HomeThe criminal complaint which formed the basis of Ponzi's federal arrest set out the elements of a mail fraud case. The complaint alleged that Ponzi devised a scheme to defraud investors by claiming he could pay 50 per cent. interest every forty-five days on their notes, when in fact he was not able to pay such interest and intended to keep their money.
The complaint further alleged that, for the purpose of executing his scheme, he mailed investors letters about their notes. This second element was included because, unlike common-law fraud, the essence of a mail fraud charge is not the fraudulent scheme itself, but rather the use of federal mails in furtherance of that scheme.
On August 19, Ponzi was brought from jail for a hearing before Federal Commissioner Hayes. The Federal Building was surrounded by a crowd intent on seeing Ponzi, and the hearing was held in its largest courtroom. When the courtroom doors were opened, people pushed past bailiffs and scrambled for seats.
This court appearance found Ponzi relaxed and cheerful. Hands casually in pockets, he nodded to friends and well-wishers. Ponzi sat through an unrelated hearing, and when his own turn came, he waived examination and agreed to no change in bail. The hearing was brief, and Ponzi was remanded to the East Cambridge Jail until his case could be heard in the September term of the Federal District Court. Ponzi reported receiving $5,000 in his cell from hopeful investors, and again promised he could recoup his losses if allowed an extra 60 days.
On October 1st, a federal grand jury returned two forty-three count indictments, the longest in years, against Ponzi, and on November 30 he made a deal with the prosecutors, pleading guilty to a single count. Having dismissed all counts but one, Assistant United States Attorney Shea urged the imposition of the maximum sentence, reminding those assembled of the extent of Ponzi's fraud: "It is true Mr. Ponzi did collect about $10,000,000. It is also true he paid back about $8,000,000, leaving a difference of about $2,000,000 between what he took in and what he returned."
In imposing the maximum five year sentence for a mail fraud count, Judge Hale added his own stern pronouncement: "The defendant conceived a scheme which on his counsel's admission did defraud men and women. It will not do to have the public, the world, understand that such a scheme as his through the United States' instrumentality could be carried out without receiving substantial punishment." With his wife sobbing on his shoulder, Ponzi wrote: "Sic Transit Gloria Mundi," (thus passes worldly glory) on pad of paper and passed it to reporters.
Despite Ponzi's federal incarceration, the State of Massachusetts proceeded with Larceny charges. Because Ponzi was in the custody of a federal correctional facility, Judge Fessenden of the Massachusetts superior court issued a writ of habeas corpus, on April 21, 1921, directing that the master of the House of Correction produce Ponzi in state court where he could stand trial for state charges.
Federal authorities initially resisted this request, but later, at the direction of the United States Attorney General, withdrew the objection and directed Sheriff Earl P. Blake, master of the Plymouth House of Correction, to produce Ponzi in state court. He was arraigned there on May 3, but refused to plead on the grounds that he was a federal prisoner.
On May 23, he filed a writ of habeas corpus in Federal District Court alleging that as he was a federal prisoner, the state had no jurisdiction to try him. The district court denied the writ the next day, and Ponzi appealed to the First Circuit Court of Appeals. Ponzi would not be produced in state court pending his appeal, and on June 2 the First Circuit denied the Massachusetts Attorney General's motion to expedite the appeal, which would be considered in the Fall.
The First Circuit certified the issue as a question of law to the Supreme Court on November 29. Oral arguments before the high court were held on March 8 and 9, 1922, and the Supreme Court ruled against Ponzi on March 27. Discussing the issues raised by a state and federal court both proceeding against a defendant, Chief Justice Taft, writing for the court, stated:
We live in the jurisdiction of two sovereignties, each having its own system of courts to declare and enforce its laws in common territory. It would be impossible for such courts to fulfill their respective functions without embarrassing conflict unless rules were adopted by them to avoid it
The chief rule which preserves our two systems of courts from actual conflict of jurisdiction is that the court which first takes the subject-matter of the litigation into its control, whether this be person or property, must be permitted to exhaust its remedy, to attain which it assumed control, before the other court shall attempt to take it for its purpose
In the case at bar, the federal District Court first took custody of Ponzi. He pleaded guilty, was sentenced to imprisonment and was detained under United States authority to suffer the punishment imposed. Until the end of his term and his discharge, no state court could assume control of his body without the consent of the United States.
