Saturday, July 31, 1920: Ponzi scheme

Saturday, January 24th, 2009

In 1903, Charles Ponzi emigrated from Italy to the United States, where he found work as a dishwasher, bank teller, forger and smuggler. Enough to pay the bills, but hardly the stuff of the American dream. You can’t get a magnificent scam named after you by thinking small. In this interview published in the Minneapolis Sunday Tribune, he details the “great idea” that attracted thousands of investors, earned him millions of dollars, thrust him to national prominence and landed him in jail — all within a year.

Ponzi Tells
How He Made
15 millions

Financial Juggler Explains
How ‘Exchange’ Pays
Him 350 Per Cent.

$3,500,000 Cleanup in Week
Balked By Federal In-
Quiry, He Says.

Defends Scheme; Defies
Government to Wrest
Secret From Him.

Boston, July 30. – Charles Ponzi, the man who ran a shoe string into $15,000,000, whose amazing financial juggling has brought him to the attention of federal investigators, whose life’s history includes a career as a waiter in a cheap Italian restaurant, has consented to tell how he became a figure of world interest almost overnight.

“I want it understood from the start,” he said tonight, in beginning his story, “that I have done nothing criminal.”

Charles Ponzi: His numbers just didn’t add up.

“For the time being I have ceased operations. Whether I shall continue remains to be seen. There is no law forbidding my continuing. The United States government may make a ruling that will hurt my business, but if I cannot go on as I am I shall go on as an ordinary banker and broker. At the outside I owe $3,000,000. I could meet three times that amount this minute. But let me explain.

“The idea, which is referred to as the ‘great idea’ and which really is not great, came to me last August. It came because I was thoroughly awake and on the lookout for the main chance. Are not you also doing just that? I had a scheme to start an export publication, a pamphlet, or periodical, dealing with the most ordinary export and import trade. I wrote to a man in Madrid, asking him certain things that I had to know about exports, and in reply I received an international coupon, which I was to exchange here in the United States for United States postage stamps and for these stamps I was to mail to the man in Madrid a copy of my magazine.

“Perhaps you do not know about these coupons. They are simply international postal reply coupons. One buys them for 6 cents in one’s own country and sends them to a correspondent in another country. You do this if you desire to render the courtesy of prepaying the postage of the letter or correspondence you hope to receive. They are redeemable in stamps at 5 cents each. The sixth cent goes to the government for the expense of getting them out.

Yields 400 Per Cent Profit.

“Well, that coupon I received from Spain cost in Spain the equivalent of 1 cent here in America. The rate of currency exchange differs, you know, in these times. Do you see? I took that coupon to the United States post office and there I received the value of 5 cents for it.

“That meant the stamp had yielded a 400 percent profit.

“I said to myself that I might buy hundreds, thousands, millions of these stamps in Spain, France, Italy, Switzerland and all the new countries in south and southeastern Europe. Then I planned further. I investigate and studied foreign exchange.

“I bought a small amount of the stamps abroad. I made a neat turnover. I had little money of my own and I figured it was best to make money in this way while the possibility was here. So I went out among the few men I knew and begged them to let me have their wages, their earnings and what they could obtain in loans. I worked hard. It was hard work. It almost drove me mad. Here I had an opportunity to make a legitimate fortune and I was going to fail because there would not be time and I would have to do it like a piker unless some one helped me. I worked all day and all night. Men laughed at me. They warned me I’d go to jail. I knew I was right and kept looking for a man who would take a chance or let me take a chance with his money. I had none of my own.

“I took one room. I found a man who said he’d put money in my scheme if I’d prove its worth. I had a couple of thousand dollars and I decided to let it go into advertising and office rent. I shot the roll, as they say, and the roll came home. I really got under way in December.

“I got a few investors, many of them my own countrymen. To each of them I issued a promissory note, as I do now, saying they could collect in 90 days. Why I pay in 45 days I shall explain presently.

“Within a month the few thousand dollars increased to fifteen thousand. Persons who had received 40 to 50 per cent on their money in two months naturally told their friends. And their friends came and brought more funds and these friends brought more friends, ad infinitum.

“Investigation of my business affairs impended. Naturally the news became general. I did not wait for the authorities to come to me. I went to them and invited them to investigate. For instance, they sent two police officers down to look me over. Each invested a few dollars and each made 50 per cent on his investment in forty-five days. They let their earnings ride and they are due for another harvest.

He Keeps 350 Per Cent.

“I made millions of dollars. It was simple. Suppose you came to me and gave me $1,000 to invest. I purchased international postal coupons in Spain, we’ll say. For one American cent, for that value of that cent, I purchased a coupon that is redeemable for 5 cents here. That makes 400 per cent profit. I pay you 50 per cent profit and there you are. I make 350 per cent on your money.

