#1. On a beautiful summer day in July 1890 Vincent van Gogh, now recognized as one of the world’s most gifted painters, went down into the open country of Auvers, France and shot himself in the heart with a revolver
(Martini 3). The man who is now known throughout the world for his revolutionary artistic talent died in his brother Theo’s arms, little known or appreciated in his own time (Barnes 17). Van Gogh’s suicide marked the
end of a life-long struggle with mental illness and depression that affected every aspect of his personal and social life. His unpredictable, sometimes even violent mental and emotional states led to a life of loneliness and
isolation, preventing van Gogh from achieving much recognition or success in his own lifetime. Much of van Gogh’s inner pain is reflected in his paintings, especially in his own self-portraits. In fact, the fluctuations in
van Gogh’s mental state and mood due to his mental illness directly influenced his choice of color schemes and facial expressions in his self-portraits. His Self-Portrait painted in 1887 reflects van Gogh’s mental
excitement and optimistic energy during this very productive period of his life. In contrast, Van Gogh’s 1889 Self-Portrait was painted during his darkest period of illness and misery and these qualities are expressed
through van Gogh’s technique. His Self-Portrait with Bandaged Ear (1889- 90), is a testament to the physical effects of van Gogh’s illness. His Self-Portrait in Front of the Easel (1888) gives a foreshadowing of van Gogh’s passage from a time relatively free of symptoms to a period of mental pain and turmoil. Through his self-portraits van Gogh communicated his pain and sorrow to the viewer, creating lasting monuments to his chronic sadness as well as to his phenomenal talent.
Vincent van Gogh was born on March 30, 1853 at Groot Zundert, a village in Dutch Brabant. He was the eldest son of a Protestant clergyman named Theodorus van Gogh, and his mother’s name was Anna Cornelia
Carbentus (van Uitert, van Tilborgh, and van Heugten 27). In 1857 van Gogh’s brother Theo was born, and for the rest of his life van Gogh would remain very close to his younger brother. In many ways, Theo was van Gogh’s only friend, and lent him support in times when van Gogh felt totally isolated and alone. Throughout his childhood van Gogh suffered from a “highly strung, over-sensitive temperament” which contributed to his sense of isolation and loneliness (Barnes 8). He felt alone in the sense that no one else could really understand him, and this further cemented the bond between van Gogh and his brother.
In 1869 van Gogh found employment with an art dealership called Goupil and Co, but he soon became disenchanted with the business world and decided to devote himself to preaching the word of God. He was a devoted missionary, committing his entire heart and soul to helping the poor and the afflicted, but his somewhat eccentric and extreme behavior often worked against his efforts, frightening those whom he intended to convert. It was at this time, at the age of twenty- seven, that van Gogh finally decided to become a painter. The final ten years of his life were spent in a frenzy of painting and it was during these ten years that all of van Gogh’s most memorable works were produced. It was also during this time that van Gogh’s extreme tendencies and eccentric behaviors began to develop into serious mental illness, marked by episodes of periodic depression and melancholy often accompanied by mild psychotic features. During these years van Gogh’s relationship with his brother Theo became a lifeline, and the two corresponded closely with one another up to the time of van Gogh’s death. Van Gogh traveled a good deal during this period, experiencing life and conversing with many artists as he developed his style.
He eventually settled in Paris to live with his brother (Barnes 12). His years in Paris were relatively happy, but van Gogh eventually decided to move to Arles in 1888. It was during the last two years of his life that van Gogh would experience his darkest period of mental illness, as his depressive mood swings began to be accompanied by violent attacks or fits, one of which led to the severance of his own ear. During this time, the painter Gauguin, an acquaintance whom van Gogh admired and respected, came to live with Vincent in Arles. Gauguin’s three- month stay placed great stress on van Gogh, as the two argued incessantly. Gauguin’s visit began to wear down Vincent’s nerves, and this had a negative impact on his already unstable mental condition. Van Gogh began to make several visits to the St. Remy Mental Hospital, as his attacks became more frequent. Eventually, his illness defeated his will to live and on July 27 1890 van Gogh committed suicide in Auvers, France, shooting himself with a revolver. He died in his brother Theo’s arms on July 29. His last words: “The sadness will never go away” (Barnes 17).
