Ponzi's Scheme: The True Story of a Financial Legend

by Mitchell Zuckoff

Paperback, 2006

Status

Available

Publication

Random House Trade Paperbacks (2006), Edition: Reprint, 416 pages

Description

Biography & Autobiography. Business. True Crime. Nonfiction. HTML:You’ve heard of the scheme. Now comes the man behind it. In Mitchell Zuckoff's exhilarating book, the first nonfiction account of Charles Ponzi, we meet the charismatic rogue who launched the most famous and extraordinary scam in the annals of American finance. It was a time when anything seemed possible–instant wealth, glittering fame, fabulous luxury–and for a run of magical weeks in the spring and summer of 1920, Charles Ponzi made it all come true. Promising to double investors’ money in three months, the dapper, charming Ponzi raised the “rob Peter to pay Paul” scam to an art form and raked in millions at his office in downtown Boston. Ponzi’s Scheme is the amazing true story of the irresistible scoundrel who launched the most successful scheme of financial alchemy in modern history–and uttered the first roar of the Roaring Twenties. Ponzi may have been a charlatan, but he was also a wonderfully likable man. His intentions were noble, his manners impeccable, his sales pitch enchanting. Born to a genteel Italian family, he immigrated to the United States with big dreams but no money. Only after he became hopelessly enamored of a stenographer named Rose Gnecco and persuaded her to marry him did Ponzi light on the means to make his dreams come true. His true motive was not greed but love. With rich narrative skill, Mitchell Zuckoff conjures up the feverish atmosphere of Boston during the weeks when Ponzi’s bubble grew bigger and bigger. At the peak of his success, Ponzi was taking in more than $2 million a week. And then his house of cards came crashing down–thanks in large part to the relentless investigative reporting of Richard Grozier’s Boston Post. In Zuckoff's hands, Ponzi is no mere swindler; instead he is appealing and magnetic, a colorful and poignant figure, someone who struggled his whole life to attain great wealth and who sincerely believed–to the very end–that he could have made good on his investment promises if only he’d had enough time. Ponzi is a classic American tale of immigrant life and the dream of success, and the unexpectedly moving story of a man who–for a fleeting, illusory moment–attained it all.… (more)

User reviews

LibraryThing member Schmerguls
I decided to read this book because I was so impressed by the author's 2011 book "Lost in Shangri-La", which I read 4 Apr 2014. This book on Charles Ponzi (born 3 March 1882 in Lugo, Italy-died Jan 17, 1949, in Rio de Janeiro, Brazil) is carefully researched and tells well the amazing story of
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Ponzi's scheme by which he induced thousands of gullible folk to give him money which he promised to return to them in 45 days plus 50% interest, thereby adding his name to the English language. His scheme had little to substance but it induced people to believe it could be valid. Ponzi had a personality and demeanor which inspired trust in many eager to get money without earning it. Zuckoff did research in Italy and mined Boston newspapers and legal records and I found the book far better reading than many a novel. And I confess that when Ponzi failed as he so richly deserved to I felt compassion for him. He had a great talent but it was devoted to satisfying his and others' greed rather than a nobler aim.
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LibraryThing member JohnMunsch
An interesting but slightly overly detailed history of Charles Ponzi and how the scheme which has come to be perpetrated over and over again managed to acquire his name as though it belonged exclusively to him. Given the scope of Bernie Madhoff's running of a Ponzi Scheme, I thought it would be
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interesting to revisit his story.
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LibraryThing member ecw0647
It seems appropriate to finish this book a day after Madoff was sentenced to 150 years. The parallels to today's economic crash and Madoff are striking. A charismatic personality, connections with those in power, "too big to fail syndrome," a gullible and avaricious public coupled with an adoring
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media had people rushing to give Charles Ponzi their money. He was raking it in so fast that he reached $1 million per week with the possibility of $1 million per day not impossible.And this at a time when the average annual wage was $2,000. He promised returns of 50% in 45 days. Of course, those who cashed in early, willing to take a terrific return but not willing to spin the wheel more than once, did well. Part of the secret was the hint of secrecy, exclusivity, and his charming personality.

Ponzi was an Italian immigrant of financially comfortable origins who landed in New York. He discovered that the streets were covered in an inch of mud rather than paved with the gold he had been promised. He had never worked a day in his life, but over the next four years managed to work at a number of humble jobs finally landing one as a bank teller in Canada. He soon became involved in a scheme at the bank and for his efforts was sentenced to prison in Canada. After his release, he figure it would be wise to return to the U.S. but ever the schemers he became involved with some other Italians and they were arrested at the border, he for suspicion of assisting illegal immigrants. He pled guilty, believing he would get a light sentence but was stunned to get a two-year sentence in a federal penitentiary in Atlanta. (Why they didn't ship him back to Canada seems bizarre.) Anyway, the Atlanta federal prison was pretty cushy, it having been ordered by the feds, I suppose, for the inevitable time, when the legislators might have to go to prison and a gilded cage was better than just any cage. He made friends with Lupo, an Italian mafia gangster, but the warden also noted that Ponzi was always scheming and designing financial intrigues. Little did he know. So all the signs were there.