(Here it must be explained, however, that on July 7 the authorities at Washington, hearing that some such transactions were going on, passed a rule that no one person could redeem more than ten such coupons – 50 cents worth. Any excess offered at any post office had to be referred to Washington for approval. Moreover, Washington let it be known that they were noticing no great speculation in these international postal coupons and that the total redeemed did not exceed more than about $5 worth a day. Ponzi was reminded of this.)

“There you will ask me for me secret. Well, I shall not tell. That is my business. How I get them, how I dispose of them and such things are my business. It is enough to assure you that there is nothing illegal.

“As I said, I had made millions. I purchased the controlling interest in a large trust company. I opened offices in Portland, Manchester, Portsmouth, Burlington, Lawrence, Lowell, Fitchburg, Brockton, Plymouth, Fall River, Taunton, Framingham, Milford, Providence, Woonsocket, Pawtucket, Hartford, Meriden, New Haven, Bridgeport and down in New Jersey in Bayonne and Clifton. Soon I should have opened a great office in Lower Broadway, New York.

$500,000 a Day Handled.

“The peak of my business was reached in May, just two months ago. When I decided to suspend for the time being, while the authorities satisfy themselves that there is nothing illegal about it, I was taking in about $250,000 a day in my Boston office and about the same amount through the branch offices. That made $500,000 a day, and there is not one man who can say that I did not keep my word or who can say that every dollar he invested with me is not his for the asking, provided he does not want to wait the 45 days.

“Merely, I happened to discover something before any one else did. It might have been you. It might have been my neighbor. It might have been a great banker. But it wasn’t. It was Ponzi.

“I think I should have cleaned up $3,500,000 this week had I not suspended. I think the United States is butting in upon a perfectly legitimate proposition. I know it is legitimate. Why should it concern the government what my secret is so long as I have twice as much money in reserve as is needed to meet all possible claims upon me?

“I can tell you this much. I am not redeeming these international reply coupons in this country. I have never said that I am doing so, and I never shall say so. And I am perfectly well aware that France, Italy and Roumania have issued orders to suspend payments, but that does not stop me from doing business in those countries.

“If the government prohibits speculation in these coupons I shall go on making money. Let the government find out how I cash the coupons. I am not called on to tell. I repeat, I made a great discovery and then found out how to work it.”

Boston, July 30 – United States Attorney Gallagher announced that a firm of auditors had begun work on Charles Ponzi’s books in behalf of the federal authorities.

Examination of the books, however, according to Miss Mell, his manager, will not solve the mystery of how Ponzi has made his money. With his ready satisfaction of all demands for payment, question has turned to “how does he do it?”

Intends to Keep Secret

To the statement of Postmaster Patten of New York that there are not enough international coupons in the world to build up the fortune which Ponzi claims is his, Miss Mell declared that her chief’s manner of “cashing in” on his operation was a business secret which he intended keeping and which examination of his books would not show.

“We have money; there has been no violation of law; the public has received and will receive, dollar for dollar, on every promise. Let the investigations come; what can they do?” the manager said.

Of the many stories told about Ponzi’s customers was one of a post office department inspector who, after investigating Ponzi’s methods, is said to have borrowed and begged all the cash he could get and returned to invest it.

A pretty stenographer, who originally invested $50, reinvested the profits until, at the time of the suspension of Ponzi’s business, she had made $1,500.

These St. Paul letter carriers no doubt handled many international postal reply coupons — yet probably never thought to exploit their potential as bait in a multimillion-dollar con. (Photo courtesy

Monday, Jan. 16, 1905: Dies reading her prayer book

Thursday, January 15th, 2009

A powerfully sad tale from the Minneapolis Tribune:


Mrs. Ole Johnson, a Widow, Is
Found Dead Under Peculiarly
Affecting Circumstances


Death Results From Pneumonia
Brought On By Neglect
And Privation

Left alone and uncared for, Mrs. Ole Johnson, 52 years old, of 3018 Thirty-Fourth avenue south, met her death. Her only companion at the last hour was an old and worn prayer book. This was found in her lap as she sat in the sleep of death.

Her dead body was discovered yesterday morning by neighbors. The police broke in the front door of her little home. She was found sitting up with one hand on her prayer book.

At first it was thought that the woman had frozen or had starved to death. A post mortem examination yesterday afternoon, however, revealed that she had died from pneumonia.

That this disease was brought on by exposure and neglect there is no doubt in the minds of the authorities, yet there is no one who can be blamed or held to account.

Three years ago Mrs. Johnson’s husband was killed in the Milwaukee yards. This was a sad and hard blow to the wife and mother. Three weeks after the husband’s death Mrs. Johnson’s daughter committed suicide by hanging. That was a death blow to the mother. She mourned alone and uncared for in her little home. Her body gradually became weakened from neglect and her mind at times wandered.

