Ponzi Scheme: The Notorious Namesake

Many know what a Ponzi Scheme is, but why is it called 'a Ponzi Scheme?' On this episode we detail the rise and fall of Mr. Charles Ponzi, and why he is the one who bears the notorious namesake. 

Episode Transcript

Speaker 2 (00:08):
page three, history's forgotten headlines Ponzi
scheme, the notorious namesake.
This is history's forgotten.
Headlights.
Here we revisit some ofAmerica's most notorious and
shocking murders, scandals anddisasters that once made
headlines across the world, andnow they've not only fallen to

(00:30):
back pages, almost beencompletely forgotten.
Everything you're about to hearinvolve some of the most
powerful, wealthy and belovedAmericans of their time.
Many are lives at triumph andonly in tragedy.
These are histories, forgottenheadline, page three, Ponzi

(00:53):
scheme, the notorious namesake,

Speaker 1 (01:02):
okay?

Speaker 2 (01:04):
A Ponzi scheme is defined as investment scam that
pays existing investors out ofmoney, invested by new investors
giving the appearance ofearnings and profits where there
are none.
You know the phrase Rob Peter topay Paul?
Yeah, that's it.
A friend of mine told me thatPonzi schemes or his oldest
time, the cavemen were evensaying, you give me two rocks

(01:27):
today.
Two months from now, I'll giveyou four rocks

Speaker 3 (01:35):
except the promise paid the money,

Speaker 2 (01:37):
but many often wonder or simply don't know.
Why is it called a Ponzi scheme?
Let's all because of one man andone headline making skate.
If you're going to tell thestory of the man behind the
Ponzi scheme, you have toinclude one man who literally

(02:01):
wrote the book on Ponzi and wewere lucky enough to get them.

Speaker 3 (02:05):
Okay.
How's that?
That's great.
Hey, can you hear me okay?
Fine.

Speaker 2 (02:10):
That's author Donald Dunn.

Speaker 3 (02:12):
just about everything I'm gonna tell you a is based on
a book that I wrote in 1975,which was about about 55 years
after Ponzi had pulled off hisbig scheme.
And, uh, the book is calledPonzi the incredible true story

(02:35):
of the King of financial cons.

Speaker 2 (02:39):
Don't agreed to speak with us over the phone from his
home in Florida, Atlanta to beexact.
Remember those?
Yeah.
Well, Don likely knows thisstory better than anyone alive
today.
And he says his fascination ofthese schemes all started with
his love for magic,

Speaker 3 (02:58):
the for what was about

Speaker 2 (02:59):
12 or 13 years old.
I started getting interested indoing magic tricks for people.
And I guess I learned how easyit is to fool people.
So you could say the man behindthe Ponzi scheme put off the
most notorious financial magictrick of all time.
His name is Charles Ponzi.

(03:22):
Charles Ponzi.
He wasn't the first to run amassive financial scam, nor was
he the last, but he carried outhis crime with such flair and
bravado and that is what willkeep his name connected to crime
forever.

Speaker 3 (03:36):
His name is the only name of a criminal connected to
a particular kind of crime.
Everyone knows what a Ponzischeme is.
A, I'd say that's unusualbecause Ladenburg hello, major
kidnapping with these babies,but people don't refer to

(04:00):
kidnapping as the Lindenbergstill under a lot banks, Bonnie
and Clyde, rob banks.
But when somebody robs a bank,they don't refer to it as it as
a bunny and quiet, but ifthere's a major scheme swindle
as cold a Ponzi.

Speaker 2 (04:20):
So we're going to retrace Ponzi steps and look
into how we did it and how weended up.
Let's start from the beginning.

Speaker 3 (04:27):
Charles Ponzi came to this country and they were
really nice and as a poorimmigrant from Italy and he was
penniless

Speaker 2 (04:40):
to understand just how painless it really was.
This is where we need the helpof judge Mark Kantrowitz.
He also wrote about Ponzi andhis own book, old whiskey in
young women, American true crimeof murder, sex in scandal,

Speaker 4 (04:55):
Carl Lau, Pa Tro, Giovanni di Elmo dibbled.
Oh, Ponzi.
Who was born March 3rd, 18, 82.
And I was born in Italy.
Obviously the only son of hisparents and a very bright young
man with a lot of, uh, with alot of potential.

