Famous Con Men 1 : Charles Ponzi

Anatomy of a Con Man

Charles Ponzi: Probably the most infamous and the most celebrated of conmen. Probably the first who had such a great modus that it still cannot be completely proven that it is actually a con – technicalities notwithstanding, and probably the only conman to actually have a con named after him – the Ponzi Scheme.

Charles Ponzi was the original mystery man whom you couldn’t separate the good from the bad. Even after so many years, little is known about his early life and times, a stark contrast to the highly publicized and reported con-scheme.

Ponzi was an Italian immigrant who came to the United States of America in 1903. With only two and a half-dollars to call his own, the rest lost in gambling, Ponzi could not dream of a good future in America – at least legally. But Ponzi had a will to survive, quickly learnt English and became an odd job all along the East Coast. Maybe his first con was caught too quickly to force him into a life of crime and capers – he was fired from his waiter’s job for short changing the clients.

Inspirations and Teachings

He then moved to Montreal, Canada and took the post of an assistant teller at the Banco Zarossi, where he learnt the modus of what would be the biggest scam known to humankind. The bank was run by Luigi ‘Louis’ Zarossi and paid six percent as interest, double the current going rate. Therefore, the bank was minting money. Ponzi’s sharp eyes and ears quickly realized that the bank was going through a hard time due to some bad real estate loans. He also found out that Zarossi was paying his bank account holders with money that was coming from the new investors, simply because Zarossi had no money to call his own. Zarossi later fled with a large portion of the bank’s money.

Ponzi continued living with Zarossi’s family and planned to return to the US and start over afresh, and that meant going to one of Zarossi’s previous customer’s office and writing a check to himself for $423.58. He was confronted by the police and arrested. He subsequently spent three years in a Quebec prison. Conspiracy theorists will thrive on the fact that his prison number during his stint as a state guest was # 6660.

It is true that even the best talent requires role models, someone whom they look up to, and this is the case in crime as well. Charles Ponzi met a lot many men of crime, important among them being Ignazio ‘The Wolf’ Lupo and Charles Morse.

Charles Ponzi was eventually released and was back in Boston in no time. He was the first person to think of the business-listing concept, which would sell a list of businesses to businessmen. This concept never took off the ground for Ponzi at that time, but is today known as the ‘Yellow Pages’.

Modus Operandi

One fine day, Charles Ponzi received a letter from a company in Spain asking for a catalog of his business. And this is where Ponzi got what would be his claim to infamy – the International Postal Reply Coupon (IRC). This was the loophole that he was looking for in the system, the one loophole that would mean a lot of money for Ponzi.

The purpose of the postal reply coupon was simple, to allow someone in one country to send it to a correspondent in another country, who could then use it to pay the postage of a reply to the mail sent. IRCs were generally priced at the price of postage in the country, but could be exchanged for the cost of stamps required to pay the postage in the country where they were being redeemed. It was this potential, minimal profit that made Charles Ponzi one of the greatest conmen of our times.

Ponzi showed this idea to his friends and family and the idea sold like wildfire. People soon began investing – and investing heavily – in the Ponzi scheme. By February 1920, Ponzi owned $5000, and was paying impressive commissions to the agents that he hired for every transaction that they did. People began mortgaging their homes, investing their lifesavings, in the fantastic con, the Ponzi scheme. He had made millions within a few months and that is where his problems started.

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Eyebrows started to be raised when Ponzi could not pay one of his furniture dealers. Some investors started pulling out of the scheme, and the financial authorities were now treating Ponzi as a ‘person of interest’.

Finally, it was the media that brought the end to this fantastic gold rush. It was soon noted that Ponzi himself wasn’t investing a single cent in the business. Also, a simple analysis showed that the number of postal stamps that would have to be printed and in circulation were far more than the current number of stamps that was in circulation. The Postal Authorities declared that there were no plans to increase the printing or circulation of postal stamps.

These reports were a damning for Ponzi and he was finally arrested and charged guilty for mail fraud. He was sentenced to five years in prison, and later released to face state charges, and sentence to nine years in prison.