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The Capitalist Crucify the Old Man - 1880's


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Sunday, November 14, 2010


I hate to point it out, but in 1920 the Boston Red Sox began the month of July on a very sour note. The legendary pitcher for the Washington Sentators,  “Big Train” Walter Johnson, threw a no hitter shutout against the Red Sox on the very first day of the month. His achievement dropped the Sox record to 30 wins and 32 losses, with one tie. The rest of July would be even worse, with the team that had begun the year by selling Babe Ruth to the rival New York Yankees, finishing the July 13 games below .500, at 40 wins and 53 losses.
Worse, on July 17th, Babe Ruth, broke his own and major league baseball's record for home runs in a single season, hitting numbers 30 and 31 against the Chicago White Sox. And to drive the point home even more strongly, on July 27th, he hit number number 35, leading the hated Yankees over the Red Sox, 8-2; and the season was only half over.
But July was even worse for Bartolomeo Vanzetti. He was already charged with the April 15, 1920 robbery and double murder in Braintree along with Nicola Sacco. But then he had been brought to trial by himself for a Christmas Eve 1919 attempted robbery in Bridgewater, Massachusetts. That trial had opened on Tuesday June 22nd and the guilty verdict had been read out just one week and two days later, on Thursday July 1st.
It is almost impossible not to call this trial a travesty of justice. Twenty witnesses testified they had bought eels from Bartolomeo at his stand in Brockton on the day of the robbery, but they were all Italians who spoke only broken English, and the jury simply refused to believe them. All the witness for the prosecution admitted they had not gotten a good look at the suspect with the shotgun, but they were all Protestants, and were all fluent in English. The only actual physical evidence against Bartolemeo were the shot gun shells found in his coat pocket at his arrest. They might have fit the shot gun used in the attempted robbery, but neither the gun nor any spent shell casings were ever found. Sill the jury was willing to believe that Vanzetti was guilty.
The defense attorney did such a bad job that modern readers of the transcripts suspect he might have even thrown the case. And he did later go into private practice with the prosecutor. Bartolomeo’s Vanzetto’s sentencing was set by Judge Thayer(above) for  the middle of August. His trial with Sacco would not begin until the summer of 1921. But with this conviction, the prosecutor might have suspected that Vanzetti would turn on his fellow defendant. He did not, perhaps because he could not.
Meanwhile, in downtown Boston, and in “The North End”, Charles Ponzi was having a very good month. A financial reporter for the Boston Post, Princopio Santosuosso, wrote a column, questioning Ponzi's financial scheme, and Ponzi sued him for liable. And to everyone’s amazement, Ponzi won a $500,000 judgment. He was never paid, of course, but it stilled any public concern about his investment scheme. And it stiffled most of the press as well. The Post even ran a July 24th story filled with praise for the Old Colony Foreign Exchange, Ponzi’s company. That really opened the flood gates and even more money poured into Ponzi's scheme.
By this time Ponzi’s offices, in room 227, in the Niles Building at 27 School Street, were receiving $1 million every three hours from new investors. Of course, most of that money had to go right back out in order to pay dividends to earlier investors. Of course, as long as every day brought in more money than the day before, Ponzi’s business plan stayed afloat. But the editors at the Post had not rolled over after the lost liable case. In fact they were more determined than ever to put the little Italian out of business.
Publisher Richard Grozier and city editor Eddie Dunn had enlisted a “short, rotund powerhouse”, to reinvestigate Ponzi. Their man was a proven expert in finance, and wealthy enough and so well connected to the power strucutre in Boston and New York that he was not afraid of the little Italian’s lawyers. His name was Clarence W. Barron (above), and besides residing in a mansion at foot of Beacon Hill, he was also the owner and editor of “The Wall Street Journal.” Within a year he would also found “Barron’s”, making him the unofficial “diarist of the American Dream”.
First, Barron’s staff checked the public records. What they discovered was that Ponzi (above on the right) was worth about $8.5 million. But they also discovered that Ponzi had invested none of his own money in his own company. Then they did a little math and learned why.
To have covered all the money invested in the “Old Colony”, the company would have had to buy at least 160 million international postal reply coupons. However, according to the U.S. Postal Service, there were only about 27,000 coupons in circulation, worldwide. Which meant Ponzi's business model was not possible.
This information, combined with what the investigative staff of the Post had already collected, portended doom for Ponzi. The cheerful little man from Italy had been released from a Canadian prison in 1911, after serving a sentence for forgery and financial fraud. He had then almost immediately run afoul of American Immigration authorities for his part in a immigrant smuggling scheme, and served two years in the Atlanta Federal Prison.
Upon his release, he had gone to work for his father-in-law, as a lowly clerk in an Italian grocery (above). But Ponzi did not stay there long. It was only a few months later, in mid-1919, that he had registered his Old Colony Foreign Exchange” with city hall.
By the beginning of August, The great Red Scare, which had begun with such a furor in January, was pretty much over. Attorney General Palmer had predicted a communist-anarchist uprising on May Day. It had not happened. He had predicted another on July 4th. That rebellion had not happened either. By the middle of July both Palmer and J.Edgar Hoover, his man at the Justice Department’s Investigation Bureau, had both been reduced to laughing stocks. Palmer’s dreams of reaching the White House had faded away.
August and the hot dog days of summer were on the horizon. And by all indications, August would be a very eventful month in Boston.
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