(05:15):
They sent them off to theUniversity of Rome and he
quickly gambled away his tuitionand lasted there about a year
and mom and dad said, well,maybe we should send them to
America where the streets alignwith goal.
Then Anji heard that said,that's great.
They gave him money to, to makethe, to make the voyage and, and

(05:36):
to stay here for awhile.
And he quickly lost just aboutall the money gambling on the
boat over Ponzi

Speaker 2 (05:43):
came to America in 19.
Oh, three through Boston, he waslater quoted saying, I landed in
this country with$2 and fiftycents in cash and$1,000,000 in
hopes.
Those hopes never left me onFonzie.
Then found his way to Canada.
Easy to say it was a roughstart.

Speaker 4 (06:03):
He's working at a bank in Canada and the bank is,
you know, doing a little shadystuff and he probably learned it
with reengaged in it, who knows,and he kinda got caught up in it
and does a short prison term andit needs to come into America
Guy Nice with some Italianimmigrants and they accused him

(06:24):
of smuggling the immigrants intoAmerica and unlawfully whether
that's true or not, who knows?
He thinking he's gonna get a$50fine.
He winds up getting a jailsentence in it.
Landa,

Speaker 2 (06:36):
whether that's true or not, mark brings up a good
point.
Listen to how don describesPonzi dealings.

Speaker 3 (06:46):
So he was working as an interpreter in the illegal
immigrants.

Speaker 2 (06:52):
Really in regards to his life before the spotlight.
We don't know too much abouthim.
That's the reason we really onlyhave his account.
Again.
He's only known because he wasreally good at cheating.

Speaker 3 (07:05):
Very little is known about his early life.
What, what we do know aboutPonzi is said he was a
consistent liar.
So anything that was brought outabout his young, young years in,
in Italy, uh, may not be true.

(07:26):
He made up his, his backgroundand he, he can, he can say that
he had degrees in differentareas, but the weather, whether
or not he.
So he did a, he, he obviouslyhad a golden, a golden tongue,

Speaker 2 (07:43):
but there was one story that appears to be true
from ponzis early years, amoment of kindness from the
criminal.
It happened while he wasbouncing around parts of us
after his second prisonsentence, when he's in his
travels to some explosion, anurse is seriously injured.
She needs a skin graft.

(08:04):
His, he gets up like 100 inchesthat is scanned and winds up
staying himself in the hospitalfor three months and 100 inches
on a man who's only five feettwo inches tall is a lot.
Yes, Ponzi was a small man.
Anyway, Ponzi ends up findinghis way back to Boston and now
is when we can cue the upbeatmusic because it's about to get

(08:27):
good.
The year is 1917.

Speaker 4 (08:35):
He decides it's going to go to the western parts with
his landlady and at the end ofthe pops they walk across the
street, they're waiting at theBoylston Street, Green Line a
stop and then in his words, welleach spots rose.
Marie Inaca, who's like him fromItaly for 11, so he's taller

(08:57):
than she is.
She has this lustrous brown hairand he said to her, he said off
her time, space the world andeverything else around me except
for that girl had ceased toexist.
It's kind of like that scene.
You have to see the west sidestory.
So the first time Tony Mariaspot each other on the dance

(09:20):
floor and everything else ceasesto be basically Jack, except
Tony and Maria as they cometogether and you know,
everything else is very cloudyand that's, and that's.
This is long before west sidestory.

Speaker 2 (09:34):
Now that Ponzi has met the love of his life.
They marry within about a year,despite having his bride, he
still doesn't really have anymoney, or at least he doesn't
have as much money as what hethought he should.
Ponzi is plan starts to takeshape.
Nineteen, 18.