In money and worldly goods the woman had nothing. She lived for a long time on donations of food given her by neighbors. This winter has been a hard one on her. Neighbors frequently brought wood and supplies to her and she managed is this way to make out a living.

Friday she appeared about her yard and house as usual. Yesterday, therefore, when she failed to appear neighbors began to fear for her safety, and many of them thought she had committed suicide.

Patrolman Clansen was called. He broke open the door to the home and found the woman dead in her chair.

The “Milwaukee yards” mentioned in the story — shown here in about 1915 — were in south Minneapolis. (Photo courtesy

Sunday, Dec. 10, 1939: A stringer’s tale of survival

Sunday, December 28th, 2008

A Star-Journal headline writer’s fine work on this page one story is still effective nearly 70 years later. Who could resist reading a story about a marooned mother and baby surviving on goat meat and flour? The baby indeed survived and lives to this day. An interview with him follows his mother’s first-person account of a flood that killed tens of thousands of people in Tientsin (now Tianjin), China.

Minneapolis Girl
Describes Tragic
Tientsin Flood

Marooned Mother
and Baby Lived on
Goat Meat, Flour

Aug. 6, 1938: Miss Ada Ruth Hanson visited the Star-Journal office to report she was going to China – to become a newspaper woman, to write a novel, to find adventure.

Miss Hanson was going back home. Born and reared by missionary parents in China, Miss Hanson was homesick for China after 12 years in the United States. The war in China did not matter. She was going back.

Miss Hanson wished to send stories back to Minneapolis from China. This letter is the first received from her. It is addressed to Nat Finney, features editor of The Star-Journal.

Formerly Miss Ada Ruth Hanson

It has been a year and a half since you and I talked about my trip to China.

I remember that it was a boilingly hot day, that you had my picture taken, and that I sat in your office telling you about the book that I was going to write when I got to China.

* * *

Well, I did get to China and married Harry Woshinsky, who is a former student at the University of Minnesota. (Mr. Woshinsky attended the university from 1935 to 1937.)

Now a year later I am still thinking about writing a book though by now I am rather vague about the whole project.

This studio portrait of Ada and Oliver Woshinsky was taken about the time this story was published in the Star-Journal. Doesn’t he look a little … professorial?

We have a son, born August 6, who takes a considerable amount of my time to care for.

The son, Oliver, arrived exactly two weeks before the Tientsin flood. We were dismissed from the hospital Sunday morning, Aug. 20, and by noon that day water was rushing into the city.

Mother and I fled to the second floor of the house and there we stayed for the longest eight days I ever experienced.

* * *

That first night was the worst. Chinese who did not have second-story houses were clinging to roofs shouting for help. Explosions lit up the water since fires were raging in all parts of the city. Electricity was cut off.

Fortunately we found a small candle so I could feed my baby by its light.

As soon as it was light we shouted across to the people in houses near us to find out who had supplies.

We had a bag of flour so had pancakes quite regularly that week. Someone near had killed a goat rather than give it roof space, so sold us a hunk to be eaten in two days as of course we had no ice.

During the second day the sound of wailing had given place to hammering. Every family with tools was busy constructing boats. Peculiar crafts, also inner tubes and bath tubs were soon seen navigating the filthy water.

Men and boys got about and did business with their neighbors and then returned to their precarious roofs for the night.

Authorities soon obtained barges and were dragging in bodies to be identified.

Because my own baby was safe two stories up from the water, I was particularly shocked at the number of bodies of babies found drowned and floating in the scum of the streets.

Chinese mothers with bound feet, several small children to save and food to drag up from their room to the roof could only hope that the smallest tot would not roll off into the water.

The third day found organizations at work on the tremendous task of relieving the immediate suffering of families made homeless.

Missionaries opened school buildings to refugees and then made huge caldrons of gruel to feed them as they crouched in classrooms huddled together with their scanty belongings.

Many Chinese families preferred to take the chance of existing on their roofs rather than to be separated since it is doubtful if such families are ever reunited.

The men are often sent north to do manual labor in Manchuria and Mongolia. The children are sent to Japan to be raised in Japanese traditions, and I don’t know what happens to the women, though I can imagine them, like Evangeline, wandering for a lifetime searching for their loved ones.

Mother and I were not forgotten by Uncle Sam in our predicament. A motor boat brought out a representative of the American Consulate to ask us how we were getting along and to advise us to get to Peking as soon as we thought the baby and I could stand the trip.

Next day another motor boat brought American Marines to our front door.

* * *

They came up a ladder to our second floor to give us typhoid shots and cholera injections, and brought several cans of food to vary our pancake-goat meat diet.

We were glad to see them and decided to follow all the advice of getting out of the city, for mosquitoes and flies were thick, while the smell of decay that came from the bodies floating in the water was unbearable.

