Ponzi's Scheme_ The True Story of a Financial Legend - Mitchell Zuckoff [53]
On March 24, three months into the operation of the Securities Exchange Company, Ponzi wrote a letter to postal officials asking a few questions it might have been more prudent to pose back in December. Would it be possible, Ponzi inquired, to redeem International Reply Coupons for cash instead of stamps?
The question was effectively an admission by Ponzi that, even if he could obtain the coupons in enormous quantities at depressed prices, he was stumped after that. He knew of no way to turn them into the dollars he needed to pay his investors. At one point, Ponzi had imagined he could reap huge returns by selling the stamps at a discount to businesses that relied on the mails, but that had proved unworkable. In his letter, Ponzi also wondered whether coupons bought in America, rather than overseas, could be redeemed for cash at United States post offices. The reason for that question was less clear. A coupon bought in America, with dollars, redeemed in America for dollars, would be the equivalent of moving a dollar from one pocket to another.
The letter triggered a visit to Ponzi’s office by postal inspectors, who informed Ponzi of the obvious: International Reply Coupons were not intended for financial speculation. No, they could not be redeemed for cash. Ponzi shrugged off the news and went on with his business. A solution to that problem would have to wait.
A more authoritative response came on April 19, when Ponzi received an official and officious response from Washington, signed by W. J. Barrows, a man with the unwieldy title of acting third assistant postmaster-general: “You are advised that International Reply Coupons are issued . . . for use in pre-paying international reply postage. To effect that purpose they must be exchanged for stamps of foreign countries, and I know of no necessity for redeeming American reply coupons in this country. Post office inspectors have reported their interview with you concerning a proposed speculation in International Reply Coupons issued by foreign governments. They are not intended as a medium of speculation, and the department cannot sanction their use for that purpose.”
During the weeks between Ponzi’s letter and the postmaster’s reply, the Securities Exchange Company experienced explosive growth.
Word of the easy money spread like a financial version of the Spanish flu. It moved from police officers to trolley drivers, from trolley drivers to their passengers, from shopkeepers to waiters, to diners, to their families. Fruit peddlers polished their apples while telling stories of the riches they were expecting. Newsboys in knickerbockers passed the word on street corners, though the newspapers under their arms told no story of the amazing financier. Kitchen girls heard from their fishermen husbands, then passed the news to their upstairs employers. News incubated in the Italian enclaves, then moved among the tribes of Boston, from the Irish to the Jews, the Armenians to the Poles, the Swedes to the Brahmins. Some still had doubts, but human nature was asserting itself; in the absence of hard evidence, too good to miss trumps too good to be true.
Clementi Viscarello ran into cook Antonio de Agostino at Henry Fravega’s provision store and mentioned all the money to be had on School Street. So de Agostino invested a hundred dollars and Fravega bet the bank, putting eighteen hundred dollars on Ponzi for himself, plus a hundred dollars each for his son and daughter. Canal Street butcher Amarco Cataldo told customer John Badaracco, who promptly invested five hundred dollars.
South End bricklayer Ricardo Bogni heard about it on the job and brought his wife, Rose, to 27 School Street. Ponzi sensed that Mrs. Bogni was the skeptical one, so he focused his charm on her, displaying sample International Reply Coupons as he spoke. To make her laugh, he told Rose Bogni that the deal was so safe she could sell her shoes and invest the money. Ponzi told Ricardo Bogni that if he took sick