Tuesday, 2 June 2015

Charles Ponzi - Conman

In the world of financial crime where the money illicitly gained dwarfs all avenues of crime, bar, probably, drugs, it is not a generally well covered subject.  In the last few decades, we have heard about Bernie Madoff, the so-called "Wolf of Wall Street," the stealing of pension funds, most famously by Robert Maxwell, though most certainly not limited to him.  There are the numerous companies registered offshore, for no other reason than tax avoidance, but it runs much deeper if you trace financial crime throughout history.  One man, a pint sized Italian, in less than nine months, became synonymous with one particular type of crime; Charles Ponzi.  He originated a simplistic form of fraud that quickly turned him into a millionaire, but as with all scams, inevitably they crumble.

    Ponzi emigrated to the U.S.from Italy, hoping to make it in the land of opportunity.  But despite his later "reputation" as a financial "genius" Ponzi, in all sense and purposes, was as thick as pigshit!  How did he gravitate to such heights?  Simple.  Telling people what they want to hear and letting talk of money override any suspicions.  When he arrived in the States, the only job he could acquire was that as a waiter, which he was not very good at.  So he moved on to Montreal in Canada, where he started acquiring a taste for the better things in life.  His first scam was persuading people that he could send money to their relatives in Italy at cheaper rates than the postal service.   Naturally, he spent all the money entrusted to him and it earned him his first prison sentence.

    Ponzi had turned 36 when he moved to Boston, married a girl called Rose and somehow managed to persuade his father-in-law to let him run his grocery business.  Ponzi soon ran it into the ground.  Then he got a job at an import/export firm because he could speak Italian.  He had no interest in the job but in 1919, a letter from abroad changed his outlook.  It contained a postal reply coupon.  Abroad, they cost one cent, redeeming in the U.S. brought five cents.  He had found his niche. So he thought.  He resigned his job, and made big plans to have people buy them en masse abroad and send them to him in the States.  Big money was waiting.  Except this was scuppered by postal regulations.  But he was not deterred.  With a number of these coupons to show off to people, he made a promise he could make them 50% profit in 90 days, adding that the Rockefeller empire was built on the same principle.  The suckers could not resist.  Soon he was getting thousands of dollars and paying 50% interest on the repayment date.  He urged them to keep reinvesting and tell their friends.  More and more people "invested."  Soon he formed his own company, Financial Exchange Company, and bought himself into the Hanover Trust Company, having enough clout to get the President`s job.  Everybody seemed to love this guy who could not stop making people profits.  Except one.  The newspaper the Boston Post openly questioned where Ponzi acquired his money.  But Ponzi was vain and wanted the adulation, so he hired a PR man to rebuild his image.  But it backfired.  The Pr man, Bill McMasters discovered Ponzi had absolutely no head for mathematics.  Everything in finance and foreign exchange bedazzled him.  So he insisted on examining the books.  They resembled gobbledy gook.  His millionaire lifestyle was about to topple.

    He took $2 millon dollars from the company vault and went to gamble it, in the hope of winning more millions to keep afloat.  He blew the lot.  It was estimated he received $20 million and paid back $15 million.  He had a shortfall of $5 million.  It was the simple task of paying back with other people`s money.  The Government got him first, giving him a five year stretch, then the state of Massachusetts gave him another seven years for Grand Larceny.  After release from prison, Ponzi went back to Italy but achieved nothing.  He died in Rio de Janeiro in poverty in 1949.  But in less than nine months, December 1919 to August 1920, the five foot two inch Ponzi was on top of the world and his name lives on with this type of fraud.