Ponzi's Scheme_ The True Story of a Financial Legend - Mitchell Zuckoff [112]
Ponzi gathered the reporters around him and announced that he would “call the bluff of all the public authorities and gossip mongers trying to make out that my liabilities are insurmountable.” Specifically, he promised to pay the 50 percent interest on all outstanding notes, regardless of when they would mature, immediately after he proved he had enough cash to cover whatever debts Pride calculated. That would clean the slate completely. Then he turned his fire directly on prosecutors and bankers.
“After I have been proved on the level, I will demand that the public authorities be investigated,” Ponzi declared. “I and the public want to know whether the actions of these officials have been instigated by bankers, or not, to try to cross me.”
Public support certainly appeared high. Ponzi’s clerks had to turn away people hoping for a chance to invest in his new business. Boston barber Joseph Bonina stood at the front of the line with five hundred dollars, hoping to be the first shareholder in the Charles Ponzi Company. He was outdone two hundredfold by pharmacist Louis Mantani of Portsmouth, New Hampshire, who had collected $100,000 of pooled savings from that city’s Italian immigrants.
Shortly before noon, Ponzi received an invitation from Gallagher to hear Pride’s preliminary accounting and to begin checking the accountant’s figures. Ponzi brought along his two newest lawyers, Dan Coakley and his partner, former assistant district attorney Daniel McIsaac, who, he believed, would hold the most sway with the federal prosecutor. For the next three hours they discussed Pride’s early totals, which looked as though they would be higher than Ponzi had hoped.
While they met, Ponzi sustained the most direct attack yet on his business, from the public official he least expected to skewer him.
It had been weeks since Ponzi had met with Bank Commissioner Joseph Allen. Ponzi had walked out of that meeting certain he had charmed and bamboozled the banking bureaucrat. But Ponzi had dangerously underestimated this Mr. Allen. While Attorney General J. Weston Allen had publicly thrashed around with his investigation, the bank commissioner had employed a stealth offensive designed to starve Ponzi of the lifeblood of his company: cash.
Upon concluding that Ponzi’s game was fixed, Joseph Allen had been quietly, carefully watching Ponzi’s accounts at Hanover Trust, waiting for the opportunity to pounce. Two days earlier, on Saturday, Allen’s bank examiners had informed him that Ponzi’s main account at the bank, the one opened in the fictitious name Lucy Martelli, had dipped dangerously close to the breaking point. Even after Ponzi had deposited the money he had taken from Cosmopolitan Trust and Tremont Trust, the ceaseless withdrawals of the previous two weeks had left only about thirteen thousand dollars in the Martelli account.
Ponzi had tried over the weekend to replenish the account by transferring money from a bank in Manchester, New Hampshire, but in his haste he had made two mistakes. Ponzi believed the Manchester account held $275,000, so he wrote himself a check for $200,000 and deposited it in the Martelli account. When that check bounced, he wrote a second for $150,000. But Ponzi had only $146,000 in the New Hampshire account. By the time his second check bounced it was too late for him to write a third. Allen had already begun moving against him.
Knowing that Ponzi’s Martelli account was on the verge of depletion, Allen had stationed examiners at Hanover Trust on Monday morning with orders to act as his eyes and ears. They watched as several dozen Ponzi investors walked from Pi Alley and School Street around the corner to Washington Street, then into the bank to cash their checks from the Securities Exchange Company. By early afternoon the examiners were certain that Ponzi’s Martelli account was deeply overdrawn. They called Allen with the news: The Martelli account is busted.
At fifteen minutes before