Alkisah bermula Skim Cepat Kaya : Charles Ponzi

Posted on 27 December 2008. Filed under: Banking, Finance, HYIP, Pelaburan, Pelan Perniagaan, peluang perniagaan, Pendapatan Aktif, Pendapatan Pasif, Perbankkan, Plan Perniagaan | Tags: |

Charles Ponzi

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Charles Ponzi
Ponzi in 1920
Born March 3, 1882
Lugo, Italy
Died January 18, 1949 (aged 66)
Rio de Janeiro, Brazil
Charge(s) Mail fraud
Penalty 5 years (federal, served 3 and half years before facing state charge) and 9 years (state)
Status Deceased
Occupation Con man
Spouse Rose Gnecco

Charles Ponzi (March 3, 1882January 18, 1949) was an Italian immigrant to the United States who became one of the greatest swindlers in American history. His aliases include Charles Ponei, Charles P. Bianchi, Carl and Carlo. The term “Ponzi scheme” is a widely known description of any scam that relies on a “pyramid” of “investors” who contribute money to a fraudulent program. He promised clients a 50% profit within 45 days, or 100% profit within 90 days, by buying discounted postal reply coupons in other countries and redeem them at face value in the United States as a form of arbitrage.[1][2] Ponzi was probably inspired by the scheme of William Miller, a Brooklyn bookkeeper who in 1899 used the same pyramid scheme to take in $1 million.[3]

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[edit] Early life

Parts of Charles Ponzi’s life are somewhat difficult to determine, due to his propensity to fabricate and embellish facts. He was born Carlo Ponzi in Lugo, Italy in 1882. He told the New York Times that he had come from a well-to-do family in Parma, Italy.[3] He took a job as a postal worker early on, but soon was accepted into the University of Rome La Sapienza. His friends considered the university a “four-year vacation”, and he was inclined to follow them around to bars, cafés, and the opera.

[edit] Arrival in America

On November 15, 1903 he arrived aboard the S.S. Vancouver in Boston. By his own account, Ponzi arrived in the United States in 1903 with two dollars and fifty cents in his pocket, having gambled away the rest of his life savings during the voyage. “I landed in this country with $2.50 in cash and $1 million in hopes, and those hopes never left me,” he later told the New York Times.[3] He quickly learned English and spent the next few years doing odd jobs along the East Coast, eventually taking a job as a dishwasher in a restaurant, where he slept on the floor. He managed to work his way up to the position of waiter, but was fired for shortchanging the customers and theft.

In 1907 Ponzi moved to Montreal, Quebec, and became an assistant teller in the newly opened Banco Zarossi, a bank started by “Louis” Luigi Zarossi to service the influx of Italian immigrants arriving in the city. Zarossi paid 6% interest on bank deposits – double the going rate at the time – and was growing rapidly as a result. Ponzi found out that the bank was in serious financial trouble because of bad real estate loans, and that Zarossi was funding the interest payments not through profit on investments, but by using money deposited in newly opened accounts. The bank eventually failed and Zarossi fled to Mexico with a large portion of the bank’s money.

Ponzi stayed in Montreal and, for some time, lived at Zarossi’s house helping the man’s abandoned family while planning to return to the United States and start over. As Ponzi was penniless, this proved to be very difficult. Eventually he walked into the offices of a former Zarossi customer and, finding no one there, wrote himself a check for $423.58 in a checkbook he found, forging the signature of a director of the company. Confronted by police who had taken note of his large expenditures just after the forged check was cashed, Ponzi held out his hands wrist up and said “I’m guilty.” He ended up spending three years in a Quebec prison. Rather than inform his mother of this development, he posted her a letter stating that he had found a job as a “special assistant” to a prison warden.

After his release in 1911 he decided to return to the United States, but got involved in a scheme to smuggle Italian illegal immigrants across the border. He was caught and spent two years in an Atlanta prison. Here he became a translator for the warden, who was intercepting letters from a mobster, Ignazio “the Wolf” Lupo. Ponzi ended up befriending Lupo. However it was another prisoner who became a true role model to Ponzi; Charles W. Morse convinced doctors Ponzi was dying by eating soap shavings, and was released early.