The trip to Peking, made via ladder from the house to a flat-bottom boat, from the boat to a rickshaw and then by train, was rather tiresome and uncomfortable.

* * *

We made it safely, however, with the baby sleeping most of the time. We shall probably bore him in later years telling him about the dangerous trip he took when only 22 days old.

Once in Peking, there was nothing to do but wait for the flood waters to recede in Tientsin. Harry went back to work. Mather went back to Taian, baby and I stayed on in Peking.

But now the Woshinsky family is reunited in Tientsin. Harry, young Oliver, and I have a tiny house rented from the English missionaries and are busy these days trying to get it settled.

Drying out furniture, repairing warped doors and straightening out floors are tasks that are keeping all the local workmen busy.

The only good from the flood is that local workmen are able to get higher wages than they have ever had before.

* * *

In spite of the overwhelming tragedy the people are valiantly trying to recover their losses. Drying in the sunshine these days are ledgers and bank books from offices on first floors.

Secondhand stores have bought up water-soaked article for resale. One man has cigarets drying outside his shop, another is painting rusty stoves and kettles.

The Chinese merchant is a plucky individual working day and night with no time out to moan his losses.

In every back yard and alley are discarded boats which perhaps will never be used again. Certainly Tientsin has never had a flood like this before, and everything will be done to ensure security from such another one.

DECEMBER 2008 UPDATE: Oliver Woshinsky, now 69, lives in Portland, Maine. He taught political science at the University of Southern Maine for 30 years, retiring in 2001. He’s married and has one son from a previous marriage.

He remembers his mother as a “gentle rebel” and “a bit of a noncomformist.” At age 21, while the rest of her family voted for Herbert Hoover for president, she cast her first ballot for the Socialist candidate. She trained as a journalist, Oliver says, but always had trouble finding work as a journalist.

Oliver Woshinsky

She met Oliver’s father in Minneapolis in the mid-1930s. Along with several of her siblings, she was in town to be with her father during the year of his 60th birthday. Harry Woshinsky, who was born to a poor Jewish family in Odessa, was in town to pursue an engineering degree at the University of Minnesota.

Harry and Ada had attended the same American school in Tientsin years before, but had never met because of their age difference (she was seven years older). Ada’s family was in Tientsin because of her father’s work as a Methodist missionary. Harry’s family had sent him to Tientsin to live with a prosperous uncle. Two of Harry’s friends and classmates at that American school – Ada’s brothers – persuaded him to travel to Minnesota to go to college, and it was these brothers who introduced Ada and Harry to each other in Minneapolis.

“How she got back to China was kind of romantic and crazy,” Oliver says. She and Harry dated for two years in Minneapolis before Harry’s uncle sent him a one-way ticket back to China after finding out the young man was no longer studying engineering. During a yearlong separation, he wrote long letters to Ada, pleading for her to come to China to marry him, which she did in 1938. But not before visiting the Star-Journal offices. How did she end up pitching her story ideas there?

“She always subscribed to papers in the towns she lived in, and read them cover to cover,” Oliver says. “She realized she was going into war zone and might be able to parlay the writing into a full-time correspondent job.”

While in China, Ada wrote for the North China Star, an English language paper in Beijing. As an “ambulance chaser,” she covered fires, accidents and crime — and her work did not go unnoticed. “She was several months pregnant with me when an AP editor asked to meet her to ask her to be a stringer. When he saw she was pregnant, he just smiled and said this isn’t going to work.” Harry worked in journalism as well, mostly as a proofreader.

The new family fled Japanese-occupied China in 1941, just six months before the attack on Pearl Harbor. Ada had an American passport; Harry had a Soviet passport. She suggested they go to Russia, but Harry convinced her that America was a better option. “Russia was not a pleasant place in 1941,” Oliver notes.

“My grandfather [Ada’s father] had to pull a lot of strings to get the family U.S. permission to settle in the United States,” Oliver says. They lived first in Texas, then Kansas and finally Vermont, where Harry had landed a job on a farm before sending for Ada and Oliver.

“My father was not good at holding down jobs,” Oliver says. He “just bounced around” after the family moved to the United States. He enlisted in the Army and ended up in Berlin as a Russian translator at the end of World War II. He and Ada had three more children, and Ada eventually found a job as a proofreader at the Hartford Courant, where she worked for 20 years until her retirement. Harry died in 1993, Ada seven years later.

Oliver earned a bachelor’s degree at Oberlin College and a Ph.D. at Yale. He has written a few academic books, including “Explaining Politics: Culture, Institutions, and Political Behavior,” published this year, and is just now starting to sort through his mother’s papers.

“She was always writing stuff,” Oliver recalls. “She was always jotting things down in a writer’s notebook. Not deep, but much of it was quite interesting, quite good.”