The irony is that had Ponzi not been such a kind-hearted soul the scheme that bears his name might never have happened. Following his release from prison, he was determined to make some money legitimately. He held down several minor jobs but had a great idea for supplying power to small coal mines (coal was booming in Alabama at the time.) One of his jobs was as a nurse in a clinic. Another female nurse had been badly burned in a fire and the doctor happened to mention to Ponzi one day how difficult it was for him to find skin donors without which she might die. Ponzi was incensed and on the spot offered to be a donor immediately. The first donation was 75 sq. inches, the second determined to be needed a little later was another 50 sq. inches. He was hospitalized in pain and complications for several months. The girl lived but by the time he was released, his idea for supplying power to the mines had been co opted by others and he was forced to seek other menial employment, once as a librarian at a small college where he was eventually fired for his honesty in revealing the dishonesty of a faculty member -- who happened to be a friend of the college president.

After marrying and moving back to Boston, following numerous attempts at get-rich-quick schemes, Ponzi hit upon one that perhaps only he, with his interest in currency manipulation, collecting stamps, and his interest in the Post Office, could have worked out. Before WW I the International Postal Treaty permitted sending postal coupons for use on return mail envelopes. The idea was that $1 in postal coupons would buy the equivalent in, say, French stamps to send mail back from a foreign country. After WW I there were vast differences in currency values. 5 cents in the US would buy a five cent stamp, but in Italy it would buy the equivalent of 10 cents in stamps. Pozi's idea was to purchase huge quantities of international postal coupons in countries with devalued currency and exchange them in the US. In the the example above the immediate profit would be 100%. He soon realized that enormous quantities of these coupons would be needed ($50 would buy a stack of Italian coupons over 73 feet high) and that the Post Office would not redeem the coupons for cash, only stamps. In the meantime, money was rolling in to fund his scheme which purported, in writing, to guarantee 50% profits in 90 days. His legitimate idea soon foundered on logistical problems and it shifted to what we now call the classic Ponzi scheme where early investors are paid off with money from later investors.

The irony of it is -- and this is perhaps true of Madoff also -- that Ponzi really wanted nothing more than to be a legitimate businessman. It had hit upon a scheme that was technically legal and would work in very small amounts, but never at the scale it ballooned into.

A fascinating account of a time with striking similarities to today and a morality tale: "if we don't learn our history, we're doomed to repeat it".
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LibraryThing member dougcornelius
When Bernie Madoff’s fraud was exposed it was labeled a Ponzi scheme. Madoff was not investing the money as promised. He was using new investment money to pay old promised returns. I thought it would useful to look back at the original Ponzi scheme to see if offered insight to today’s world of
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compliance. I just finished reading Ponzi’s Scheme: The True Story of a Financial Legend by Mitchell Zuckoff.

When Charles Ponzi sailed from Italy in 1903, his father told him that America’s streets were paved with gold. Ponzi had landed in America at the end of the Gilded Age. He thought he could earn a fortune. He looked for one one get-rich-quick scheme after another and that lead to two stints in prison before settling in Boston.

He tried setting up a international listing of import-export companies and selling advertisements. One respondent requested information and included an international reply coupon. This coupon was effectively a return stamp for foreign correspondence. Ponzi realized that he could theoretically arbitrage the difference in foreign currencies to generate big returns. It was a theoretic return because he would have to find someone to buy the coupons overseas and someone to sell them to here in the U.S. to convert the coupon back to cash.

The idea was solid enough that he could convince investors to give him money. In exchange, he promised a fifty percent return in three months. Eventually, he had investors lined up to give him money. Unlike Madoff, Ponzi carried out his scheme in the open. It was even briefly approved by Boston’s newspapers and financial sector. (If you wonder why private placements could not be advertised for decades, you need to look no further.)

Perhaps it was the wealth of media coverage that got Mr. Ponzi famous enough for the fraud that now bears his name. Of course, he couldn’t have been the first.

In one of the court pleadings, Ponzi’s lawyer states that his client was not a “520 percent Miller.” This was a recall of an earlier fraud by William Miller and his Franklin Syndicate. Mr. Miller was promising a 10% return each week during his heyday of 1899. It was a Ponzi scheme before it was called a Ponzi scheme.

What about before 520 percent Miller? Mr. Zuckoff uses the older expression of “robbing Peter to pay Paul.” That expression refers back to the Reformation when taxes had to be paid to St. Paul’s church in London and to St. Peter’s church in Rome, so people would neglect the Peter tax in order to have money to pay the Paul tax.

Mr. Zuckoff provides a detailed look at the life of Charles Ponzi. Although it is non-fiction, Mr. Zuckoff has written the story in the narrative form, imposing some insight into the thoughts of Mr. Ponzi and those involved. The result is a nuanced and insightful look into a fraud.
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Language

Original language

English

Barcode

1141
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