[edit] The Ponzi scheme

Ponzi under arrest circa 1910

When Ponzi was released he eventually made his way back to Boston. There he met Rose Maria Gnecco, a stenographer, whom he asked to marry him. Though Ponzi did not tell Gnecco about his years in jail, his mother sent Gnecco a letter telling her of Ponzi’s past. She remained with him nonetheless, and they married in 1918. (The couple divorced circa 1937, and Rose Gnecco, who later remarried, eventually became the bookkeeper for the New Cocoanut Grove Inc, the parent company of Boston’s Cocoanut Grove nightclub.)[4][3][5] For the next few months he worked at a number of businesses, including his father-in-law’s grocery, before hitting upon an idea to sell advertising in a large business listing to be sent to various businesses. Ponzi was unable to sell this idea to businesses, and his company failed soon after.

A few weeks later Ponzi received a letter in the mail from a company in Spain asking about the catalog. Inside the envelope was an International reply coupon (IRC), something which he had never seen before. He asked about it and found a weakness in the system which would, in theory, allow him to make money.

The purpose of the postal reply coupon was to allow someone in one country to send it to a correspondent in another country, who could use it to pay the postage of a reply. IRCs were priced at the cost of postage in the country of purchase, but could be exchanged for stamps to cover the cost of postage in the country where redeemed; if these values were different, there was a potential profit. Inflation after the First World War had much decreased the cost of postage in Italy expressed in U.S. dollars, so that an IRC could be bought cheaply in Italy and exchanged for U.S. stamps to a higher value. The process was: send money abroad; have IRCs purchased by agents; send the IRCs to the U.S.A.; redeem the IRCs for stamps to a higher value; sell the stamps. Ponzi claimed that the net profit on these transactions, after expenses and exchange rates, was in excess of 400%. This was a form of arbitrage, or profiting by buying an asset at a lower price in one market and immediately selling it in a market where the price is higher, which is not illegal.

Ponzi canvassed friends and associates to back his scheme, offering a 50% return on investment in 45 days. The great returns available from postal reply coupons, he explained to them, made such incredible profits easy. He started his own company, the “Securities Exchange Company”, to promote the scheme.

Some people invested, and were paid off as promised. The word spread, and investment came in at an ever-increasing rate. Ponzi hired agents and paid them generous commissions for every dollar they brought in. By February 1920, Ponzi’s total take was US$5,000, (approximately US$54,000 in 2008 dollars).

By March he had made $30,000 ($328,000 in 2008 terms). A frenzy was building, and Ponzi began to hire agents to take in money from all over New England and New Jersey. At that time investors were being paid impressive rates, encouraging yet others to invest.

By May 1920 he had made $420,000 ($4.59 Million in 2008 terms). He began depositing the money in the Hanover Trust Bank of Boston (a small Italian American bank on Hanover Street in the mostly Italian North End), in the hope that once his account was large enough he could impose his will on the bank or even be made its president; he did, in fact, buy a controlling interest in the bank. One biographer of Ponzi who wrote eighty years later described the cash price at which the bank’s founding family sold their stake as suspiciously high. Having had a fiduciary duty to protect their depositors they were a lasting unindicted beneficiary without direct involvement.[citation needed]

By July 1920 he had made millions. People were mortgaging their homes and investing their life savings. Most did not take their profits, but reinvested.

Ponzi was bringing in cash at a fantastic rate, but the simplest financial analysis would have shown that the operation was running at a large loss. As long as money kept flowing in, existing investors could be paid with the new money, but colossal liabilities were accumulating.

Ponzi lived luxuriously: he bought a mansion in Lexington, Massachusetts with air conditioning and a heated swimming pool, and brought his mother from Italy in a first-class stateroom on an ocean liner.

[edit] Suspicion

There were signs of Ponzi’s eventual ruin: a furniture dealer, who had given Ponzi furniture when he could not afford to pay, sued Ponzi to cash in on the gold rush. The lawsuit was unsuccessful, but it did start people asking how Ponzi could have gone from being penniless to being a millionaire in so short a time. There was a run on the Securities Exchange Company as some investors decided to pull out.

Ponzi paid them and the run stopped. In fact, on July 24, 1920, the Boston Post printed a favorable article on Ponzi and his scheme that brought in investors faster than ever. At that time, Ponzi was making $250,000 a day.

Despite this reprieve, one of the editors of the Post was suspicious and assigned investigative reporters to check Ponzi out. He was also under investigation by the Commonwealth of Massachusetts, and on the day the Post printed its article Ponzi met with state officials. He managed to divert the officials from checking his books by offering to stop taking money during the investigation; a fortunate choice, as proper records were not being kept. Ponzi’s offer temporarily calmed the suspicions of the state officials.

