This Week In History: The Boston Post Takes Down Charles Ponzi

July 25, 2014

  Real Estate agents Jodi and Jean Winchester are walking me through a stately yellow stucco colonial revival mansion on a tranquil street in Lexington. There’s a perfectly manicured acre of land surrounding the estate. Heck, there’s even a carriage house.

And it belonged to Charles Ponzi, of the infamous Ponzi scheme.

Ponzi’s rise and fall was lighting quick. It all started in December of 1919, when Ponzi hatched an investment scheme involving the purchase of foreign stamps. He figured — and promised — that he could double investors money in just 90 days.

"But of course that proved to be impossible, so it just became a robbing-Peter-to-pay-Paul scheme where early investors were paid with money from later investors," said Boston University professor Mitchell Zuckoff, author of Ponzi Scheme: The True Story of a Financial Legend.

And for a while, it worked — spectacularly. By the middle of 1920, there were lines of eager investors outside of Ponzi’s office on School Street downtown.

"He’s a wonderfully charismatic character. He’s an incredible salesman, maybe the greatest who ever lived," Zuckoff described. "Suddenly, this guy that nobody had ever heard of, this Italian immigrant who had come to Boston in 1917 after traveling the country is the most popular guys in Boston, but none of the papers had taken note of this."

That all changed on July 24, 1920, when the Boston Post, the city’s biggest newspaper at the time, turned their attention to the charismatic huckster and his precipitous rise.

"It’s just a straight forward news story, it doesn’t accuse him of being a swindler, it doesn’t accuse him of anything, and they run it on the front page," Zuckoff said. "And this becomes the best day in Ponzi’s life."

On the heels of the story, the crowds outside Ponzi’s office swelled. Money came pouring in. He was the toast of the town. But the Post’s editors were suspicious, and brought in Wall Street Journal founder Clarence Barren as a consultant.

"And he says this isn’t possible," Zuckoff said. "Nobody can promise these kind of returns. Every bank would go out of business and just open these kinds of investment houses."

And so the Post stayed with the story, printing day after day of front-page pieces investigating Ponzi — and his activities.

"When the Post gets on Ponzi, it's central to everything that happens," Zuckoff said. "The politicians, the bank commissioners, the attorney general, the district attorney all realize ‘Oh my god we have to figure out what’s happening here.’"

What was happening was, of course, criminal. On August 11, the Post revealed that Ponzi had been convicted of forgery at a scandal-ridden bank in Montreal the decade prior. The next day, Ponzi surrendered to federal authorities.

"He gets prosecuted by the state and the federal government," Zuckoff said. "He gets sent to prison here in Massachusetts, ultimately deported. And he dies in the late 1940s, impoverished, actually, in Brazil."

His investors received less than 30 cents to the dollar on their investments. Losses totaled $20 million — about $225 million in today’s dollars. But Zuckoff insists that despite the evils that he perpetrated, Ponzi wasn’t a truly evil guy. He says that, initially, Ponzi never set out to swindle anyone; he simply drank his own Kool-Aid.

"He didn’t know how to stop, and he was so desperate to succeed that he let the devils of his nature overtake the angels," Zuckoff said.

And Ponzi’s estate in Lexington? It’s for sale. But it might take a Ponzi scheme to gather the $3.3 million it will cost for it to be yours.

Charles Ponzi, America’s most famous swindler, who’s scheme came crashing down, thanks to the work of the gang at the Boston Post, 94 years ago this week. 

Edgar B Herwick III can be reached at edgar_herwick@wgbh.org.

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