CHAPTER XXVII

A COUPLE OF WINDJAMMERS SETTLE MR. PONZI'S GOOSE AND HE GOES DOWN FOR THE COUNT OF TEN

Toward the end of the first week of the run, my payments had dwindled down to a few thousand dollars per day. My investors had made up their mind to hold their notes until maturity. And earn their 50%. The editor of one of the Boston papers was at his wits' end. For the first time in his life, he had found himself up against a surprise. A "banker" who could weather a run. And he did not know what to make of it.

However, he had gone too far to give up the fight. He spent a busy week-end, preparing for a new offensive. And recruiting some allies. Among them, one Chiaramonte. Chiaramonte knew me from Montreal. And brought to him the information that I had done time in Canada.

Monday morning, August 2nd, that newspaper carried a huge headline, "PONZI HOPELESSLY INSOLVENT," it read. Which contained many inaccurate statements. And some utterly false. That blow was a whopper! If it didn't knock me cold, it's a wonder. But it certainly raised the deuce! The run blazed out with new vigor. And for the next two or three days I paid out close to two millions.

But the run wasn't the only thing I had to contend with. I was being double crossed on all sides. One of my help saw his opportunity and took advantage of it. He issued notes by using straw names and managed to file the stubs with the rest of them. All my clerks could do was to compare them with the stubs. We had no means of knowing whether or not we had ever received the money. So, we paid them. How many of them? I don't know exactly. But I estimate the defalcation at about a quarter of a million.

Beside him, other clerks robbed me of at least one hundred thousand dollars. By the simple expedient of not marking "cancelled" notes which had already been paid, and presenting them for payment through a confederate. I have a complete record of them. As well as of other notes issued by some clerks to themselves or their relatives and paid with interest long before maturity. They did that by juggling the date on the face of the note. A date that should have matched the cancellation date on the revenue stamps. But it didn't

The stealing wasn't serious from the standpoint that it diverted my attention away from other matters. Because it didn't. I was aware of the fact that I was being robbed. But it was serious on account of the inroads it was making in my bank balance. My cash resources had been reduced considerably. By about $5,000,000, I would say. And the run was still in full swing.

It took me the best part of the second week to restore confidence among my investors. But, by Friday, I had the situation again under control. And the Boston newspaper pursuing me the hardest, was up a tree once more. Except for the Canadian lead. I learned of it somehow. And I fully realized that I was in for the worst wallop yet.

The newspaper had sent one of its best men up to Montreal. It was only a question of days before the cat would be out of the bag. Exposure could not be avoided. And exposure spelled ruin. In a way. In every way, perhaps. Except in the matter of the investigation. Of proving my solvency to the satisfaction of the officials and the public. I still had confidence to come out on top at the show-down with auditor Pride. But I needed a few more days. It was vital for me to delay the exposure until after the show-down.

In order to do that, it was necessary for me to be posted as to the progress the reporter was making in Montreal. I had ways and means of learning what was going on in the editorial rooms of that paper. Ways which permitted me to know the Ponzi news before the paper was in the streets. But I needed more than that. I needed to know certain things even before it did. Because I didn't want it to bluff me into some damaging admission of fact. What it might know, was not really dangerous until it could prove it. And when I was sure it could prove it, I wanted to be one step ahead of it. But I did not want to take that step until and unless I had to.

I solved the problem of learning of its progress by intercepting its telegrams. Both coming and going. A copy of every incoming telegram relating to Ponzi would be delivered to me even before it was delivered to it. Outgoing telegrams would be communicated to me almost instantly. Day or night. Its office phone was also covered. How did I arrange that? Well that would be telling. And involving others. But I can say that for each communication I paid a fancy price. Even for a millionaire. Like I was. Or supposed to be.

While this was going on, one of the officials after me was showing marked hostility. In a number of ways. Getting under my skin regularly. Like a splinter. And drawing out curses from me. He got to be so cordially hated around my office that one of my help, the "black sheep" of the family, decided to have him "removed". To have him "taken for a ride."

Through his connections with the underworld, he sent to New York for a gunman. He agreed to pay him $15,000 for the job. The killing of the official. Which was entirely too much money. For any official. But, in so far as that official in particular was concerned, he wasn't worth the powder to blow him to Hades.

After he had the thing all arranged, this employee came to me and told me about it. Nonchalantly. He wanted me to watch the fireworks.

"What do you think I am?" I jumped at him. "A murderer? Do you think that I would stand for anything like that? Don't you dare to go ahead with it. Because, if you do, I'll deliver you myself to the police."

"But the gunman wants to go through with it now," he protested. "He wants his money."

