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Sunday, November 21, 2010

1920 - DOG DAYS OF SUMMER

I admire the way the Boston Post handled the attack on Charles Ponzi. They respected him as an opponent. He had sued one of their compatriots and won a half million dollars, and they were not going to let that happen again. So on Friday, July 30th, 1920, they began to draw away the curtain, slowly, like a magician unveiling a disappearing elephant. First there came Mr. Barron’s detailed explanation of the impossibility of Ponzi’s plan to buy and sell international mail coupons. And then on Monday, August 2nd, the paper featured a column written by Mr. William McMasters. He had been a writer for the Post, until Ponzi had hired him as a Press Agent. And nobody can cut your throat more quickly than a Press Agent who suddenly starts telling the truth.
The Press Agent, it seems, had gotten a better gig. McMasters’ ex-employer, The Post, had paid him $500 for the all the dirt on his new employer. McMasters said he had not been a Ponzi employee for very long before he realized that his boss was, in McMasters’ own words, “a financial idiot who didn’t know how to add”. The press agent quoted from documents he had found in the company offices which showed that, contrary to the public records (such as those which Mr. Barron had access to), Mr. Ponzi was not worth $8 million, but was $4.5 million in debt. There was an immediate run on the “Old Colony” offices.
Terrified investors jammed Room 227 in the Niles Building, each demanding to withdraw their cash. And Charles Ponzi greeted them with cookies and coffee and a smile and gentle words and…cash. Over three days he paid out an estimated $2 million in cold hard cash to panicked investors. Overnight they had confidence again in Charles Ponzi. Many put their money back into his company. A few new investors even lined up to hand over their life savings. And if it had remained merely a matter of Ponzi verses the Boston Post, he might have won that battle. But a new player had entered the arena.
His name was Joseph Allen, and he was the Massachusetts Bank Commissioner. Following Ponzi’s amazing adventures in the Post, Mr. Allen.grew suspicious. Where had that most recent $2 million in cash come from so fortuitously, so suddenly? Normally no business, certainly not an investment program such as the “Old Colony”, has that much cash on hand. Following normal investment procedures the cash is out, earning interest for the customers. And when Mr. Allen learned that the little cheerful Italian had received over a quarter of a million dollars in loans from the Hanover Trust Bank, he ordered in two examiners.
It took the examiners only a couple of days to realize that McMasters had probaly gotten it right; Charles Ponzi was in all likelyhood overdrawn. And he had used his position at Hanover Trust to get a loan he could never hope of repaying. Using his own authority, the Commissioner ordered Hanover to freeze Ponzi’s accounts while they checked further. And then he went one step further himself, beyond his authority.
Mr. Allen got together a group of unfortunate investors in the “Old Colony” and helped them to all file for bankruptcy. That forced an immediate audit of the company. And that again confirmed McMasters’ documents; Ponzi was worse than broke. Ponzi was at least $8 million in the hole.
And then on the morning of Wednesday, August 11th, 1920, the Post delivered the coup de grace. They revealed that Charles Ponzi had served time in a Canadian Prison, convicted of forgery. The people of Boston, now ready to believe that Ponzi might be a liar and a crook after all, were handed proof that he had been a liar and a crook in the past. That very afternoon, Commissioner Allen seized Hanover Trust. The next day Ponzi surrendered to the cops, and was charged with mail fraud. He made bail, but the bondsman revoked it the very next day, on Friday the 13th. Even the bondsman now considered Ponzi a bad risk.
In all six banks were pulled under by the Ponzi scheme. And the investors, many of whom had stood in line for hours to hand over their lives’ savings, got back just thirty cents on every dollar. And the furniture dealer, who had started all the questions about Charles Ponzi, he did not even get his furnture back.
On Monday, August 16, 1920, Bartolomeo Vanzettii was bought back before Judge Webster Thayer for sentencing in the Bridgewater attempted robbery case. And almost no one was surprised when Judge Webster Thayer threw the book at him; twelve to fifteen years in prison.
August had shown a resurgence for the Boston Red Sox.  It was interrupted on the 20th when the Red Sox were schedualed to play the Cleveland Indians. On that day the entire Cleveland team was on the train back to Cleveland to attend the funeral of their teammate, shortstop Ray Chapman.  On the 16th "Chappie" was hit in the head by a pitch from the Yankee pitcher Carl Mays. He died 12 hours later; the only player ever killed in a baseball game. The Red Sox finished the month just five games below .500, their record now at 59 wins and 64 losses. The season was finally winding to a sad end for Boston.
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