- The Washington Times - Saturday, March 26, 2005

Not many people gain immortality through the dictionary, but the “Ponzi scheme” is there along with a few other such terms as “quixotic” and “quisling.” Charles Ponzi, a spoiled, 21-year-old Italian immigrant who heard about how the streets in America were paved with gold and sailed to Boston to get rich quick, has now been given his due by Mitchell Zuckoff (Ponzi’s Scheme: The True Story of a Financial Legend, Random House, $25.99, 390 pages).

This beautifully researched book — the author fabricated none of the picturesque quotes — is a rollicking tale of a man with irresistible charm and moxie who based his life on the principle, “We are all gamblers.” To the end, Ponzi maintained that if he had only had enough time he could have turned his Rob Peter to Pay Paul “business” into something legitimate.

Ponzi arrived with his eye out for a deal. Nothing worked for him for long, however, and by 1916 he was a well-traveled huckster who had served years in Montreal and Atlanta prisons for forgery and other frauds. After a disappointing decade and a half up and down the East Coast, he decided to return to Boston to try his luck anew.

He found work as a clerk, and rejoiced that he “had painted his last sign, washed his last dish, begged his last bowl of macaroni.” He met a nice girl, the daughter of a fruit merchant from Genoa, and he married her. She worshiped him.

But Ponzi had a minor setback when he tried his hand at trading in commodities (“His chief mistake was trying to do so with someone else’s commodities.”), but he escaped prosecution through a clerical error: The clerk writing out a warrant charging him with stealing 5,387 pounds of cheese misspelled his name. The authorities’ attempts to prosecute him were frustrated by the error, and Ponzi’s prison record remained hidden.

It was not long before he hit upon the scheme that bears his name — offering investors in his “business” 50 percent interest on all deposits of 45 days. The “business,” Ponzi said, was based on using the differentials in exchange rates to profit from the purchase and sale of international postal reply coupons.

The author writes: “The coupons were, in effect, legal tender used to buy stamps anywhere in the developed world. If a coupon bought more stamps in Romania than Rhode Island, that was not his fault. He was merely the first person smart enough to figure out how to take advantage of it. On the other hand, he acknowledged, some people might say exploiting exchange rates by trafficking in postal coupons might not be entirely ethical. But his experiences during the sixteen years since he’d arrived in America made that a secondary consideration.”

So Ponzi was off and running, pretending to be an international financial wizard (whether he actually bought more than a few coupons abroad remains unclear, and in any case they could only be redeemed, legally, for stamps). Friends signed up to be his sales agents, and gullible Bostonians flocked to give him their money. As long as Ponzi got more in deposits than he had to pay out in interest, he could keep afloat.

Eventually, of course, the dapper rogue got his comeuppance. His extravagant claims of financial genius coupled with conspicuous consumption, publicized in The Boston Post, attracted the attention of federal and state authorities. The Post sent a journalist to check out rumors of a shady past in Montreal, and it all came crashing down.

Ponzi was found to be $3 million in the hole, and was convicted of using the mails to defraud. He was sentenced to five years in jail at Plymouth, the first of many sentences in courts from Massachusetts to Florida. He died alone in a charity ward, his mother having returned to Italy, and his long-suffering wife having finally divorced him.

Mr. Zuckoff, a professor of journalism at Boston University, follows the investigations of The Boston Post, which won a Pulitzer Prize in 1921 (a gold medal for public service in exposing the swindle), as closely as he follows Ponzi’s perigrinations. He also describes all manner of other swindles in the Roaring ‘20s. His book is a solid piece of business history as well as a great read.

• • •

Gouverneur Morris (1752-1816) was one of a lesser echelon of our Founding Fathers. Born into a wealthy New York family, he served in the Continental Congress during the Revolution, where he demonstrated an aptitude for foreign affairs. Moving to Pennsylvania, he was a delegate to the Constitutional Convention of 1787, where he favored a strong central government, with voting limited largely to property owners.

Morris had many business interests, and in 1789 he traveled to Paris as agent for Philadelphia financier Robert Morris, a friend though not a relation. There, Gouverneur Morris’s affability, wealth, and intellect opened all doors. Morris would live in Paris for much of the next decade, pursuing business interests and observing the French Revolution.

Because he was on the scene, Morris was a natural choice for appointment as American minister, and he served in that position from April 1792 to July 1794. Although later historians would dismiss Morris as an incorrigible meddler and an inept diplomat, historian Melanie Randolph Miller takes a more positive view in her study of Morris’s Paris years, Envoy to the Terror (Potomac Books, $30, 279 pages).

Access to the highest levels of French society did not give Morris a favorable impression of Paris. Eight months after his arrival he characterized the city as “perhaps as wicked a Spot as exists. Incest, Murder, Bestiality, Fraud, Rapine, Oppression, Baseness, Cruelty; and yet this is the City which has stepped forward in the Cause of Liberty.”

To comfort him amid this depravity, Morris took as a mistress Adelaide Filleul, a Paris beauty who was married to a man more than 30 years her senior, and who had a son by another man. Morris also had to share her charms with one of revolutionary France’s leading politicians, Charles Talleyrand, but he was truly devoted to her.

Morris was far more involved in France’s internal affairs than any diplomat had a right to be, even in those days when ambassadors enjoyed considerable independent authority. He advised King Louis XVI on various matters, and sympathized with that dull monarch. (“It would seem strange that the mildest monarch who ever fill’d the French Throne…should be persecuted as one of the most nefarious Tyrants that ever disgraced the Annals of human nature.”) Morris was deeply involved in several plots to get the king out of Paris, none of which came to fruition.

Morris was the only foreign diplomat who refused to leave Paris during the Terror. He repeatedly attempted to assist Lafayette, who was regarded by Morris as well as by most Americans as a great friend of the United States. The American minister eventually made a substantial loan to Lafayette out of his own funds.

Morris was ultimately recalled, on France’s insistence, after President Washington dismissed France’s envoy to Washington, the meddlesome “Citizen” Genet. Despite Morris’s lack of sympathy with the French Revolution, Ms. Miller believes him to have been an effective diplomat who dealt skillfully with the differences between his own country and revolutionary France.

John M. and Priscilla S. Taylor are writers in McLean, Va.

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