"A fine mess you got me into," I told him.

"I thought I was doing you a favor," he apologized.

"I don't want any of that kind of favors!" I replied to him. "If that official is an obstacle to me, I can take care of him. I don't have to have him killed. I can spend half a million to discredit him. You leave those things to me. No, you go and find that fellow and send him to me."

The go-between as he was known, was one of the old time "gang lords". He undertook to dissuade the gunman. And send him back to New York. But he charged me $4,500 for his services. For which I made him sign a regular receipt. Only, I put an arbitrary date to it. So as to cover up things.

That is about the worst investment I ever made. In the opinion of many. Including myself. I actually went and paid good money to save an enemy's life. The man who hounded me unremittingly for the next years. Notwithstanding his knowledge of what I had done for him. Because, on a latter occasion, when he had me by the nape of the neck and was telling me what a dangerous person I was, I didn't miss the chance of telling him what I had done.

But I do not regret the bad investment. Even if I paid a price far in excess of what his life was worth to the community. Forty-five cents would have been more like it. But a human life is a human life. And I wouldn't have one on my conscience for any amount.

The week-end found me scouting for cash. I don't believe I had $500,000. And stocks and property amounting to another million or more.

I tried to negotiate the certificate of deposit. Everywhere. Even in New York. But I couldn't do anything with it. The big banks had passed the word around to lay off. And everybody was laying off. I thought of Tom Lawson. The only one likely to help me. He was approached. But he wouldn't handle it. Or couldn't. I don't know which.

Things looked kind of black. I had to have money to carry me along until the auditor was ready to report. And nobody knew when he would be ready. He might have been ready in four or five days. Or in a couple of weeks. At any rate, I had to have money for the next Monday. Because the $500,000 couldn't last much over the week-end.

I consulted with the Hanover's officials. About cashing on the certificate of deposit. It was suggested that I make out 18 demand notes for $80,000 each and one for $60,000. And that I have them signed by "dummies". Employees of the bank and others. Then, by endorsing the certificate over to the Hanover as collateral, the bank could have discounted the notes and credited the amount to my account. I did as it was suggested.

On Monday morning, August 9th, I started to draw against the proceeds from those notes. To an extent of about $450,000. Why that much? I don't remember. I probably drew against my account for much less. But some out-of-town checks, which had not been cashed as vet, might have come in. At any rate, $450,000 of the funds from the certificate of deposit were used up on Monday morning. Then, hell broke loose! From the State House. The Bank Commissioner sent down word that the transaction was in violation of the banking laws. Maybe it was. Maybe it wasn't. It surely didn't make sense. I had $1,500,000 in that bank. And the Bank Commissioner said that the law did not permit me to draw against it! If that was the law, it was strange to me! If it wasn't the law, the commissioner was decidedly wrong. No two ways about it. He ordered me to cover the overdraft immediately. Or, else …

I managed to cover it. By splitting the original certificate into three smaller ones. Two for $500,000 each and one for about $57,000. The difference went to cover the overdraft. That, was the best I could do. Legal or illegal.

But I remained without liquid cash. And I couldn't stop issuing checks. We issued some. Hoping to raise some cash in the meanwhile. Before they were presented for payment. But we couldn't make it. The Hanover Trust had to turn several down. An attorney for several investors, who for a week had been trying to round up some of my investors in order to petition for a receivership, saw his chance. He filed a petition in the bankruptcy courts. And that had the effect of stopping any further payments. Title to everything I had, automatically passed from me to the United States Courts.

It was the same night, I believe, that a city editor came up to my house in Lexington about midnight. Flashing a telegram from Montreal. But without allowing me to read it. Which wasn't necessary, anyway. Because I already had received my copy of it. He waved it at me and said that he had proofs of my Canadian conviction. Was going to print the story in the morning. Wanted to know whether I had anything to say.

"Yes, I have," I told him." You go ahead and print that story. But that will be the last issue of the paper that will ever be issued. You don't dare to print it. And you know it."

He didn't print it. He couldn't print it. The man from Montreal had wired him that, before he could be absolutely positive I was the same man who had been convicted in Canada, he would have to compare pictures. And so, I had another respite for a day or two. But the exposure was unavoidable.

Under the circumstances, the best I could do was to come out myself with the story. Before the newspapers did. So as to take the sting out. I sent for Joe Toye. Then with the Boston Record. Now, city editor of the Boston Traveler. I told him the facts. Gave him permission to use the story as soon as he had information that the papers were about to come out with it. He used it. On the 11th, I believe.