Speaker 4 (09:51):
It has to say, Hey, I'm a married guy.
Now.
I may start having a family.
He never did, sadly.
Uh, but now you know, which forrose, I got to do something for
rose.
I'm living in poverty, but sheshouldn't have to live in
poverty and I don't want to livein poverty.
Poverty.
And then he comes up, he gotjust scheme and it was through
international postal coupons.

(10:13):
You know, today we take thingsfor granted.
You put a letter in the mailbox, you put a stamp on it, it
goes somewhere, you want to sendthe letter to Aa, you want to
send the letter to wherever youput the appropriate stamped
signed.
And it goes to where, you know,that wasn't the case at all
times.
And back into the early 19hundreds.
It was very bifurcated.

(10:34):
And you know, with postal ratesare different from here.
Then they had the nair, so whenAuntie said, I'll go into some
country and I'll buy cheapstamps basically, and then I'll
go to another country where thestamps are more expensive and
then I'll, I'll sell them, youknow, and I'll make a profit,

Speaker 2 (10:52):
but that was just the front for ponzis business even
took from his wife to make hisbusiness appear even more
legitimate.

Speaker 3 (10:59):
She was 19 and he was in his thirties when they got
married, he wormed his way intothe family and one story is that
she had some jewelry that hepawned get the money to start to
torrented office so he could setup is a security investment

(11:23):
scheme, which was what he wascalling himself.

Speaker 2 (11:26):
I'm familiar with Boston.
Ponzi is older office.
It's right next door to the OldCity Hall on School Street and
right above what is now astarbucks, of course.
So now what's 19?
Nineteen in Ponzi has an officeand a front.
Now we just test to use his giftof Gab to make that golden

(11:46):
promise.

Speaker 3 (11:47):
His skin was based on simply a promise that if you
gave him your money in sixmonths time, he would give it
back to double or triple that.
He does it with such provato andin that day when there was no
television sets, he did all byword of mouth, simply promising,

(12:12):
I will give you 100 percentreturn on your money and people
without any, any his suspicions.
Said, all right, that soundsgood.
Here's my money.
And it just, his scheme grew byword of mouth,

Speaker 4 (12:36):
just like they rushed Bernie madoff.
Bernie, please take my money.
You know, you're so brilliant.
You know you're given theseunheard of returns, you know, so
please take my money.
So Ponce, please take my Monday.
So like any Ponzi type ofscheme, you know, you get all
this money and then, and thenyou keep getting money and in

(12:59):
the new money you get helps payoff the old debt.
So we have to run 90 day someonecomes and says, okay, fine.
See I gave you$100.
You owe me$140.
Now a lot of people said let itride, you know, it takes$140 and
just reinvested.

(13:20):
In fact, there's no$140.
That's a figment of everybody'simagination.
So some people took the money,they took$140.
So that money, that hundred$40came from subsequent investors.
So the next person it's, youknow, comes into Deloitte.
He had taken my money pines, hetakes their hundred dollars and
uses add hundred dollars to payyou off, you know, the earlier

(13:43):
investors you know, but peoplearen't giving$100 or people are
given$100 out.
A lot of people are giving thema lot of money,

Speaker 3 (13:53):
old habits.
And so people started lining up,presented their money and the
Boston paper post editor of thepost says let's do a story about
it.
And they actually did a storysaying Charles Ponzi who have

(14:17):
something called the security asa company is doubling money.
That was the, that was the firststory that we're above it.
And there was nothing in thestory saying, you know, it could
be a scheme.
They just said he's doublingyour mind and that started
people even more.

(14:38):
That men, six months later, hehad taken in about$3,000,000,

Speaker 4 (14:43):
but it wasn't just the money that made besides the
fancy suits and the gold headedcane.
Ponzi also bought a a mansion in

Speaker 2 (14:52):
a Boston suburb with air conditioning and a heated
swimming pool.
Again, this is the early 19hundreds and it was also
reported that at his peak he wasmaking about$250,000 a day.

Speaker 3 (15:06):
He hired himself, a press agent who announced that
Charles Ponzi, he would be gladto speak in front of various
organizations, have a banker andindustrialists investors.
He would be glad to speak aboutwhat his system that he had
found two double people's moneyand he.

