It was okay to call Susan on a Saturday morning. But odd. We had never clicked. I held myself responsible for the mutual dispassion. Life had plucked each of our loves way too soon, and I kept my distance. Affinity through death was way too damaging.
“This is a surprise,” Susan replied, cordial but formal.
“Do you have a few minutes?”
“What’s on your mind?”
So much for warming up the audience.
“Sam Kelemen asked me for help.”
“I’m sorry about Charlie,” Susan said.
“Me too.”
“What kind of help?”
“Mostly financial,” I explained, “with details regarding Charlie’s estate and the Kelemen Group.”
Susan said nothing. I had expected some observation, some comment no matter how light. Nothing. The mood changed, quickly, instantly. What began as cordial shifted to distant. How had I wandered into off-limits territory so soon?
Uh-oh.
“I found a spreadsheet that showed your investment in the Kelemen Group.”
Again, Susan said nothing. Money talk could derail even the most pleasant conversations. But her abrupt change in demeanor bordered on bizarre.
“Susan, I don’t want to be intrusive. But is it okay to ask a few questions?”
“Let’s start and see what happens,” she answered. All geniality had left her voice. Through the receiver I could feel her smile dissolve.
“Did you ever receive audited financials from the Kelemen Group?” I crossed my fingers.
“Of course. I keep all that stuff.”
“Do you recall if the financials included a list of the hedge funds in the portfolio?”
“I can check, but I doubt it.”
“What makes you say that?” It impressed me that Susan even remembered. So few people paid attention to Wall Street’s mail.
Our paperwork will deforest the planet someday.
“I probably would have noticed,” Susan said. “I own a bunch of hedge funds.” She exuded confidence, sounding like a seasoned viewer of CNBC.
“The spreadsheet said you were up five hundred thousand dollars.”
“To the penny,” she acknowledged, pleased by the return, unaware of my skepticism.
There’s no such thing as an even profit of $500,000.
“Why’d you pull out?”
“Charlie was always sending me letters. Every time I checked the mail, he was there. A note. A letter. A present, like the latest bestseller. There were always invitations to spend time with Sam and him. This may sound funny, but it felt too intimate.”
“Too intimate?” I repeated, the Socratic-sales echo used by all top producers to open up prospects.
“Creepy intimate, if you know what I mean. My hedge funds leave me alone. They send computer-generated statements. They send market letters that brag when they’re up.”
“And snivel when they’re down.”
“You got that right. Charlie was different. He got too close.”
“He wanted to take market share,” I pointed out.
“That’s not how Duncan ran things,” she argued. “His business dealings were more formal.”
“The Kelemen Group gave you a nice return.” The point was to coax more information from Susan, not to defend anyone.
“Don’t get me wrong. I loved Charlie. We made good money over three years.”
“But what?” I heard the qualifiers.
“I struggled to get my money out.”
Hotel California?
“All funds of funds have lengthy redemption features,” I observed. My tone was neutral. My big ears could have been elephant transplants.
“That’s not what I mean,” she countered. “My other hedge funds have those clauses.”
“They surprise some people.”
“It surprised me I had to nag Charlie. He wouldn’t even start the redemption process.”
“What did you say?”
Without skipping a beat Susan Thorpe replied, “I threatened to call you. Then your firm. That’s why you’re calling now, right?”
Another forged letter
.
“Tell me more,” I prodded, nonplussed and clinical.
“Charlie promised never to lose a dime. He sold me an option that guaranteed the returns.”
Another OTC option
.
Translation: “OTC” stood for “over-the-counter.” In the world of derivatives it meant a private option negotiated between two parties, usually a brokerage house and an investor.
“And you needed a letter from SKC proving his ability to guarantee your investment.”
“A girl can’t be too careful, you know.”
“Your letter says Charlie keeps an eight-figure account with us?” I asked, already knowing the answer.
“You wrote it. Why are you asking?”
I was unsure whether to hang up or throw up. “One other thing,” I said, not answering Susan’s question. “Once you threatened Charlie, how long did it take to get your money back?”
