Ponzi's Scheme_ The True Story of a Financial Legend - Mitchell Zuckoff [63]
“J.R., I never bluff.”
Over the next few days Ponzi paid Poole $240,000 for control of the company. He gave Poole five loans totaling $155,000 to launch a major expansion that included opening branches in several foreign countries. In addition to the import-export business, Poole’s holdings included a sardine factory in Maine and a meatpacking plant in Kansas City, which Ponzi thought went nicely with the Napoli Macaroni Manufacturing Company. All he needed was some contraband Italian red wine and he could make a meal from his own holdings.
Next he expanded his real estate holdings. He bought a small tenement house in the city’s West End that cost him six thousand dollars. He issued loans secured by mortgages ranging from fifteen hundred dollars to thirty-five thousand dollars on homes in East Boston, Brookline, and the city’s Roslindale section.
Ponzi also made a series of unsecured loans, given mostly under the same terms as the one he had given Daniel Desmond, the treasurer of the Lawrence Trust Company—money provided to friends or acquaintances to help them buy certificates from the Securities Exchange Company. The biggest was for forty thousand dollars to Charles Pizzi, the young Hanover Trust banker who had landed Ponzi’s deposits. The smallest, for five hundred dollars, went to James McTiernan, police chief in the suburb of Sharon. Ponzi did not like McTiernan, whom he thought had “more gall than a brass monkey.” But with postal inspectors still dropping by on a regular basis, Ponzi wanted as many friends with badges as possible.
When Ponzi turned his attention to the banks, he started by spreading his money around. He bought fifty shares of Fidelity Trust for six thousand dollars, five shares of Tremont Trust for five hundred dollars, and one hundred shares of Old South Trust for $12,500 dollars. But little pieces of large institutions did him no good. He certainly was not going to earn his way out of the hole he was in by collecting dividend checks on his relatively small investments. A plan began to form in his mind. If he could gain control of a bank, he might weather any storms that came his way. Given enough time, the plan might allow him to transform his unsustainable business into something more permanently profitable.
He set his sights on Hanover Trust, a bank with about $5 million in assets, small enough for him to have a shot at taking over, yet large enough for it to be worth his while. An added incentive was the chance to settle an old score. Ponzi had not forgotten that when he’d been in dire straits the previous summer and had needed two thousand dollars to keep alive his Trader’s Guide idea, he’d been shown the door by the bank’s president, Henry Chmielinski.
Ponzi began putting his plan into motion with a two-pronged strategy of buying stock and increasing his deposits. On the stock side, he first bought small blocks of shares, seventy-five in all—not enough to gain control but enough for a foothold. At the same time, he endeared himself to several of the bank’s Italian stockholders the way he knew best: financially. The largest mortgage loan Ponzi made was to one of those stockholders, Enrico DiPietro, who turned around and invested in the Securities Exchange Company.
By making friends with other Hanover Trust stockholders, Ponzi might eventually control the votes that came with the shares they owned. By Ponzi’s count, between his own seventy-five shares and the stock owned by his friends, he controlled about six hundred of the two thousand shares of Hanover Trust stock. At the beginning of June, the bank intended to issue another two thousand shares. If Ponzi could buy fifteen hundred, he would have about twenty-one hundred, a majority of the stock.
At the same time that he was eyeing Hanover Trust stock, Ponzi was depositing more and more money into the bank. Though he kept accounts at more than a dozen other banks as well, he focused his money on Hanover—eventually keeping $2.7 million there, making him easily the bank’s biggest depositor. Ponzi knew that the larger his