This principle was the basis of Ponzi's objection, but he took it a step further, alleging that the United States did not have the authority to waive its exclusive jurisdiction over Ponzi. The court responded: "There is no express authority authorizing the transfer of a federal prisoner to a state court for such purposes. Yet we have no doubt that it exists and is to be exercised with the consent of the Attorney General."
Regarding Ponzi's claim that he could not get a fair trial under such circumstances, Justice Taft responded:
One accused of a crime has a right to a full and fair trial according to the law of the government whose sovereignty he is alleged to have offended, but he has no more than that. He should not be permitted to use the machinery of one sovereignty to obstruct his trial in the courts of the other, unless the necessary operation of such machinery prevents his having a fair trial. He may not complain if one sovereignty waives its strict right to exclusive custody over him for vindication of its laws in order that the other may also subject him to conviction of crime against it.
On May 12, the Supreme Court directed the First Circuit to take further proceedings to implement its ruling, and the First Circuit affirmed the District Court's decree, denying Ponzi's writ on June 6. With the constitutional question resolved against him, Ponzi requested a trial date for his 22 Massachusetts larceny indictments on July 14.
On September 11, 1920, shortly after his arrest on federal charges, a Suffolk County Grand Jury had returned twelve larceny indictments against Ponzi, totaling 68 counts. Ten indictments charging accessory before the fact of larceny were also returned. The case was delayed while the constitutional issues surrounding the state trial were being resolved, and did not reach trial until October 23, 1922. At this trial, only twelve of the twenty-two indictments were presented. Ponzi objected, requesting a single trial on all indictments, but the trial proceeded only on the twelve indictments, giving the state prosecutors a significant tactical advantage.
At the trial, Charles Rittenhouse, an accountant employed by the receivers of Ponzi's bankruptcy estate, testified that $9,582,591 was invested in Ponzi's scheme reflecting notes with a face value of $14,374,755. When the business shut down, $4,263,652 of investment was outstanding, having a face value of $6,396,353. These figures probably present the most accurate financial picture of Ponzi's business when it closed. Testimony also revealed that three quarters of the Boston Police force had been investors. Whether this impacted their deliberations is not known, but the jury found Ponzi not guilty on December 1.
For reasons which are not known, it was nearly two years before Ponzi was brought to trail, on November 6, 1924, for five of the untried indictments. In this trial, the jury disagreed on four of the indictments and the judge directed a verdict of not guilty on the fifth. Massachusetts prosecutors had a third shot at Ponzi on February 18, 1925, trying him on four indictments, and finally found a sympathetic jury which returned a guilty verdict on all counts on February 26. Three of the indictments were placed on file. Ponzi was sentenced on the fourth indictment which was based on transactions with an investor named Bodenstab. The first count was larceny of $1,000 on July 8, 1920. The second was larceny of $600 on July 16, 1920, and the third, larceny of $400 on July 20, 1920. Based on these three larceny convictions, Ponzi was adjudged a "common and notorious thief," under [General Laws Chapter 266, § 40]. Ponzi appealed this conviction to the Massachusetts Supreme Court.
Massachusetts Superior Court Judge Sisk sentenced Ponzi to a seven to nine year prison term as a "common and notorious thief," on July 11, 1925, but stayed the sentence and released Ponzi while his appeal was pending..
His arrest and bankruptcy clearly marked the end of Ponzi's salad days. From this point on, events and law enforcement agencies conspired against him and assured that he would never again achieve a comparable degree of wealth and notoriety.
While Ponzi was languishing in a federal correctional facility in the early 20's, speculators in Florida seized upon real estate as a moneymaking scheme which would ultimately prove more enduring than trade in postal reply coupons. In Miami alone, the land boom increased the assessed value of property 560 percent between 1921 and 1926. This speculation provided many opportunities for overreaching, and gave rise to a familiar, if less personal, phrase for another species of fraud: "Swamp land in Florida."
Ponzi answered Florida's siren call, arriving In Jacksonville on September 28, 1925, as the boom was beginning to fade. As his name had become synonymous with fraud, he used the alias Charles Borelli. Once his presence and true identity were revealed, he announced plans to recoup his fortune, through the subdivision of real estate, and repay all investors. He would advertise nationally, selling lots at an affordable ten dollars each.
The Massachusetts District Attorney's office, purportedly on procedural grounds, petitioned Judge Sisk on November 16 to vacate Ponzi's stay of sentence. Judge Sisk, stood by his earlier decision and dismissed the petition on November 18. Ponzi complained about the motion, claiming to be the victim of unnamed "hostile interests," but one hardly need resort to conspiracy theory to see why prosecutors wanted him behind bars.
