Who was Charles Ponzi and What is a Ponzi Scheme?

Ponzi Scheme. The word is all around thanks to the efforts of super-investor and super-criminal Bernard Madoff. If you want to find out what a Ponzi scheme is in the grand scheme of things, look elsewhere, but if you want to know the real story behind the mysterious Mr. Ponzi, your retinas have come to the right place.

Charles Ponzi was his name and like many a member of the Mafia and many a singer who topped the charts during the 1940s and 1950s, Ponzi owed his status as an American celebrity due to the massive influx of European immigration that took place during the late 1900s and early 20^th century. In many ways Charles Ponzi was more American than Italian; he decided to eschew hard work and take a shortcut to wealth. Mr. Ponzi meet Mr. Trump. Mr. Trump meet Mr. Ponzi. It was in 1919 that Charles Ponzi finally apprehended and set in motion a delightfully saucy plan to do away with that Horatio Alger nonsense and rise to prominence and wealth in American. The American Dream in this instance would become known as the Ponzi plan. Later, of course, those who write history would refashion that description so that it was more appropriately named.

The Ponzi Scheme, or plan as Ponzi called it, revolved around buying International Postal Union reply coupons in countries experiencing economic downturns. (Hey, if Ponzi was alive today, he'd buy them from Bush's America!) He would then redeem the coupons for five times the face value inside the U.S. Okay, so that's not exactly what he planned to do, but that's the story that Ponzi told his investors. Yes, Ponzi was as truthful about his economic plans as Bush and Cheney were about their plans to invade Iraq.

Ponzi at first tried to get his relatives back in the Old Country to help him with the buying of the coupons, but as with Catholicism, the redemption process was simply too unwieldy to work properly. His solution was to promise friends they could make a 50% profit in just three short months on money they gave him to invest in the coupon strategy. He actually did repay them and thus set in motion the Ponzi plan. Word of its success quicker than rumors about Clay Aiken's sexuality and before you know it Ponzi was sitting high in an office in Boston under the aegis of the Financial Exchange Company. Pretty soon Ponzi was collecting more money for investment than that guy who figured out how to make cars run on gas. Well, you know, before Dick Cheney had him sent to Gitmo.

The Great Ponzi. Not as catchy as the Great Gonzo, true, but that was the nickname that Charles earned. The Great Ponzi was living inside a mansion and had his own limousine at a time when most people didn't even own a car. There were reports that he was almost as big a shoes horse as Imelda Marcos. The Great Ponzi spent his money well, if not wisely: gold-tipped canes and an infamous cigarette holder studded with diamonds. He was able to continue bringing in the money by taking care of that 50% payout as promised. During one particularly exciting news conference someone shouted out that Ponzi was the greatest Italian of all time. The modest Ponzi demurred. He was only the third greatest Italian of all time, right behind Columbus and Marconi. Interesting that he chose two Italians who have made claims that have been proven false.

Ponzi's claim to having a can't-miss shortcut to wealth was eventually proven false as well. Auditors from the New York legislature began to sniff a rat and went to work investigating the manner in which Ponzi had accumulated his wealth. The ledgers were mysteriously incomplete and even chaotically organized. Things would get worse for Ponzi when he was arrested for forgery, mail fraud, and even smuggling in aliens. He was sentenced to four years in prison and finally deported back to Italy in 1934. The link between unregulated capitalism and fascism was made clear when Charles Ponzi secured himself a decent little position handling the finances for Benito Mussolini. Like many a good little fascist, Ponzi stole from the morons running things and escaped to Brazil following the war. The man who had once owned 200 suits died destitute and blind in Rio.

The Ponzi scheme continues to live on, however.