[edit] Collapse of scheme

By this time Ponzi was seeking another deal to get him out of the golden trap he had built for himself, but time was running out. On July 26 the Post started a series of articles that asked hard questions about the operation of Ponzi’s money machine. The Post contacted Clarence Barron, the financial analyst who published the Barron’s financial paper, to examine Ponzi’s scheme. Barron observed that though Ponzi was offering fantastic returns on investments, Ponzi himself wasn’t investing with his own company.

Barron then noted that to cover the investments made with the Securities Exchange Company, 160,000,000 postal reply coupons would have to be in circulation. However, only about 27,000 coupons were actually circulating. The United States Post Office stated that postal reply coupons were not being bought in quantity at home or abroad. The gross profit margin in percent on buying and selling each IRC was colossal, but the overhead required to handle the purchase and redemption of these items, which were of extremely low cost and were sold individually, would have exceeded the gross profit.

The stories caused a panic run on the Securities Exchange Company. Ponzi paid out $2 million in three days to a wild crowd outside his office. He canvassed the crowd, passed out coffee and donuts, and cheerfully told them they had nothing to worry about. Many changed their minds and left their money with him.

In the short term, Ponzi had hired a publicity agent, James McMasters. However, McMasters quickly became suspicious of Ponzi’s endless talk of postal reply coupons, as well as the ongoing investigation against him. He went to the Post, calling Ponzi a “financial idiot.” The paper offered him five thousand dollars for his story, and ran a headline on August 2 declaring Ponzi hopelessly insolvent. On August 10 federal agents raided the Securities Exchange Company and shut it down. There was no large stock of postal reply coupons. The Hanover Trust Bank was shut down as well. The Post continued their articles, with one revealing Ponzi’s jail record and publishing his (smiling) Canadian mugshots.

On August 12, 1920 Ponzi was under arrest, with a Federal indictment. His liabilities were estimated at $7,000,000.[6]

Ponzi’s supporters were outraged at the officers who arrested him. 17,000 people had invested millions, maybe tens of millions, with Ponzi. Many who were ruined were so blinded by their faith in the man or their refusal to admit their foolishness that they still regarded him as a hero.

[edit] Prison and later life

Con man Ponzi circa 1910

On November 1, 1920, Ponzi pleaded guilty to mail fraud, and was sentenced to five years in federal prison. He was released after three and a half years to face state charges.[1] On November 29, 1924 proceedings were initiated to have him deported.[7] During a state trial he was again found guilty and sentenced to seven to nine years.[1] Before entering state prison, Ponzi jumped bail and fled to Florida, where he set up a real estate business in the Springfield section of Jacksonville. In September, 1925 Charpon Land Syndicate began selling “prime Florida property” to gullible investors.[1] In reality, it was a scam that sold swampland in Columbia County.[8]

Ponzi was indicted by a Duval County grand jury in February, 1926 and charged with violating Florida trust and securities laws. A jury found him guilty and the judge sentenced him to a year in the Florida State Prison. Ponzi appealed his conviction and was freed after posting a $1,500 bond. Ponzi traveled to Tampa[8] where he shaved his head, grew a mustache, and tried to flee the country as a crewman on a merchant ship bound for Italy. However, the ship made one last American port call and he was caught in New Orleans and sent back to Massachusetts to serve out his prison term.[1]

In the meantime, government investigators tried to trace Ponzi’s convoluted accounts to figure out how much money he had taken and where it had gone. They never managed to untangle it and could conclude only that millions had gone through his hands.

Ponzi was released in 1934 and asked for a full pardon from Joseph Buell Ely, the Massachusetts Governor.[9]

He was deported to Italy because he had never become an American citizen. His flashy confidence had faded by that time, and when he left the prison gates he was met by an angry crowd. He told reporters before he left: “I went looking for trouble, and I found it.” Rose stayed behind and later divorced him in 1937,[10] as she did not want to leave Boston for his sake. However, they continued to exchange hopeful love letters up until Ponzi’s death.

In Italy, Ponzi jumped from scheme to scheme but little came of them. He eventually got a job in Brazil as an agent for Ala Littoria, the Italian state airline.[2] However, during World War II, the Brazilians, who had sided with the Allies, realized the Italians were using the airline to ship strategic materials and shut it down.

