Ponzi's Scheme_ The True Story of a Financial Legend - Mitchell Zuckoff [44]
Ponzi offered to give Daniels a promissory note for two hundred dollars. Daniels could cash it, using the furniture dealer’s own credit at the First State Bank. Daniels scoffed—Ponzi was already in debt to him for the furniture. Why should he add two hundred dollars in cash? Anticipating that reaction, Ponzi parried with an appeal to Daniels’s greed. Ponzi told Daniels to keep half of the cash for himself—a hundred dollars—as a payment toward Ponzi’s furniture. Daniels would pay the remaining hundred dollars to Ponzi in twenty-dollar increments, and in sixty days Ponzi would pay back the full two hundred dollars, plus interest. If Ponzi defaulted, Daniels would be out only a small sum of money, and the bank where he cashed the promissory note would help him pursue Ponzi to make good.
The deal remained a risk for Daniels—there was no guarantee Ponzi would be in any better shape two months hence, and even with the bank on Daniels’s side Ponzi might stiff him. On the other hand, Daniels would be giving Ponzi only a relatively small loan, and the alternative of repossessing the furniture held no upside for him.
Still, Daniels was skeptical. He wanted to know how Ponzi intended to pay the note at maturity. Ponzi expected that question, so he outlined his plan to build a financial empire based on International Reply Coupons. He spoke of the meeting in Rome, showed Daniels a coupon, and read a passage from page 37 of the United States Official Postal Guide that described how the coupons could be redeemed for stamps in any country that was a member of the Universal Postal Union. Feeling the fish nibbling on the bait, Ponzi let out more line, expounding on foreign exchange rates and fluctuating currencies. He went in for the kill by describing the crux of his business plan: to pay investors 50 percent interest on any amount invested within ninety days, or forty-five days if everything went as smoothly as anticipated.
Daniels listened to the rapid-fire delivery and found himself swept up in Ponzi’s excitement. Daniels accepted Ponzi’s note and gave him a check for twenty dollars, the first installment of Ponzi’s half of the two-hundred-dollar loan. Emboldened, Ponzi pressed his luck by asking if Daniels wanted to invest in the coupon business. Daniels declined—first he wanted to drop by the post office down the street from his store to inquire about postal coupons. Still, for Ponzi it remained a pivotal moment.
Until then, everyone to whom Ponzi had explained the plan had brushed him off—it was impossible, impractical, and anyway, who was this pint-sized immigrant to imagine himself a financial giant? The only person who had believed Ponzi was Rose, and even she had trouble understanding the coupons-for-stamps-for-cash machinations. Although she did not tell her husband, Rose suspected it would turn out to be another of his short-lived inspirations, soon to be replaced by another. But now, by winning Daniels’s meager support, Ponzi sensed the possibility of success. And after so many years of failure, he was intoxicated by it. He had convinced a hard-nosed, if not terribly bright businessman that he was onto something. With some polish, he was certain his sales pitch would draw investors in droves.
Just as important, the experience made Ponzi realize that he should launch his company by seeking small sums from large numbers of people. The few big-money types he knew had shunned him, but almost anyone could spare ten dollars, or fifty, or maybe even a hundred, on the promise of a 50 percent gain. Even if they did not grasp the details of how he would do it, or even if they had doubts about him, the possibility of huge returns in such a short time would be too tempting to pass up. If they gambled a small amount