From the very beginning of his career, Vincent van Gogh had very specific goals concerning the emotional impact of his work: I want to do drawings which touch some people… In either figure or landscape I should wish to express, not sentimental melancholy, but serious sorrow… I want to progress so far that people will say of my work, he feels deeply, he feels tenderly, notwithstanding my so-called roughness, perhaps even because of it. (Barnes 11) Van Gogh wanted to move people through his art. He wanted them to understand his feelings and emotions. He wanted them to experience the very same feelings that he felt while painting his subjects. It is in his self-portraits that van Gogh comes closest to achieving his goal, for in them one gains a profound sense of van Gogh’s mental and emotional condition at the time he created the portrait. Crispino writes that van Gogh’s self-portraits “provide much evidence of his appearance and above all, of his moods” (36). For example, in his 1887 Self-Portrait we see a van Gogh filled with passion, energy and determination, a van Gogh relatively free of the symptoms of mental illness which darkened so much of his adult life. In the painting we see van Gogh wearing a grey felt hat. He is wearing a well-kept beard and moustache, painted orange, and a white shirt and coat painted blue. The strong blues contrasted with the vivid oranges provide a sense of energy and optimistic activity. This was doubtless van Gogh’s intention, for as Martini writes, van Gogh knew that “the external world, once placed in a particular light and a specific color, was the emotional equivalent of his inner world” (6). Van Gogh’s facial expression is one of healthy focus and determination, and van Gogh himself called his expression in this portrait “purposeful” (van Uitert, van Tilborgh, and van Heugten 83). His skin tone is vibrant and healthy; his face full and well formed. One striking characteristic of this self-portrait not found in van Gogh’s others is the “halo” effect created by the brushstrokes which are painted surrounding van Gogh’s head. The brushstrokes radiate outward from van Gogh’s head “symbolically, as if they originated from a luminous source” and create an “intensity of expression” (Martini 13).
Van Gogh painted this self-portrait during one of the happiest and most productive periods of his life while living with his brother in France. Van Gogh’s use of color, technique, and facial expression all work together to create an impression of energy and determination, qualities which communicate the painter’s contentment during this pleasant and most productive time of his life. Unfortunately, times of peace and inner contentment were relatively short-lived for van Gogh. Tormented by his illness, van Gogh experienced frequent bouts of serious melancholy and depression. Shortly after he moved from Paris to Arles in 1888 van Gogh experienced some of his most severe bouts of mental illness (Barnes 13). It was during van Gogh’s last two years (1888-90) that his psychotic, often violent attacks began to appear, leading eventually to the cutting off of a portion of his own ear. It was also during this time that van Gogh began to require periodic hospitalization for his illness.
In 1889, during his first stay in the asylum of St. Remy, van Gogh painted another self-portrait that captures his melancholy feelings of isolation and loneliness (Crispino 38). In contrast to his self-portrait of 1887, van Gogh here appears gaunt and tired, pale and drained of energy. In the painting van Gogh peers at the viewer holding a painter’s palette and brushes. He wears a dark blue cape over a white shirt. The background is a deep, almost purplish, blue, and van Gogh’s hair, beard and moustache are painted in more muted tones than in his 1887 self- portrait, with greater emphasis on yellow than orange tones. The overall effect is one of sadness and ill health. Van Gogh describes himself in this portrait as being “as pale as the devil” (Crispino 37). His face is gaunt and indeed “pale,” and his eyes have a haunted, almost weary look. Surely this is a reflection of van Gogh’s mental state at the time. The yellow tones of van Gogh’s beard and hair also give one the impression of weakness. His eyes communicate a great sadness to the viewer, a sign of “feverish tension, the sign of a desperate internal struggle which is brought out into the open” (Martini 6). Van Gogh used color, facial expression, and technique to once again communicate his mental state to the viewer. This time, the message is one of pain and loneliness. As Taschen writes:
Van Gogh was inimitably skilled at representing the fate of man… the things and people in his paintings inevitably had a mood of melancholy and pity; in the act of painting, the artist’s emotional world acquired independence — and objectivity, in that it could clearly be seen in the object of contemplation.
