companies carried huge overdrafts. For instance, Chmielinski treated Hanover Trust like a rich relative, secretly borrowing money to finance real estate purchases and a company he ran called the Polish-American Finance and Trading Association. But Ponzi’s overdraft was the last straw. Allen described how he had expressly prohibited McNary from tapping into Ponzi’s certificate of deposit to cover the overdraft, yet McNary had done it anyway.
Hundreds of people raced to the Washington Street bank. Most came out of curiosity or to catch sight of Ponzi. As word spread a small number of depositors arrived and jostled their way through the horde to rattle the locked doors and demand their money, to no avail. A cordon of police officers surrounded the bank, but the excited mob pushed and pressed against them. After forty-five minutes of shoving, the police regained control and the crowd dispersed.
When Ponzi heard of Allen’s move, he issued a statement without his usual vigor. “I learn with regret that the bank commissioner has ordered the Hanover Trust Company to close its doors. I feel that this action on the part of the bank commissioner is merely a new attempt on his part to prevent me from gaining possession of the one-point-five-million dollars which I have in that institution, in the hope that I will not be able to meet m
y obligations to note holders.” Ponzi continued to insist that he had at least $4 million in assets. That would be more than enough, he declared, to meet his liabilities and move on to his new business. Publicly, he estimated that Pride would find no more than $800,000 in liabilities, though privately he certainly knew that the number would be many times higher.
Ponzi left Barristers’ Hall at about five o’clock. As usual, a crowd gathered the moment his Locomobile pulled to the curb to carry him home. He flashed his smile and stepped into the car just as a newsboy leapt onto the running board. Amused, Ponzi bought copies of all the evening papers to read on the ride to Lexington.
As night fell, reporters took their places outside the house on Slocum Road. Around eight o’clock, they heard the sound of a woman weeping inside.
A few minutes before midnight, Ponzi paced along the gravel walkway outside his home. If he could find any solace, it was in knowing that the events of the past twenty-four hours had not disproved his claims about his solvency or demonstrated that he had done anything illegal in building his fortune. Though his credibility was damaged, he still had fervent believers, among them thousands of people who had already profited from the Securities Exchange Company. At that moment, editors of the Boston Traveler were preparing an editorial about him, marveling at “the grip which this apostle of rapid finance is able to retain upon thousands of people.” The editors even urged that Ponzi “receive the benefit of every doubt” and likened him to Jean Valjean in Les Misérables. Ponzi and the fictional Valjean spent their lives “striving to live down some misdeed, and oftentimes society appears to conspire against them.”
Ponzi had one last flickering hope: He could preserve the life he had built if he could somehow cover the liabilities counted by Pride’s audit, which was scheduled to be revealed at noon on Friday.
As he walked, a thought occurred to him, one he wanted to share with the public. He asked his guards to summon two reporters he knew were keeping vigil nearby. But by the time they’d arrived he had changed his mind and momentarily lost his bearings.
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