Ponzi's Scheme_ The True Story of a Financial Legend - Mitchell Zuckoff [69]
A plan formed in Daniels’s mind. He reasoned that the small loan he had given Ponzi the previous December must have been the seed money for a successful enterprise. Surely he was entitled to more than simple repayment of principal and interest. So, at the end of June, he dropped by 27 School Street to see Ponzi, ostensibly to offer to sell him more furniture. But Ponzi saw through Daniels’s ruse and delivered a curt message: I am still not making any money. Even if I were, you would not be entitled to any.
An honest man would have let it drop there. Daniels hired a lawyer, Isaac Harris.
On July 2, Harris filed a million-dollar lawsuit claiming that Daniels was entitled to half ownership of the Securities Exchange Company. The claim had no merit, so it did not worry Ponzi. But Daniels’s lawyer also filed an attachment against five of Ponzi’s bank accounts, effectively freezing about $700,000 in cash, a legal maneuver designed to squeeze a settlement out of Ponzi.
A million-dollar lawsuit was no everyday occurrence, so it caused enough of a stir in the halls of the Suffolk County Courthouse to reach the ears of a Boston Post reporter. On page 1 of the paper on Sunday, July 4, the headline over the brief, unbylined story read: BOSTON MAN IS SUED FOR $1,000,000.
The reporter could not locate Daniels, who was in Vermont for the Fourth of July weekend, but he found a confident, talkative Ponzi on School Street. First the reporter wrote a vague explanation of the business: “The company, which was started in December 1919, claims to be able to pay 50 percent profits out of dealings in foreign exchange through international postal agreements.” Then he turned the story over to Ponzi, whose name was appearing for the first time in a Boston newspaper.
“I haven’t the slightest idea why Mr. Daniels brought the suit. So far as I know, he has no claim against me,” Ponzi told the reporter. “The only reason I can see for the suit is a desire to get some money out of me. If Mr. Daniels has a just claim he will have no difficulty in getting it satisfied because I have got two million dollars over and above all claims of investors against me in this country. This does not include funds in foreign lands.”
He rebuffed a suggestion that the lawsuit might hurt his business, turning the question to his advantage. “Anybody who withdraws funds to his credit only increases my profits. At the beginning, when I was trying to establish foreign connections and working out my idea, I needed capital and was forced to depend upon the public for assistance. Happily, my own private fortune is now sufficient to meet all demands upon the business for ready money.”
Privately, though, Ponzi knew he needed to take the lawsuit seriously. For one thing, it was sure to trigger additional scrutiny from postal officials and, quite possibly, law-enforcement authorities. Ponzi needed a good lawyer, and he looked no further than the investor list of the Securities Exchange Company. Frank Leveroni had arrived in Boston from Genoa at age four and had graduated from Harvard and Boston University Law School. A handsome man, forty years old, with an aquiline nose and a high forehead, Leveroni ran his own law firm and served as the first Italian-born judge in Massachusetts, sitting part-time on the bench in juvenile court. What really impressed Ponzi was that Leveroni had invested five thousand dollars during two weeks in June. With a wife and five young daughters to support, Leveroni believed he had found a sure thing.
Although confident he could beat Daniels in court if the suit came to trial, Ponzi instructed Leveroni to open settlement talks with the furniture dealer. Ponzi