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In the late spring of 1914, a sign painter named Charles Ponzi arrived in Mobile aboard the steamer Tarpon. He had been working on board as a painter but, after arguing with the captain about his pay, was unceremoniously deposited in the Port City.

Eleven years prior, Ponzi, an Italian immigrant, had landed in Boston with barely $2.50 to his name. He had gambled away his savings during the voyage and upon arriving, he went to work as a dishwasher in a local restaurant, sleeping on the floor at night. After being promoted to waiter, he was fired when customers repeatedly complained about being shortchanged.

Soon after, Ponzi served a three-year stint in a Canadian prison for a forged check before returning to Boston. There, he went back to sign painting before being hired for the Tarpon. While in Mobile, he boarded in a rooming house on St. Anthony Street where he told his landlord’s daughter that one day his picture would be in all the papers. “Maybe when you are hanged, ” she quipped. 

He replied, “Either that or when I am a millionaire.”

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From Painter to Librarian

A local newspaper ad caught Ponzi’s eye; the University of Alabama’s medical school, then in Mobile, was seeking a librarian. The painter somehow convinced an interviewer of his fluency in both Italian and Greek and got the job. It paid $30 a month and came with room and board at the school.

Ponzi would later reminisce about his time in Mobile and his fondness for the young medical students who were constantly playing pranks on him. One of the most memorable occurred one night during a bad storm, which had left the city without power. When he went to turn in, he found that he was not alone in the darkness. The students had placed a female cadaver in his bed. Ponzi placed the corpse on the floor and went to sleep, adding that the next morning he got up but she did not.

In those years, a plan was underway to close Mobile’s medical school and move it to Tuscaloosa. When one of the college instructors asked the librarian to mail a letter as he headed for a Birmingham-bound train, Ponzi became suspicious and opened it. The contents revealed that the professor was actively working with university personnel in Tuscaloosa to have Mobile’s school shut down.

After presenting the letter to the school’s dean, he was thanked and then dismissed for his actions. Despite what he had found out, the opening of a private letter was considered grounds for immediate termination. Ponzi moved to New Orleans where he took up sign painting once more, and the medical school was on its way to Tuscaloosa in 1920.

A Boston Millionaire

By the end of the decade, Ponzi had returned to Boston where he began the Securities Exchange Company, which promised a 50 percent return after just 45 days. He hired well-paid agents to drum up business, and investors started flocking in to deposit money. He ultimately had agents in cities throughout New England and as far south as New Jersey.

In February of 1920, the firm held $5, 000. By May, that figure had jumped to $420, 000, and in July, the Boston Post wrote a favorable article about his firm. Later that month, he deposited $3 million in the Hanover Bank of Boston. Existing depositors who chose to cash out were paid by the flood of money from new customers. The majority, however, did not withdraw, choosing to reinvest. Depositors moved their life savings to Ponzi’s “investment” while others went so far as to mortgage their homes to get onto the gravy train.

Ponzi acquired a colonial revival mansion in suburban Lexington and covered the interior walls in silk damask. A staff of three maintained the place while he met regularly with reporters on the spacious front porch.

Eventually, the Boston Post changed course and began an investigation on Ponzi. The report concluded that, although his firm reported $7 million in assets, it was actually over $2 million in debt. The resulting panic brought down six banks, and it is estimated that investors lost $20 million, roughly the equivalent of $225 million today.

In the fall of 1920, Ponzi pled guilty to 86 counts of mail fraud in two federal indictments and was later charged with 22 charges of larceny by the State of Massachusetts. Despite his conviction, neither the state nor federal government was ever able to sort out his convoluted accounting system or trace the millions of dollars they estimated he took.

Free to be Deported

In 1934, Ponzi was released from jail only to be deported to Italy as an undesirable. After suffering ill health, he died in a charity hospital in 1949 at age 66.

Ponzi seems to have had no remorse for his actions and once said, “I had without malice given the Americans the best show ever staged since the landing of the Pilgrims.” His name will be forever linked to financial fraud. 


Text by Tom McGehee

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