(15:31):
He was not.
It was not hiding.
Oh, most people who run a Ponzischeme have a basic idea that
they will start small.
The money will come in, theywill package up that money and
they will take off somewhere inthis scheme.
Well, and with them havingdisappeared a Ponzi because he

(15:57):
was so confident in his ownability.
Just to get out of everything,he decided not to take all of
the investments that came in.
He did not hide away in a trunk.
He went down to the local banksin Boston and he put all this
money in different banks andthe.

(16:20):
He had them give them acertificate of deposit, so he
was walking around with his,with his gold headed cane.
He hired a very expensivelimousine and at any time he
could reach into his pocket andpull out a piece of paper is
eight.
I have a million dollars ondeposit in the local bank.

(16:45):
Why should I hide this?
This is all part of the ego thatcertain certain people have and
I'm sure that they have thefeeling that with this kind of
money at my disposal, I can hirethe greatest lawyers.

(17:08):
So nothing has ever been tohappened.

Speaker 2 (17:17):
Believe it or not, this scheme only goes on for
less than a year.
About December 19, 19 to June19, 20, and then one day the
police come to visit Ponzi athis office.

Speaker 4 (17:30):
So the police that.
Yeah, we better look into itall.
No one's complaining, you know,we should look into it.
So a couple couple of policeofficers go to speak to ponce
and they become investors at theconclusion of speaking with
ponce.
So everybody's happy with ponceand you thought

Speaker 2 (17:50):
that was going to be his fault and not so fast.
This is Charles Ponzi.
We're talking about here, verynewspaper that had already done
a feature on the overnightsuccess, kept asking questions
and kept digging.

Speaker 4 (18:04):
The Boston post starts doing a newspaper article
about it and then they come tothe conclusion the numbers don't
add up.
You know, if you invest$140basically on foreign stamps.
No, that's not going to grow 40percent in 90 days or however
many days.
So the Boston posters around ranthe mass and instead it's just a

(18:26):
house of cards and then theypublish that and then it hits
the fan, they say and then allof a sudden there's a rush on
poor Mr Ponce.
He to a, you know, a positive,we want our money, you know, and
no one's giving Ponzi money.
Now they just want all wanttheir mining.

Speaker 3 (18:44):
And as soon as the funds is coveralls that says,
Church turning off of thefountain, as soon as more money
is coming in, then you canafford to pay back those that
you were promised.

Speaker 4 (19:01):
People literally will lining up, you know, they're
lining up the staff.
There was so many people, theline went from the street up
five floors to two ponds, thisoffice there, then out and then
down the street and then downthat alleyway.
So Ponzi being the guy made surethat women and pregnant women

(19:21):
got to the front of the linehere we go out and give them
refresh meds.
You know, it's just a salesmanto the end

Speaker 3 (19:28):
curtain for their investments.
Old people that was a piece ofpaper saying you don't sign a
promissory notes.
Uh, and then said, I promise onJune 10th, I will pay you back
$200.
Well, if you, if you give ussome money, that kind of a note
and you can give them the$200 a,that's, that's against the law.

Speaker 4 (19:51):
We had the run on Ponzi.
Ponzi obviously could not, youknow, Yo, you know a lot of
money and he couldn't make doughwent in before you.
Now it ponds.
These being charged both stateand federal relay for his
crimes.

Speaker 3 (20:06):
The government says deposit the bad.
He has been using the mail todefraud.
People

Speaker 2 (20:14):
charged with 86 counts of mail fraud to be
exact.
Remember that part when Donmentions Ponzi felt he was so
rich, he could buy the bestattorneys.
Well, Ponzi decided to representhimself.

Speaker 3 (20:29):
When you have a $3,000,000 in the bank, it's
easy, the easy to definelawyers, it will represent you,
but if, if you don't want togive them any of that$3,000,000,
they say he was interested ingetting the money and keeping
it.
The arrogance is such that, youknow, I know what I'm doing.