[edit] Death

Ponzi spent the last years of his life in poverty. He had a stroke in 1948, and died in a charity hospital in Rio de Janeiro on January 18, 1949. He was blind in one eye and partially paralyzed.[2]

In the charity hospital, Ponzi granted one last interview to an American reporter, and commented about the wild ride he had given Bostonians: “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.”[11][3]

[edit] Similar schemes

[edit] References

  1. ^ a b c d ePonzi Payment“, Time magazine (January 5, 1931). Retrieved on 21 December 2008. “In 1920 thousands of gullibles had a more ornate picture of him. He was then the shrewd, straight-eyed miracle man of Boston’s Hanover Street. He promised his clients a 50% profit in 45 days. … The essence of his scheme was to buy postal reply coupons in countries with depreciated exchange, redeem them at face value for U. S.”
  2. ^ a b cTake My Money!“, Time magazine (January 31, 1949). Retrieved on 21 December 2008. “In Italy, Ponzi got on the good side of Mussolini’s Fascists, was sent to Rio de Janeiro as business manager for Italy’s LATI airlines. The war ended his job; after that he eked out a meager existence as a translator. Committed to a Rio charity ward, blind in one eye and partly paralyzed, he said not long ago: “I guess the only news about me that most people want to hear is my death.””
  3. ^ a b c d eIn Ponzi We Trust“, Smithsonian magazine (December 1998). Retrieved on 21 December 2008. “Ponzi himself was probably inspired by the remarkable success of William “520 percent” Miller, a young Brooklyn bookkeeper who in 1899 fleeced gullible investors to the tune of more than $1 million.”
  4. ^ John C. Esposito, “Fire in the Grove”, Da Capo Press, 2005
  5. ^ Grove, Martin A. (2004-2-13). “‘Ponzi’ Movie Isn’t Dunn Deal Yet, But Could Be“. The Hollywood Reporter. http://www.allbusiness.com/services/motion-pictures/4810464-1.html. Retrieved on 23 December 2008.
  6. ^Ponzi Arrested. Liabilities Put at $7,000,000. Federal Authorities Charge Using Mails to Defraud. State Warrant Charges Larceny. Claims $4,000,000 Assets. Bank Commissioner Fears Hanover Trust Assets Have Been Wiped Out. Investors Grow in Number. Attorney General Still Recording. Hundreds of Note Holders Caught in Crash.“, New York Times (August 13, 1920). Retrieved on 21 December 2008. “Liabilities running at least up to $7,000,000 and assets unknown, save for his assertion that they amount to $4,000,000, are among the echoes of the bursting of Charles Ponzi’s bubble this noon, when he surrendered …”
  7. ^Proceedings to Deport Coupon Financier to Canada or Italy Are Begun.“, New York Times (November 30, 1924). Retrieved on 21 December 2008. “Charles Ponzi, promoter of the get-rich-quick scheme of four years ago which attracted investments of many millions of dollars, was arrested early today by immigration authorities on a warrant charging that he is in this country illegally. Deportation proceedings will begin immediately, it was said by Immigration Commissioner John P. Johnson.”
  8. ^ a b Florida Times-Union December 22, 2008-Ponzi lived here: Infamous name tied to scheme was local by Jessie Lynne Kerr
  9. ^Ponzi Pardon Plea is Denied in Boston. Governor Ely Decision Is Followed by Court Move to Block Deportation.“, New York Times (July 13, 1934). Retrieved on 21 December 2008. “Governor Ely today denied Charles Ponzi’s petition for a full pardon, which would save him from deportation. The Governor made his decision after a hearing at the State House in which Ponzi pleaded tearfully to remain in this country.”
  10. ^Sued for Divorce“, Time magazine (1937). Retrieved on 21 December 2008. “Charles Ponzi, 54, celebrated Boston swindler, now a Roman tourist guide; by Mrs. Rose Ponzi whom he married in 1918; in Cambridge, Mass. Grounds: he had served “more than five years” (1922-34) in prison. Explained she: “When he was down … I stuck to him.””
  11. ^ Scams – and how to protect yourself from them. ISBN 1409232913. http://books.google.com/books?id=KNC_VRtss60C. “… to an American reporter, and commented about the wild ride he had given Bostonians: “Even if they never got anything for it, it was cheap at that price. …”
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