Ponzi's Scheme_ The True Story of a Financial Legend - Mitchell Zuckoff [49]
A shiver of panic raced down Ponzi’s spine. He was about to lose his first sale, and with it, he feared, a measure of confidence in himself and his plan. He could not let that happen. Giberti had to be sold. Impulsively, Ponzi came up with an idea that harked back to his time in Montreal during the heyday of the padrone. A man could grow rich and powerful not only by his own hard work but by putting others to work for him. Ponzi made Giberti an offer: Become the first sales agent for the Securities Exchange Company. Surely lots of people came into Giberti’s store, and if they trusted his choice in vegetables they might also trust his choice in investments. Ponzi urged the grocer to tell his customers and friends about the Securities Exchange Company and collect investments on Ponzi’s behalf. Giberti would be entitled to 10 percent of whatever money he brought in. Giberti accepted.
Before his new agent left, Ponzi gave Giberti a tutorial on what he called “salesmanship and psychology.” He insisted that Giberti never use pressure tactics—“Never crowd a prospect,” he said. “I was selling my dollars at about sixty-six cents,” Ponzi explained. “That’s all there was to it. And they were good dollars. Any attempt to force them on a prospective investor would have been to create suspicion rather than confidence.”
Giberti absorbed the lesson and went to work. Winter had just begun, and Ponzi considered Giberti his first snowball of the season; pushed in the right direction it would get bigger and bigger. By early January 1920, Giberti had tempted eighteen people to give the Securities Exchange Company a try, returning several times to the Niles Building to hand Ponzi a total of $1,770. Though the average investment was a hundred dollars, individual amounts varied widely. Giberti put up only ten dollars—just enough to allow him to tell prospective clients that he was an investor.
The day Giberti laid the first wad of cash across Ponzi’s outstretched palm marked a pivotal moment in the career of the would-be financier. An angel sat on one shoulder and a demon on the other. The angel’s approach was straightforward. Ponzi had the money necessary to determine if his theory about legally exploiting fluctuations in foreign currencies could be put into practice. With the money from his initial investors, he could test whether he could clear the major logistical hurdles facing his enterprise: Who would exchange his dollars for foreign currencies and buy the reply coupons overseas? Would enough be available to operate on a large scale? If so, and if he could get the coupons back to Boston, how would he turn them into cash? If any of the obstacles proved fatal within the ninety-day window Ponzi’s notes gave him before the payment was due, Ponzi could admit partial defeat, refund whatever money remained, and hand out IOUs for the rest. Then he could retool his idea, try another approach altogether, or follow Rose’s advice to be satisfied with a typical job and a typical life.
The demon’s alternative was to secretly abandon any pretense that this was a legitimate business and follow the notorious example of 520 Percent Miller. When Ponzi’s first investors came looking for their 50 percent, he would pay them with money from later investors. Those investors might well be enticed to take another spin, bringing friends along with them, to multiply their winnings and keep Ponzi’s perpetual-motion machine whirring. When the time was ripe and his wallet was bursting, he would take Rose to Italy, where he remained a citizen. His cash and his home country’s fluid extradition practices might allow him to get away scot-free.
Both approaches held a certain appeal. From the moment he’d landed in America, Ponzi had been looking for a legitimate way to get rich and remove the shame he felt over disappointing his mother. Never much of a