In this case, the “object of contemplation” is van Gogh himself. Van Gogh was indeed skilled at communicating “melancholy and pity” in his painting, and nowhere is this more evident than in his self-portraits.
Another self-portrait done by van Gogh during this same time period is his Self-Portrait with Bandaged Ear (1889-90). This painting was done during van Gogh’s stay at the St. Remy Mental Hospital after the violent episode during which he sliced off a portion of his own ear with a razor. Van Gogh’s extreme behavior was likely precipitated by the presence of Gauguin, who was staying with Vincent in Arles. The two argued constantly and van Gogh felt bitter and filled with self-doubt. This violent attack of van Gogh against himself was the first of many seemingly psychotic episodes and marked the beginning of van Gogh’s final decline toward suicide. Martini writes, after the tragic crisis that unleashed the quarrel with Gauguin, van Gogh lived his saddest days, and this reflected in his work. Of van Gogh’s Self-Portrait with Bandaged Ear Denvir writes, he (van Gogh) looks haggard and depressed. Van Gogh writes to his brother Theo that at the time of this self-portrait my reason has half-foundered (Barnes 76). Martini describes van Gogh’s appearance in this painting as strangely serene and almost indifferent, perhaps reflecting how close van Gogh was to finally giving up on the struggle and ending his own life.
In the portrait van Gogh is wearing a dark green overcoat buttoned at the top. A hint of a white undershirt can be seen over the top of the coat. On his head is a small but well insulated blue cap, indicating a time of cold weather. The bandage is seen covering his right ear in the portrait, indicating that van Gogh was working from a mirror image since it was his left ear that he damaged (van Uitert, van Tilborgh, and van Heugten 188). His face is gaunt and haggard. His beard and moustache are no longer present, having been recently shaven. Once again, the eyes communicate a great deal to the viewer, giving a sense of ambiguity and disinterest in the world. Denvir describes van Gogh’s mental state at the time of this painting as acute mental derangement accompanied by delirium, which would be consistent with van Gogh’s known behavior at the time. The background of the painting is a pale yellow wall, although a surprisingly bright print of Japanese style can be seen hanging behind the artist’s head. Overall, the colors of this painting are more muted and suppressed than in the other self-portraits here discussed, which further enhances the general feeling of misery and depression induced by this painting. Van Gogh substituted the intense solar colors of his previous paintings with the muffled tones of his solitude (Martini 15), and succeeded in communicating his mental anguish and exhaustion to the viewer.
As in his other self-portraits, van Gogh once again successfully manipulated the elements of color, style, and facial expression to capture his current mental and emotional state and communicate it to the world. However, van Gogh was not limited to the use of his self-portraits to capture his mental states during opposing periods of relative contentment and deep mental anguish. He was equally adept at capturing his moods during times of transition between stability and illness. An example of this is his Self-Portrait in Front of the Easel (1888), a painting which captures van Gogh just prior to a major decline in mental health. This self-portrait was created near the end of van Gogh’s contented stay with his brother Theo in Paris. Van Gogh was beginning to feel restless and was preparing to move to Arles, where he would quickly decline in mental health. Within the next two years, he would end his life by his own hand. At the time he painted this self-portrait he was beginning to feel a deepening depression and he knew that his mental health was once again declining. This sense of mental distress is communicated vividly by the painter’s self-portrait.
