Ponzi's Scheme_ The True Story of a Financial Legend - Mitchell Zuckoff [46]
After several thousand investors bought stock, Fisher took the familiar path of fast-money magicians. In July 1898, he disappeared with about $100,000 in cash. Jernegan followed soon after, with perhaps twice as much. When a newspaper reporter caught up to him, Jernegan claimed he had left town in search of Fisher, who had stolen his secret formula. Fisher was never found, but Jernegan was struck by an apparent attack of conscience. Two years later, he returned a large amount of money to his dupes—as much as $175,000—and then lived most of the rest of his days in the Philippines.
The gold-from-seawater trick fell into the category of Get Rich Quick stock schemes based on miracles of science, a particularly popular approach for scammers at a time of medical breakthroughs and mechanical sensations like flying machines and Marconi’s wireless. Another form of Get Rich Quick stock scheme could be called the exotic-products variety. Several years after Jernegan’s scheme, a smooth talker named Ferdinand Borges came to Boston with just such an idea.
For several months Borges lived in obscurity, taking rooms in lodging houses and eating meals at the counters of low-cost lunchrooms. He knew no one would invest with a man living hand to mouth, so he pooled his resources and moved into a suite of offices that he filled with mahogany furniture, oil paintings, and expensive rugs. It was an elaborate stage on which Borges offered to sell bonds of a corporation he called the Consolidated Ubero Plantation Company. The bonds, he said, would allow investors to share in the enormous profits expected from “the four-hundred-thousand rubber trees, the million pineapple trees, and the million coffee trees now under cultivation.”
More than $2 million flowed into the company’s coffers, much of it from poor people who appreciated Borges’s offer to sell them bonds on the installment plan, investing as little as two dollars a month on the promise that when their account reached five hundred dollars they would be presented with a bond. Unlike Jernegan’s gold ruse, Borges’s company actually owned some plantation land. But that was never the point. Borges spent only a fraction of the money on the business. He kept the rest for himself, a few close associates, and a cadre of agents hired to sell bonds in exchange for commissions of 5 to 15 percent of whatever they brought in. It took authorities several years to catch up with Borges, but in 1906 he was convicted of conspiracy and seventy-three counts of larceny. Of course, by then most of the money was gone.
A variation of Get Rich Quick schemes was robbing Peter to pay Paul, or benefiting one person at the expense of others. The origin of the phrase is open to dispute, but one account traces it to the 1500s in England, when the lands of Saint Peter’s Church at Westminster were sold to fund repairs at Saint Paul’s Cathedral in London.
One example came to public notice in Boston on January 3, 1880, when an ad appeared in the Boston Herald under the headline: HOW’S THIS FOR HIGH? EIGHT PERCENT A MONTH PAID TO DEPOSITORS BY A SOUTH END BANK “FOR WOMEN ONLY.”
Below that was a further explanation:
The Ladies Deposit is a Charitable Institution for Single Ladies, Old and Young. No Deposit Received for less than $200 nor more than $1,000. Interest at the Rate of $8 per hundred per month is Paid every Three Months in Advance. The Principal Can be Withdrawn upon Call any day except Sunday. No Deposit Received from Anybody Owning a House.
The ad had been placed by Sarah Howe, a nearly illiterate former fortune-teller with a long history of petty crime and a standing reservation at the State Lunatic Asylum in Taunton. Her past notwithstanding, Howe’s “bank” briefly made her the darling of apartment-dwelling Boston spinsters. More than a thousand women made deposits, trusting her with more than a half million dollars. Howe spent lavishly on herself,