“That’s just it,” she replied. “Two weeks at the most.”
“All of it?”
“Every last dime,” she replied. “None of the holdbacks that my other funds use. Kind of odd.”
“Creepy intimate,” I agreed, borrowing Susan’s expression.
When we hung up I stopped walking for a moment and gazed down the sidewalk, seeing everything but focusing on nothing. The forgeries, Susan’s threats, and the quick return of capital—it all came together in that moment.
Can it be this simple?
I knew the answer already. It was time to discuss Charles Borelli with Sam Kelemen.
CHAPTER THIRTY-NINE
During the sticky summer of 1925 Charles Borelli mulled over Boston’s shortcomings. “Those bluenose ingrates can have this place,” he told himself. He never much liked the people or the weather. “Pain in my ass,” he cursed. “Yankees are colder than their damned winters.”
All January and February Borelli had slipped on the sidewalks. Snow slicked the bricks. Frozen pooch piss greased the paths and turned them treacherous.
“I bet a thousand dogs pee against my door every day,” he complained, now standing in the buggy heat outside 27 School Street.
Charles Borelli had fallen into a funk. He hated Boston, the people and the dogs that pissed everywhere. “The food sucks,” Borelli continued, his foul mood prompting him to decry everything. He considered Boston’s most famous dish, “boiled dinners,” and grimaced. His paesanos in Rome would never serve that slop to pigs, let alone to each another.
Oh, for the old country. Oh, for a bowl of fettuccine Alfredo
, he dreamed wistfully.
“Vaffanculo,”
he swore, cursing all of Boston but no one in particular. He still preferred his native tongue.
“Vaffanculo”
sounded far more elegant than “Fuck you.”
For all the bugs and heat, Florida’s white-hot real estate offered a chance to start fresh. That night Borelli grabbed his wife, Rose, and together they fled. They left their home in Lexington forever. He never looked back, not once. He never regretted jumping bail.
Months later an unhappy horde gathered outside the steps of the Boston courthouse. “What was Judge Sisk thinking?” a short man asked. “Releasing a convicted felon,” he complained in bitter disbelief.
“While the appeal was pending,” another man fumed.
Several members of the crowd talked about baseball, the diversion a comforting panacea. To a man, to a woman, they hated the New York Yankees. Those blackguards had been to the World Series three times since stealing Babe Ruth. The conversations invariably returned to the Italian. Some knew him as Carlo, though it had been years since the fugitive had anglicized his name.
A tall man growled, “Carlo was a rat bastard.” His head poked over the growing crowd like the tallest poppy in the field.
“Rat bastard. Rat bastard,” the crowd chorused uneasily in agreement. They all agreed Borelli was devious, a criminal without conscience. What had Sisk been thinking? Maybe the summer humidity had boiled the judge’s pea brain. How would he rule today? Would he abandon the stay of sentence? Would he listen to the crowd’s heated chants outside his office?
Charles Borelli, blessed with good looks and old-world charisma, had not always been a rat bastard. There was a time when Boston had cheered his financial wizardry. The city had toasted his name. Good salt-of-the-earth New Englanders, ten thousand people strong, once invested $9.5 million in the Securities Exchange Company. In 1920 his business had attracted thousands of dollars every day from good Yankee stock.
The early clients extolled their gargantuan returns: “Double your money in ninety days.” As word spread, people could not send money fast enough. Boston’s police certainly believed. By some accounts Charles worked with nearly 75 percent of the officers on the force.
There was a time when Borelli loved Massachusetts. The New World promised a life of riches for young men that worked hard. In 1903 he had immigrated to America. At first he washed dishes. Carlo, however, refused to toil in hot kitchens forever. He abandoned dishwashing for other pursuits, and eventually his perseverance paid off. Charles bought a twenty-room
mansion in Lexington, Massachusetts. He draped big jewels on Rose. He carried a gold-handled cane and dressed in the finest suits, hand-sewn by the tailors of Newbury Street. He hired staff, and his company opened branch offices. He even opened a small outpost in Rhode Island, the state that Cotton Mather had contemptuously labeled “the sewer of New England.” It was a dreamy time for an industrious thief.
