Carlo “Charles“

Ponzi`s only ligitimate source of income was $45 that be receive as a dividend of five shares of telephone stock. His total assets came to 1,593,834.12, which didnt come close to paying of the outstading debt. It took about eight years, but not holders were able tohave an esimated 37 perent of ther investment returnedin installments.

Ultimately, Ponziwas sentenced to five years in federal prison for using the mail system to defraud. After three and one-half years in prison, Ponzi was sentenced to an additional seven to nine years by Massachussets authborities. He released on bond pedingand appeal and disappeared about one month later.

He turend up a short time later in Florida. Under the assumed name of Charles Borelli Ponzi was involved im a pyiramid land scheme. He was purchasing land at $16 an acre subdiving in into 23 lotsand selling each lot off at $1o a piece. He promised al investors that their initial $10 investment would translate in $5.3 milliom in hust two years. Unfortunately much of the land was under water and absolutely worthless.

Ponzi wa indicted for fraud and sentenced to one year in a Florida Prison. Once again he jumped bail on June 3. 1926 and ended up in Texas. He hopped a freighter headed for Italy but was captured on June 28 in a New Orleans  port. On June 30,he sent a telegram to President Calvin Collidge asking to be deported. Ponzis request was denied and he was sent back to  Boston to complee his jail term. After seven years Ponzi was realised on good behavior and deported to Italy on October 7,1934. Back in Rome, Ponzi become an English translator. Mussolini then offered him a position with Italynew airline an he served as the Rio de Janeiro branch manager from 1939-1942. Ponzi wanted a cut. Hwn they refused to include him he tipped of the Brazilian government. World War 2 brought about the airlines  failure and Ponzi found himself unepoyed. 

Ponzi died in Januery 1949 in the charity ward of a Rio de Janeiro hospital. He left behind an unfinished manuscrpt appropriately titled “The fall of Mister Ponzi“.


Ponzis scam is extremely helpful in understanding fraud. Certainly the scheme involved deception. It also involved green-greed by the perpetator and-this is important- even greed by the investors who wanted higher than sensible returns. Finnaly Ponzis scheme  involved the element of confidence. If he had not paid returns to original investors no one would have invested additional money. By paying early returns. Ponzi gained investors confidence and convinced them that he had a legitimate business. In fact, confidence is the single most critical element for fraud to be sucesffull.(The word “con“,which means to deceive, comes from confidence.) It is difficult to con anyone out of anything unless to deceived has confidence in the decevier. We cannot con employees if they go do not have their employees trust and confidence in the deceiver. We cannot be conned unless we trust the person rtying to deceive us. Similarly  employers cannot con employess if they do not have their employees trust nd confidence. And without investors confidence fraudulent companies cannot con unsuspecting investors:

The following example illustaters the role that confidence plays in commiting fraud:

Two man enter a bank. One is dressed in a business suit and is well groomed. The second has scraggly hair, has tattos up and down both arms is wearing tattered jeans and is carrying a motorcycle helet under his arm. Based on the probably unfounded categorizationof these wtwo individuals by most pepople in soceity which one do you think is in the best position to succesfully con a teller?

Most of would agree that the man in the business suit is in a better position to defraud the bank . He`s symple put much more likely to be trusted stereotypes being what they are. Most people would argue that sraggly fellow is unlekilly to pull off sucessful fraud becouse the bank employees are less likely to trust him initially.