Ponzi's Scheme_ The True Story of a Financial Legend - Mitchell Zuckoff [120]
If Ponzi thought the worst part of the day was over, he was mistaken. The next blow came at one forty-five in the afternoon, when Bank Commissioner Joseph Allen posted a notice on the door of the main branch of Hanover Trust. Above his signature, the sign read: “Under the authority vested in me by law, I hereby take possession of the property and Business of the Hanover Trust Company.” It was the most dramatic act in the arsenal of a banking regulator, and it was the first time Allen had used the power since taking office six months earlier.
The examination Allen had ordered of the bank’s books had revealed problems that went far deeper than Ponzi’s overdraft. Under its president, Henry Chmielinski, and its treasurer, William McNary, Hanover Trust had exhausted its reserves and issued unsafe and illegal loans. Loans to companies with connections to bank insiders exceeded legal limits, and in some cases the accounts of those companies carried huge overdrafts. For instance, Chmielinski treated Hanover Trust like a rich relative, secretly borrowing money to finance real estate purchases and a company he ran called the Polish-American Finance and Trading Association. But Ponzi’s overdraft was the last straw. Allen described how he had expressly prohibited McNary from tapping into Ponzi’s certificate of deposit to cover the overdraft, yet McNary had done it anyway.
Hundreds of people raced to the Washington Street bank. Most came out of curiosity or to catch sight of Ponzi. As word spread a small number of depositors arrived and jostled their way through the horde to rattle the locked doors and demand their money, to no avail. A cordon of police officers surrounded the bank, but the excited mob pushed and pressed against them. After forty-five minutes of shoving, the police regained control and the crowd dispersed.
When Ponzi heard of Allen’s move, he issued a statement without his usual vigor. “I learn with regret that the bank commissioner has ordered the Hanover Trust Company to close its doors. I feel that this action on the part of the bank commissioner is merely a new attempt on his part to prevent me from gaining possession of the one-point-five-million dollars which I have in that institution, in the hope that I will not be able to meet my obligations to note holders.” Ponzi continued to insist that he had at least $4 million in assets. That would be more than enough, he declared, to meet his liabilities and move on to his new business. Publicly, he estimated that Pride would find no more than $800,000 in liabilities, though privately he certainly knew that the number would be many times higher.
Ponzi left Barristers’ Hall at about five o’clock. As usual, a crowd gathered the moment his Locomobile pulled to the curb to carry him home. He flashed his smile and stepped into the car just as a newsboy leapt onto the running board. Amused, Ponzi bought copies of all the evening papers to read on the ride to Lexington.
As night fell, reporters took their places outside the house on Slocum Road. Around eight o’clock, they heard the sound of a woman weeping inside.
A few minutes before midnight, Ponzi paced along the gravel walkway outside his home. If he could find any solace, it was in knowing that the events of the past twenty-four hours had not disproved his claims about his solvency or demonstrated that he had done anything illegal in building his fortune. Though his credibility was damaged, he still had fervent believers, among them thousands of people who had already profited from the Securities Exchange Company. At that moment, editors of the Boston Traveler were preparing an editorial about him, marveling at “the grip which this apostle of rapid finance is able to retain upon thousands of people.” The editors even urged that Ponzi “receive the benefit of every doubt” and likened him to Jean Valjean in Les Misérables. Ponzi and the