In the painting, van Gogh sits in front of a painter’s easel, palette and brushes in hand. He wears a kind of blue overcoat similar to those seen in so many of his self-portraits, the now-familiar white shirt peeking out from above the collar. His hair is close-shaven, but a careful inspection reveals the use of chaotic brushstrokes, indicating that his hair is “unkempt and neglected” (Crispino 36). His beard and moustache are painted in bright orange, but the overall shading that covers the face mutes these brighter tones. In fact, the deepest shading evident in this portrait is covering the artist’s own face, indicating that van Gogh knew what was happening to him mentally and emotionally. He sensed that dark times lay ahead for him (Shone 10). Van Gogh himself describes his face in this portrait as a death’s head (Denvir 10). The background is a shade of flat gray-white. In fact, the dominant color in this self-portrait is a gray-white tone that communicates a sense of despair or impending trouble. Bronkhorst notes the unhealthy expression seen on van Gogh’s face, an impression enhanced by the use of shadowing. The painting is of a man who appears unkempt and sad. Gruitrooy writes that in this portrait van Gogh is clearly on the verge of depression. Describing his face here in a letter to his sister, he refers to the wrinkles on his forehead and ‘about the wooden mouth. Perhaps the most striking feature of all are the eyes, which appear totally black and lost in shadow. The impression is one of intense inner anguish and despair (Gruitrooy 43). The entire painting communicates a grim sense of almost prophetic foreshadowing on the part of van Gogh, who seemed to understand the danger of his dark moods to his health. Toschen describes van Gogh’s self-portrait in the following terms:
There are deep creases by the nose and cheekbones, the eyebrows are thick and prominent, the corners of the mouth have turned down it is the face of a man with no more time for friendliness.
Van Gogh had lived his entire life with mood swings, depression, and mental illness, and he was well aware that he was entering a period of ill health at the time he painted this self-portrait. It is a testament to his great talent as a painter that he was able to so successfully capture his sense of depression during a time of transition from a period of stability to a time of mental sickness. Once again, van Gogh succeeds in capturing his thoughts and feelings at a particular point in time in his self-portrait and communicating them to the viewer. His talented use of technique, color and facial expression allow him to speak to us of his private torment so many years after his passing away.
Vincent van Gogh painted approximately forty-three self-portraits during his brief ten-year career as an artist (Crispino 36). Each one of these paintings communicates the painter’s mood and mental state at that time, showing us a man of great passion, energy and dedication as well as a man of highly changeable mood and temperament. He was given to outbursts of anger, yet capable of great tenderness (Crispino 35). Nowhere are van Gogh’s transitions from times of great optimism and feverish energy to periods of misery and psychotic depression more eloquently expressed than in his self-portraits. The changes in van Gogh’s mood and mental state directly influenced his choice of color scheme and facial expression in his self-portraits. His 1887 Self-Portrait succeeds in conveying a sense of fleeting tranquility and contentment, while his 1889 Self-Portrait communicates his sense of despair and mental confusion during the darkest time of van Gogh’s life. His 1889-90 Self-Portrait with Bandaged Ear demonstrates his mental state just prior to his suicide, while the 1888 Self- Portrait in Front of the Easel shows van Gogh in a state of transition between a time of happiness and a time of despair. These paintings are lasting testaments to the unrivaled skill of Vincent van Gogh in expressing his ever-changing temperament through art, and allow the artist to communicate with viewers for as long as his paintings exist. Van Gogh once wrote to his brother the truth is, we can only make our pictures speak (Barnes 6). This was van Gogh’s greatest talent and greatest accomplishment, and he still speaks to us today through his self-potraits.
