In Ponzi We Trust- page 5 | People & Places | Smithsonian
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Mug shots of Charles Ponzi, Boston financial wizard, taken during his arrest for forgery under the name of Charles Bianchi. (Bettmann / Corbis)

In Ponzi We Trust

Borrowing from Peter to pay Paul is a scheme made famous by Charles Ponzi. Who was this crook whose name graces this scam?

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When Ponzi emerged from jail in 1934, balding and 40 pounds heavier, immigration authorities were on hand with a deportation warrant. He had never become an American citizen and was considered an undesirable alien. On October 7, after his appeals to remain in the United States were rejected, he was deported to Italy. Rose stayed on in Boston with plans to join him once he found employment, but after two years she tired of waiting and finally divorced him. For years, says Dunn, who interviewed her not long before her death, she was dogged by rumors that she had a secret stash of her husband's ill-gotten gains. But Rose was a victim herself: she and eight of her relatives had loaned Ponzi more than $16,000. After Ponzi's departure, Rose led a pinched and quiet existence, eventually remarrying after her husband's death and moving to Florida, where she tried to escape the notoriety of her former husband's escapades.

Accounts of Ponzi's life after his eviction from the United States vary. According to one version, he talked his way into a high-ranking financial ministry job in Mussolini's government. When officials realized that he was not the financial genius he purported to be, he fled carrying two suitcases stuffed with cash and caught a steamer to Brazil.

Dunn, who's done the most extensive research on Ponzi, uncovered a different story. He reports that Ponzi got help from his second cousin, Col. Attilio Biseo of the Italian Air Force, who was commander of the Green Mice Squadron and a friend of Mussolini's. Biseo landed Ponzi a job with a fledgling airline doing business between Italy and Brazil. This new career kept Ponzi in high style between 1939 and December 1941, when the United States entered World War II and the Brazilian government cut off supplies to Ponzi's airline, having learned that it was ferrying strategic supplies to Italy.

Out of a job, Ponzi scraped by, teaching English and French and later working as an interpreter for an Italian importing firm, according to Dunn. But his eyesight was failing and a stroke in early 1948 left him partially paralyzed. Ponzi died in a charity hospital in Rio de Janeiro on January 18, 1949, leaving $75 to pay for his burial.


Why does anyone fall for such scams? "It's human nature," says Susan Grant of the National Consumers League. "The crooks know that there are basic human factors that they can appeal to—the desire to do what you think you see other people doing around you, making money and getting rich."

In other words, wishful thinking. In 1920, people saw Ponzi as a man who could make the impossible possible. Today, many people in search of lucrative investment opportunities "see the Internet as a place where all things are possible," observes Paul H. Luehr, who chairs the FTC's Internet Coordinating Committee. Sometimes, they simply can't tell the difference between a legitimate business enterprise and a hoax. But other times it's clear that they don't really want to know. Grant and Luehr tell of inquiries they've received from consumers in search of reassurance that an attractive scheme is legitimate. But when cautioned against it, they become angry. "Many times people are mad at the government for spoiling a ‘good' investment opportunity," says Luehr.

Today's operators often use high-tech bells and whistles to lure their prey. Ponzi's approach was more charismatic. But the bait is always the same and the outcome is inevitable. Up to 95 percent of the people who buy into Ponzi schemes eventually lose all their investments, says Luehr. Generally, it is only the con man who gets the easy money. For Ponzi, there undoubtedly were other rewards as well: excitement and power. Richard Ault, a retired special agent and criminal profiler for the FBI, speculates that, more than anything, Ponzi wanted to be "something special." A poor immigrant, he sought to become part of the Boston establishment that had excluded him, Ault believes. "It was an impossible goal, but he managed to achieve a little bit of it for a short period of time."

To Ponzi, it was all a grand, desperate game that he was determined to play to its conclusion. At the end, he had this to say about the mad caper on which he had led the people of Boston: "Even if they never got anything for it, it was cheap at that price. Without malice aforethought I had given them the best show that was ever staged in their territory since the landing of the Pilgrims!... It was easily worth fifteen million bucks to watch me put the thing over!"

To Charles Ponzi, who began with nothing, ended up the same way but enjoyed a brief interlude of power and fame, it undoubtedly was.


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