My sole hope rested now in my ability to produce sufficient assets to meet my liabilities. Auditor Pride was about ready to report. And I was all set for the show-down. I had been down to the Hanover Trust. Picked out the securities I could use. Arranged for their temporary removal. And everything. But even that last hope failed to materialize.

Word reached me that the Bank Commissioner was up to something. I rushed down to the Hanover. And found the bank officials listening to an attorney. He was telling them that the Bank Commissioner intended to close the bank.

"What for?" I asked.

"Because he claims the bank's conditions are not sound," he replied.

"Not sound," interrupted one of the bank officials. "It's sounder now than it ever was. Our deposits have increased about 100% within the last two months."

"Well, maybe so," the attorney conceded, "but the Bank Commissioner insists that the bank has some bad loans on his books."

"You can tell him he is mistaken when he says that," I butted in. "This bank has not and cannot have any bad loans."

"Why?" asked the attorney.

"Because," I replied, "when I bought the control of this bank I went up to see the officials and told them that I would personally guarantee all loans. This bank holds a paper from me authorizing its officials to charge to my account any loan which may be deemed unsafe by the Bank Commissioner."

"That's true," one of the bank officials confirmed. "We have that paper and the Bank Commissioner knows about it."

"Furthermore," I went on, "the Bank Commissioner told me when I bought the control of the Hanover that the bank was in sound condition. If it was then, it is still more so now. You go up to the State House and tell them what I told you. Tell them also that I still have over a million dollars in this bank to take care of the bad loans."

"I will go and see them," the attorney agreed. "After what you tell me, I am prepared to argue with him."

He went. Inside of half an hour he was back.

"Did you see them?" I asked him.

"I did," he replied.

"What did they have to say?" I inquired.

"They didn't say anything," the attorney stated. "They wouldn't say anything. He told me to see the Governor."

"And did you see the Governor?" I pressed him.

"I did," he answered. "And this is what he said: 'The Hanover must be closed'."

And the Hanover Trust Company was closed the same day. And then they got me.

The morning after, the 12th, I remained home. There was nothing I could do. But wait for things to happen. And happen they did.

First, Hermann called. I received him. And he exhibited a check for $10,000,000 made out to me. The check was certified for $10,000,000 made out to me. The check was certified to by the Harriman National Bank of New York. For a moment, the sight of that check rekindled my hopes. I asked him if he had the contract with him.

"No," replied Hermann. "I have not brought the contract. We have not changed our minds. But the latest developments have caused us to defer the matter for a couple of days."

"Oh, I see!" I remarked, using a commonplace expression. What I really meant was that I realized perfectly well the case of cold feet he had developed. Nevertheless, I made him stay with me and we chatted for a while.

Then, the telephone rang. I answered it. It was the United States Attorney. He asked me to go right down to his office because Pride was ready to report. I told Hermann that, if he cared to wait, he could. I had to go in town. I jumped in my car and went.

In the United States Attorney's office, I found, Mr. Assistant United States District Attorney, an auditor and one or two more people.

"Mr. Ponzi," said the Assistant United States District Attorney, "the auditor reports that the total of your outstanding liabilities is about $7,000,000. Are you ready to produce sufficient assets to cover them?"

"My liabilities are not $7,000,000," I replied. "I don't believe they are one-half of that sum."

"But you have agreed to accept the auditor's figures," he reminded me.

"Yes," I admitted. "I have agreed to accept his figures. Because I assumed, when I made the agreement, that his figures would not be more than a quarter of a million out of the way. Nevertheless, since I have agreed. I shall live up to the agreement."

"Are you ready to produce the assets?" the Assistant United States District Attorney insisted.

"Yes, I am," I told him. "But my total assets are of about $3,000,000."

"Then, you are $4,000,000 short," he remarked.

"I am," I conceded. "On the basis of the auditor's figure. Which I am precluded by my own agreement from disputing."

"Under the circumstances, I am sorry, Mr. Ponzi, but I must do my duty," he announced. "I must place you under arrest."

A United States deputy marshal stepped forward.

"Mr. Ponzi," he said, "in the name of the United States of America you are under arrest."

"O. K., marshal. I am your prisoner," I replied, making ready to follow him to the post-office and arrange about bail.

My house of cards had collapsed! The bubble had busted! I had lost! Lost everything! Millions of dollars. Credit. Happiness. And even my liberty! Everything, except my courage. I needed that to take my medicine like a man. To meet the future. Unquestionably, I was licked. For the time being. But no man is ever licked, unless he wants to be. And I didn't intend to stay licked. Not so long as there was a flickering spark of life left in me. Like there was then. And there is now. Life, hope and courage are a combination which knows no defeat. Temporary setbacks, perhaps, but utter and permanent defeat, never!