Throughout history, the swindler has financially plagued society. Whether it is the get rich quick scheme or the carnival worker s impossible challenge, people have been cheated out of uncountable sums of money. In the 1920 s a man named Victor Ludsig, posing as a French official, sold the Eiffel Tower to a gullible scrap ironworker for $50,000. Even today con artists are thriving using the Internet to borrow from Peter to pay Paul. This is a scheme made famous by a crook so successful that his name now graces the age-old fraud, the Ponzi scheme. Webster s Dictionary defines Ponzi Scheme as
Any investment program that offers impossibly high returns and pays these returns to early investors out of the capital contributed by later investors. Named for Carlo Ponzi who promoted such a scheme in the 1920s based on a theoretical arbitrage in international postal reply coupons.
Fifty percent profit in forty-five days! was the claim of Charles Ponzi. Ponzi was a purported financial wizard. In the summer of 1920, he ran an investment company in Boston. He claimed to reap great profits by trading postal reply coupons. Nonetheless, the investment scheme was a fraud. Ponzi was using investors’ money to pay off earlier investors, while keeping some for himself. In the end, he had collected $9,500,000 from 10,000 investors.
Charles Ponzi was born in Italy in 1882. Born to a wealthy family, Ponzi put off work as long as possible and attended college at the University of Rome. Knowing he was avoiding the inevitable and seeing no appeal in the Italian business world, he immigrated to the United States. In 1903, upon entering the United States at the age of 21, Ponzi proceeded into Canada. In 1909, he was convicted of forgery in events surrounding the collapse of the Montreal banking firm of Zrossi & Co., of which he was a member. As punishment, he was sentenced to a three-year term in the St. Vincent De Paul Penitentiary in Montreal. Released from Canadian Prison after only twenty months for good behavior, Ponzi entered the United States again on July 30, 1910. Within ten days of his release, he violated immigration laws by illegally bringing five Italians over the border from Canada. For this offense, he served two years in Atlanta, Georgia. After his release from the Atlanta prison he made his way to Boston and toiled in relative obscurity until he developed a postal reply coupon scheme and formed the Securities Exchange Company.
Since colonization, Boston had been infested with so called entrepreneurs seeking to interest small investors by promising big profits. High wages in industrial centers, the climbing cost of living, and below-par quotations on Liberty Bonds, helped make New England a fertile field for those who promised quick and big returns. Many agents found their best argument was that while old banking houses made small returns to their depositors, the banks themselves were able to make enormous profits by frequently turning over their depositors money. Some agents proposed that small investors share in these big profits by permitting their savings to be invested for them.
Ponzi adopted from contemporaries the notion of sharing enormous profits with investors, adding his own twist: trade in postal reply coupons. This idea, the keystone of his swindle, was made more plausible with tales he spun about how he received the brilliant inspiration. On one occasion he said that in August of 1919, when he was considering issuing an export magazine:
I wrote a man in Spain regarding the proposed magazine and in reply received an international exchange coupon which I was to exchange for American postage stamps with which to send a copy of the publication. The coupon in Spain cost the equivalent of about one-cent in American money, I got six cents in stamps for the coupon here. Then I investigated the rates of exchange in other countries. I tried it in a small way first. It worked. The first month $1,000 became $15,000. I began letting in my friends. First, I accepted deposits on my note, payable in ninety days, for $150 for each $100 received. Though promised in ninety days I have been paying in forty-five days.
Ponzi opened his postal coupon business in December of 1919. He filed a certificate with the city clerk citing himself as sole manager of The Securities Exchange Company . In the beginning of the enterprise, Ponzi described himself as everything from President to office boy . On the second day of operation, he explained his business to a visitor from the Chamber of Commerce. The man believed Ponzi’s enterprise could succeed. A short time later the postal inspector stopped by and expressed doubts about the legality of redeeming millions of coupons. Ponzi claimed that having the coupons redeemed overseas, outside of the federal government s jurisdiction solved this problem.
In May 1906, the United States and over 60 other countries assembled in Rome, and revised the Universal Postal Convention of 1897. The UPC provided for the administration of postal services among signatory countries. Ponzi seized upon the mechanism provided by Article 11(2) of the revised Convention. Article 11(2) is as follows:
Reply coupons can be exchanged between the countries of which the Administrations have agreed to participate in such exchange. The minimum selling price of a reply coupon is 28 centimes, or the equivalent of this sum in the money of the country which sells it.
