Ponzi's Scheme (22 page)

Before writing any acceptance speeches, Ponzi still had to contend with the investigations of his business. The number of inquiries fell from three to two this day, however, when District Attorney Joseph Pelletier withdrew from the probe. Attorney General J. Weston Allen had sent Pelletier a letter stressing Governor Coolidge's call for a state investigation and pointing out that Pelletier's jurisdiction extended only within Suffolk County, while Ponzi was operating throughout Massachusetts and beyond. Pelletier acted unruffled about being elbowed aside. He said he stood ready to help the other investigations. He even gave Ponzi a qualified endorsement, when he told a reporter that the business seemed to have been conducted “normally” and remarked that Ponzi seemed generous to charity. For Ponzi, Pelletier's withdrawal meant less opportunity for Dan Coakley to shape the investigation by playing the influence game, though Coakley's friendship with Gallagher might still prove useful.

Having booted Pelletier from the field, Attorney General Allen was eager to get his hands on Ponzi's books. But he was a step too slow. Gallagher had already appointed an accountant to review the finances of the Securities Exchange Company. He was a meek-looking fellow named Edwin L. Pride who, in recent years, had made himself indispensable to state and federal prosecutors as a financial analyst. Pride had helped the government expose and imprison a swindler named Cardenio F. King, who'd sold bogus stock in a Texas mining company.

Ponzi joined Pride for a meeting in Gallagher's office, and then escorted Pride to the Securities Exchange Company to gather up the unusual bookless bookkeeping system of index cards with investors' names, as opposed to traditional ledgers—Roberto de Masellis had not had time to redo the system. Speaking to reporters who watched the procession, Ponzi repeated that he would not reveal his business methods. The only purpose of the voluntary audit, he insisted, was to determine whether his assets exceeded his liabilities. “There can be but one result,” Ponzi told a
Post
reporter. “I am solvent, and the probes will not only reveal that, but will prove that I have carried out every promise made to my investors.” He took pains to distance himself from the antagonistic comment McMasters had attributed to him the day before. “My attitude towards the investigators is not one of contempt. I wish to assist them in every way I can.” Pride expected that auditing Ponzi's “books” would take about four days. He vowed to work straight through the weekend until the job was done.

T
he next morning, Saturday, July 31, the
Post
continued its drumbeat, this time quoting Washington postal officials as saying it was impossible for Ponzi to have made a fortune with reply coupons. The paper spent the rest of the weekend impatiently cracking the whip to urge the investigations onward. The peak came when a news story scolded Attorney General Allen, declaring, “All initiative in the case thus far has come from Mr. Gallagher's office, with the attorney general's office trailing behind and apparently not quite sure what to do.” While criticizing Allen for his evident inaction, the
Post
heaped praise on New Hampshire officials for initiating their own investigation. Alongside the story, a new editorial cartoon by Ritchie pictured a smiling Ponzi with a magic wand and a pot of money, surrounded by jealous price gougers, war profiteers, greedy landlords, and monopolists.

Unknown to Grozier or his reporters, or to Ponzi for that matter, the attorney general had surreptitiously begun his investigation by tapping Ponzi's telephones at his home and office. Allen hoped to hear damaging admissions or clues about the nature of Ponzi's mysterious business. But Ponzi never revealed anything to anyone. Allen's phone minders only heard Ponzi talking about his idea to sell stock to the public, bank presidents and businessmen soliciting Ponzi's business, and calls from various other people—police officials to professionals to newly arrived immigrants—seeking Ponzi's money, time, help, advice, or all four. Allen also sent one of his assistants, Albert Hurwitz, to New York to check on Ponzi's claims that he had sent more than a million dollars abroad via a Milan bank with a branch in Manhattan. Hurwitz's trip was part of an emerging strategy by the attorney general to determine if Ponzi could be charged with “larceny by false pretenses.” It was a charge that depended on proving that Ponzi had knowingly made false statements with the intent to deceive. Lying to the attorney general about how and where he did business might fit the bill.

Meanwhile, Barron seconded the
Post
's conclusion about the dubious profitability of postal coupons. Ignoring the $5 million lawsuit, Barron published an article on Saturday sarcastically suggesting that Ponzi use his incredible powers of financial alchemy to pay the costs of the Great War. “Surely the allies could spare him a million and within three years clean up that debt tangle. Germany might cheaply hire him to wipe out the indemnity within four years.”

Still, no crowds turned up that morning on School Street.

If Barron and the
Post
were openly hostile to Ponzi, the other Boston papers generally reported the unvarnished news of the run and the investigations. Although at times they displayed skepticism, for the most part they recounted the day's events impartially. But in a city with so many different, competing voices, perhaps it was inevitable that one or two would root for Ponzi, pandering to the public's embrace of him and maybe hoping that the powerful
Post
would fall on its face.

As newsboys for the
Post
were yelling about the paper's exclusive Washington reporting, the
Boston American
was crowing over a gossamer interview with Rose Ponzi. The paper splashed a huge headline across its front page—
WIFE TELLS OF PONZI'S PLANS
—and printed a photo of the flattering portrait of Rose that hung in the Ponzis' living room. Rose offered no revelations; she beamed with pride about “my Charles,” and the only plan she disclosed was a hoped-for trip to Florida “to idle away our time on a second honeymoon.” The story concluded: “A young woman, rarely beautiful, smiled in wifely triumph. For she was the woman married to the man who had made the dream come true.”

On the perfect summer day that story appeared, Mr. and Mrs. Charles Ponzi took a ride in their limousine from Lexington to Boston's Jamaica Plain neighborhood. Shortly after noon, the car stopped on Centre Street and the two stepped out, Ponzi in one of his immaculate summer suits and Rose in a loose-fitting white satin gown that fell well below her knees. Not for her the short-short skirts of the flappers.

“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.

W
illiam 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:

D
ECLARES
P
ONZI
I
S
N
OW
H
OPELESSLY
I
NSOLVENT