(20:52):
I, I will.
I will get out of this one wayor another.

Speaker 2 (20:56):
That wasn't the case.
Ponzi was eventually foundguilty on both federal and state
charges.
You serve two separate prisonsentences in Ponzi found himself
out of prison for an appeal.
And if you think he decided tolay low, well you're wrong, and
he decides that it's a littlecold in Boston.
I Love Boston.

(21:17):
Let me go down to Florida.
And here's what he finds inFlorida.
This land speculation.

Speaker 3 (21:23):
Yes.
We printed up some certificates,a man name the company after his
wife and was trying to sellthese shares in the swamp land.

Speaker 2 (21:34):
The problem was Ponzi was selling the swamp land as
pristine land and that isillegal, another fraud.
So Ponzi is convicted.
Once again, only this time he'sdeported back to Italy.
He wasn't heard from for years,essentially disappearing.
But then he suddenly resurfacedand the ones king of financial

(21:55):
crimes had fallen far from histhrone.

Speaker 3 (22:00):
He ended up going to South America, working for the
airline, and then he kind ofdisappears for awhile until he.
He surfaces.
He was very sick and he was at acharity ward at a hospital and
that's where he passed away,supposedly stilled dreaming of

(22:23):
going back to America andgetting together with his wife,
bows.
But he died in the charity ward.
I think there was like$67 leftin the account that they used
the first funeral.
Wow.

Speaker 2 (22:50):
As for rose, the love of his life turns out, as far as
we know, don is the only personto ever interview the former
wife of Charles Ponzi.
I say former because.
Well, she did stick with himthrough all his legal troubles
and prison time.
She finally divorced him when hewas deported.
And remember when Ponzidescribed a love story between

(23:11):
the two.
Sadly, that didn't seem to be amutual feeling in the end.
When don spoke to rose, she wasin her seventies and she to
appeared to have been played byPonzi.

Speaker 3 (23:24):
Everybody was suing his.
He has money in a way.
And I'd say until rose, hiswife.
Uh, so when I startedresearching this story, I found
out the rose was living inFlorida.
He was living near estate whereAl Capone had lit.

(23:51):
So I assumed it.
Rose also had some kind of anestate there and she was
secretly have had this money.
So when I went down, of courseto Florida, uh, I found out that
Paul Ireland in 1920 was, ofcourse very exclusive these days

(24:13):
it's builds up like any othersuburb.
And I found out that rose andher husband actually we're
living in a small apartment,builds over a garage.
Rose's husband at the time wasrunning the concession stand at
a dog racing track, you know, Iwas very good.

(24:38):
She was not living in luxurylike a millionaire's wife would.
They were very ordinary middleclass people.
When I interviewed her later on,she says that all that he left
her with was his 80 year oldmother to take care of.
So she, she was, she was not ahappy.

(24:59):
His wife was not happy.
Uh, he, he wrote her Ponzi,wrote her letters from jail,
going how much he loved her andhow he looked forward to getting
out of jail and makingeverything right.
But, uh, I'm not sure that shebelieved in me anymore.
I think that as a young 19 yearold woman, maybe she had been

(25:22):
swept off her feet by the factthat you know this, this pending
was guy one day he shows up witha limousine and one would take
her on an airplane rides, so Ithink she was probably swept off
her feet,

Speaker 2 (25:39):
tells me that he has sold the rights to his book for
it to be made into a movie sofar, and if you're curious, don
himself has made a lot of moneyoff his book.

Speaker 3 (25:49):
After working on the book for a couple of years, I
have decided that you'd get alot richer if you run a Ponzi
scheme.
The if you write a book aboutit,

Speaker 2 (26:04):
Ponzi did write a book about himself.
You can actually find online.
It's titled The rise of Mr.
Ponzi, the autobiography of afinancial genius

Speaker 3 (26:16):
course talks about his entire life.
How much of it is true?
Nobody knows.

Speaker 2 (26:23):
I suppose.
We'll never know and we'll leaveyou with that.
I'm just not.
Or the headlines maybeforgotten.
Just don't forget about us.