This coupon is exchangeable in all countries parties to the arrangement for a postage stamp of 25 centimes or the equivalent of that sum in the money of the country where the exchange is requested. The Detailed Regulations contemplated in Article 20 of the Convention determine the conditions of this exchange, and in particular the intervention of the International Bureau in manufacturing, supplying, and accounting for the coupons.
This provision, with a built-in 3-centime loss on the sale of each coupon (a centime being a hundredth of a franc). Clearly, this did not makeway for profitable arbitrage through these coupons. The purpose of the reply coupon was simply to facilitate the prepayment of return postage when sending mail to another country. The recipient of a reply coupon would exchange the coupon for the appropriate stamp in the recipient’s country, such stamp not being available in the sender’s country. The value of the coupon was intended to be constant throughout all countries forming the Postal Union, and regulations defined the rate of exchange between each country s currency and postal reply coupons.
Because of economic dislocations caused by World War I, however, some currencies became devalued relative to others, and the postal regulations had not been updated to reflect this. For instance, Ponzi claimed The same amount of American money will buy more value in coupons in Bulgaria in than in the United States. There did seem to be potential for profit here, and although the aggregate volume of coupon redemption did not indicate abnormal trading activity, postal authorities took steps to prevent speculation. On July 2, 1920, the Post Office Department issued regulations limiting redemption of coupons to ten at one time. The Post Office Department announced new conversion rates on July 28, to be effective August 15. Prior to this, the rates had not been changed since before the war. With characteristic government candor, postal officials denied that the changes were the result of concerns about speculation in reply coupons. Acting Third Assistant Postmaster General Barrows noted foreign countries had also taken steps to prevent speculation. Regardless, these measures did not hamper Ponzi’s operations, as he was not trading in coupons anyway.
The flaw in a coupon trading scheme as Ponzi proposed was that while an individual stamp transaction may indeed yield a 400 percent profit, the amount of that profit would be minuscule in absolute terms. In order to earn the millions of dollars, astronomical quantities of coupons would have to be handled. One can imagine hordes of Ponzi agents, pushing wheelbarrows full of coupons to post offices, unloading them with shovels or pitchforks.
Intuitively, we can see that the transaction costs of purchasing, transporting and redeeming the coupons would exceed any profits from sale, and it is conceivable that Ponzi actually made some trades early on and discovered this fact. Ponzi recognized that the problem of handling large volumes of coupons was a matter of concern to investors and authorities, incorporating this into the mystique of his scheme: My secret is How do I cash the coupons? That is what I do not tell.
Ponzi started his business essentially penniless, and in December of 1920, he borrowed two hundred dollars from Joseph Daniels, a furniture dealer. Ponzi used most of the money to purchase furniture from Mr. Daniels, keeping the rest for spending money. Ponzi paid the note at maturity.
Although Ponzi knew the idea would never work, through his charisma and charm people began to invest in his postal reply coupon scheme. He happily accepted money from anyone willing. He even accepted eight hundred dollars from his wife Rose. By March 1920, nearly one hundred people had invested almost $30,000. Nonetheless, Ponzi owed these investors nearly $45,000. Fortunately for Ponzi, when the notes came due, most depositors kept the money invested to accrue even more interest.
At first, most of Ponzi s clients were Italian immigrants, but as the good word spread, many others rapidly joined the growing crowds. Policemen, priests, working class mothers with children, and fathers who mortgaged their homes all invested with Ponzi. Shortly thereafter, word spread throughout New England and Ponzi hired agents to operate and accept money throughout the central East Coast.