During those heady days Charles Borelli went by another name—Carlo K. Ponzi. He never aspired to become a felon. In 1919 Ponzi had no idea the world would one day scorn him as the father of a scam. He fancied himself an arbitrageur. Carlo identified, quite by accident, a risk-free trade born from the inefficiencies of exchange rates and international commerce. He noticed it was possible to redeem postal coupons, purchased for a penny in Spain, for six cents in the United States. Ponzi dreamed of investing millions and earning a nickel for every penny ventured. No matter there were only 27,000 postal coupons in circulation. No matter the maximum profit was only $1,350 at five cents per coupon.
Ponzi told everybody about postal coupons. He promised to double investors’ money in ninety days. He told friends and a former boss, certainly all the bartenders at his favorite speakeasy. He offered to double the collection plates for the good fathers at St. Paul’s. “Just give me ninety days.”
He cut Protestants in on the deal, too. Carlo was a nondenominational con. He told his butcher as well as Rose’s new hairdresser, and she told everyone else. He even told the playful redhead from the bar.
The bubs on that girl
, he thought salaciously. Ponzi mesmerized his flock of sheep, and they invested frenetically. They could hardly wait to reap extraordinary returns from promissory notes issued by the Securities Exchange Company.
Ponzi did something brilliant. As new investors arrived in droves he repaid early backers with incoming funds. He returned every cent of principal times two. Even the most avaricious drooled. “Double your money in ninety days.”
The capital markets had never been this kind. Ponzi’s posse, from the priests to the redhead with the big bubs, delighted in their windfalls. They became walking, talking testimonials to the brilliance of the immigrant arbitrageur from Italy. “Double your money in ninety days.” It was like free money from heaven.
Windfall profits spawned an orgy of greed. The blue-collar folk invested
whatever they could scrape together. They bought discount notes with face values of $5 and $10. The rich folk, while generally more cerebral, were just as greedy and no less gullible. They calculated $10,000 today would grow to $160,000 by year-end. Rich and poor alike flooded into room 227 at 27 School Street and traded bags of cash for Ponzi’s promissory notes.
At times the premises overflowed with marauding bands of investors. Carlo often asked cops to stand guard outside his doors. No wonder 75 percent of the police department invested. The boys in blue listened to all the stories, overheard all the calculations. It seemed all of Boston had overdosed on the aphrodisiac of avarice. Everyone wanted a piece of Carlo’s action.
“No problem,” Ponzi promised. Unlike today’s hedge funds, the Securities Exchange Company never employed a soft close. Simple math forced Carlo to raise ever-increasing sums. It was the only way to sustain the house of cards.
“Who needs postal coupons when people throw money at me?” he once asked no one in particular.
Investments made no difference. Records would later show Carlo Ponzi had only purchased five shares of a telephone company. For that matter he never bought any of those twenty-seven thousand outstanding postal coupons. As long as he repaid a handful of investors from time to time, the new money arrived in buckets.
Ponzi had his own needs of course. He could not work for free. The endless schmoozing required too much time and energy, not to mention cash. Carlo had already scoured enough dishes to fill a lifetime. He would never again slog over suds and settle for a laborer’s pittance. To hell with that noise. Why not skim some jack for himself? Someday he would pay everybody back.
I’ll buy a used battleship from the U.S. Navy,
he dreamed,
turn it into a floating mall, and sell American goods.
It seemed the patriotic thing to do.
In the meantime he needed a house and fine clothes. He needed that watch from Shreve, Crump & Low. He planned to engrave his initials on the back of the timepiece. Rose needed her baubles, and then there was that redhead with the great bubs. She needed something special. When Carlo’s scheme finally unraveled, trustees of the court found that his needs totaled $1.5 million in total assets. It was a monstrous sum in those days.