The smooth and selfish Ponzi had ready answers for every question or doubt. The effervescent Ponzi was able to convince anyone with his sappy chatter. He had not studied finance, yet he had a natural skill in mathematics and had supreme confidence. Ponzi believed that if you overwhelm someone with enough numbers they would at least think you know what you are talking about .
As torrents of money flowed daily into the SEC, Ponzi adjusted to his stunning success. He first expanded his office and hired people to stand behind the cages and accept money. Then within a few days, he hired managers. By that time money was flowing in at such a massive rate that he also hired two Boston Policemen. Every few hours, one of the policemen would carry out a satchel to the bank. By May 1920, one thousand investors had bought nearly $400,000 of SEC notes.
The summer of 1920 was sweltering and it was even hotter due to Charles Ponzi and his perceived financial wizardry. Immigrants from all over the East Coast joined the Bostonians in coughing up millions of dollars to double their money in three months by investing in Ponzi s postal reply coupon scheme. With income from his venture growing exponentially, Ponzi invested in the good life for himself. He bought a $500,000 home outside of Boston with central heat and air conditioning and a heated swimming pool. He also spent nearly the equivalent of the cost of his home on furnishings. Ponzi also brought his mother, Emelda, over from Italy via first class ocean liner, donated $100,000 to a local orphanage, and hired a publicity agent, William McMasters, to help with handling the onslaught of notoriety. Ponzi, out for revenge, even bought the Poole Shipping company where he once worked solely to fire his former boss. Nevertheless, with every dollar he brought in, the mountain of debt he owed his investors kept growing.
The crowds outside Ponzi s school street office caught curious officials attention. Three policemen came to question the legitimacy of Ponzi. When the officers left, two of them had invested with Ponzi. Six months earlier the Italian was flat broke, now, Charles Ponzi, was basking in his newly found prosperity and notoriety, swarmed by crowds wherever he went. In the Italian neighborhoods he was a god, he was the image of everything they had wished to achieve. In addition, their investment was growing immensely. He was idolized.
The first question involving Ponzi s financial armor arose when J.R. Daniels, the furniture dealer who had helped start Ponzi s business sued him for $1.5 million. This brought attention to the fact that Ponzi was occupying this small office with rented furniture, yet he has all these millions of dollars. An article about the issue in The Boston Post brought a swift reaction. People began withdrawing from the SEC. Ponzi alleviated this problem by simply giving the appropriately skeptical investors money back. Ponzi claimed that he could return $200,000 a day to investors and it would not hurt him. Many people turned away still faithful and more people lined up to invest.
However, the Commissioner of Banks and the Attorney General of Massachusetts heard about Ponzi s claims and sent investigators. The Boston Press also began to take interest in the man people were calling the financial genius. One particular individual, Richard Grossier, son of the publisher of The Boston Post was perhaps a little more cynical claiming that it was too good to be true. On July 24, 1920, a surprisingly positive Boston Post article hailed Ponzi and his money making scheme. Consequently, hundreds of people crowded Ponzi s SEC to invest. Prior to the articles publication the millions of dollars that flowed into his scheme had arrived purely by word of mouth. Now the SEC was receiving about $250,000 a day.
The very same day, Ponzi met with the local bank officials. After concluding that his accounting records were to convoluted to easily sort out, he offered them a plan. Ponzi volunteered to discontinue taking in money, yet he would pay out money while the audit took place. The bank officials agreed, and the SEC remained open. Meanwhile, Ponzi was developing a strategy to free him from the looming predicament. Ponzi would convince his bankers to provide him with $10 million to purchase a fleet of merchant ship for sale by the U.S. Government. The plan was to transfer all of his company s assets and liabilities to the proposed steam ship company, allowing his investors to trade in their investments for stock in the new company. The plan failed to impress the bankers and it never materialized.
By July 26, Clarence Baron, the Wall Street publisher, wrote an article that questioned Ponzi s claims. It stated that if Ponzi could make three hundred percent profit for his investors, a true financial wizard would simply invest in his own company. Meanwhile, Ponzi was depositing all of his revenue into a bank account making three- percent interest. In the next issue, Baron s stated that in order for Ponzi s scheme to work, 160 million postal reply coupons needed to be circulating. Only 27,000 coupons were circulating in the world. The Post Office also reported that there were no large purchases of postal reply coupons in the United States or overseas. Consequently, hundreds of frenzied investors began withdrawing money from the SEC. The scene resembled a riot. Two women fainted. Nearly three million dollars were withdrawn from Ponzi s school street office in three days. Nonetheless, the positive Ponzi paid everyone back with a smile. In fact, Ponzi served the crowd coffee and doughnuts. Some investors, seeing Ponzi s confidence, turned away leaving their money invested.
After the articles publication, Ponzi stated that, I only used the postal reply coupon scheme as a blind, I didn t want the Wall Street boys to even get the slightest hint of what my real scheme was. As long as my investors get their money back with profit, I don t have to account to anybody. Charles Ponzi maintained his exuberant demeanor; nonetheless, the inevitable was soon to follow. The following day Ponzi was summoned by the local bank officials. The State Attorney General was by now estimating Ponzi’s liabilities at three million dollars. Ponzi is quoted as saying, are you saying gentlemen, that I am insolvent? Then I am your prisoner. News of Ponzi’s bankruptcy devastated noteholders who had clung to the hope of getting at least their original investment back.
On August 19, Ponzi was brought from jail for a hearing before Federal Commissioner Hayes. The Federal Building was surrounded by a crowd intent on seeing Ponzi, and the hearing was held in its largest courtroom. When the courtroom doors were opened, people pushed past bailiffs and scrambled for seats.
This court appearance found Ponzi relaxed and cheerful. Hands casually in pockets, he nodded to friends. Ponzi sat through an unrelated hearing, and when his own turn came, he waived examination and agreed to no change in bail. The hearing was brief, and Ponzi was remanded to the East Cambridge Jail until his case could be heard in the September term of the Federal District Court. Ponzi reported receiving $5,000 in his cell from hopeful investors, and again promised he could recoup his losses if allowed an extra 60 days.
On October 1, a federal grand jury returned two forty-three count indictments against Ponzi. On November 30, he made a deal with the prosecutors, pleading guilty to a single count. Having dismissed all counts but one, Assistant United States Attorney Shea urged the imposition of the maximum sentence. Shea reminded the assemblees of the extent of Ponzi’s fraud: It is true Mr. Ponzi did collect about $10,000,000. It is also true he paid back about $8,000,000, leaving a difference of about $2,000,000 between what he took in and what he returned. In imposing the maximum five year sentence for a mail fraud count, Judge Hale added his own stern pronouncement:
The defendant conceived a scheme which on his counsel’s admission did defraud men and women. It will not do to have the public, the world, understand that such a scheme as his through the United States instrumentality could be carried out without receiving substantial punishment.11
After numerous indictments, trials, and appeals at the federal and state level, Massachusetts Superior Court Judge Sisk sentenced Ponzi to a seven to nine year prison term as a “common and notorious thief,” on July 11, 1925. On September 28, 1927 with Ponzi still in a Massachusetts prison, the Immigration Bureau issued a deportation order for Ponzi. After his prison term, he left the United States for Italy. He spent his final days in the charity ward of a Rio de Janeiro hospital, and died on January 15, 1949 at the age of 67. A legal agent claimed Ponzi’s body and buried him using seventy-five dollars Ponzi had saved from a Brazilian government pension. The man who once possessed nearly ten million dollars, died with barely enough to bury his own body.
In modern times, society is still burdened by individuals seeking to get rich quick. Names such as Marty Frankel and Robert Rooney, with their modern form of the Ponzi scheme, have appeared in the news. Although modern con-artists may enjoy the short success Ponzi did, none may ever possess the charm, the demeanor, or the ability to touch the hearts of individuals intended to be swindled.