Ponzi not only missed the land boom, but his luck was such that he arrived in Florida just as authorities began a campaign of investigations aimed at discouraging speculative land dealings. Ponzi, his wife, and Mr. and Mrs. Calcadonio Alviati, formed the Charpon land syndicate, quickly attracting the attention of investigators.
On January 14, 1926, Mr. Alviati was charged in Boston with violating the Massachusetts Blue Sky law while engaged in sales activities on behalf of the land syndicate. By January 16, Alviati was convicted and sentenced to six months in prison.
In February the Duval County Grand Jury returned a four count indictment against Ponzi, his wife, and Mr. and Mrs. Alviati. They were charged with violating Florida law regulating persons and associations doing business under a declaration of trust; offering securities for sale without filing a declaration of trust; selling units of indebtedness without a permit from the State Controller; and doing business without paying a $150 license fee.
Investigation revealed more details about Ponzi's pyramid land scheme. His syndicate purchased, at $16 an acre, 100 acres of land in Columbia County. It had been designated the Rosa Maria tract. Each acre would be subdivided into twenty-three lots. With a $10 price per lot, Ponzi would yield $214 profit per acre. Ponzi claimed that under his pyramiding plan, an initial $10 investment would yield $5,300,000 in two years. And, of course, pictures of the land revealed that some of the lots were under water.
After the indictments were returned, Judge George Cooper Gibbs issued capiases (writs of arrest) for the Ponzi's and Alviatis. Mr. Alviati was in Boston at the time, out on appeal of a six month sentence. Ponzi was in Tampa at the time of the indictment and drove to Jacksonville. The authorities, assuming he would travel by train, missed his arrival. While Florida authorities continued searching for Ponzi, he retained counsel and met with reporters.
After a 36 hour search, Ponzi and his wife were arrested in his attorney's Jacksonville office. The unfortunate and longsuffering Rosa fainted a few minutes after her arrest and was revived by Sheriff's deputies and newspapermen. He was released on $5,000 bond, Rosa on a $500 bond. Ponzi moved to quash the indictment and a hearing date was set for April 1.
At the Postal Inspector's request to the U.S. Attorney's office, Ponzi was again charged with mail fraud on February 24. He surrendered himself to the Federal Commissioner and was released without bail. The preliminary hearing date was set for March 4. At a second hearing on March 17, the Commissioner dismissed the mail fraud charge. Ponzi's counsel claimed that the prosecution failed to prove the specific intent to defraud required by penal law.
Testifying at the hearing, Ponzi provided many details as to the operation of his syndicate, and claimed Department of Justice officials had approved his plan. He sold "units of indebtedness" promising 200 per cent. return in 60 days, but retained the right to pay such returns with either cash or real estate. He made his first sale on November 9, 1925, and had collected $7,000 from investors before the mail fraud charges were filed. He had started to subdivide two more tracts, but put all business activities on hold until federal and state charges could be resolved.
Ponzi did not fare as well with the state of Florida. On April 2, a Duval Court of Criminal Records jury found Ponzi guilty of failure to file a declaration of trust with the Secretary of State and of selling certificates of indebtedness without permission, after deliberating for one hour and three minutes. He was released, on the same $5,000 bond, while his attorney moved for a new trial.
On April 21 he was sentenced to one year of hard labor in the State Penitentiary at Raiford, and was freed on $1,500 bond while his appeal to the State Supreme Court was pending. Judge James M. Peeler denied Ponzi's motion for a new trial but gave him sixty days to prepare an appeal. Ponzi's attorneys claimed the declaration of trust was simply a power of attorney and not covered under the state law. The prosecutors nolle prossed (dismissed) charges against Mrs. Ponzi and Mrs. Alviati.
On May 28 the Supreme Court of the State of Massachusetts upheld Ponzi's Larceny conviction. Judge Fosdick of the Superior Court in Boston then ordered Ponzi to appear before his court for sentencing. On Tuesday, June 1, Ponzi had failed to appear and the judge issued a default warrant. Ponzi telegraphed Judge Fosdick from Jacksonville that evening claiming he had only heard of the order the day before and requested ten more days to appear: "Am under bond here and need consent to leave the state. Also must settle my affairs. Please wire me your orders collect." The Judge then withdrew the warrant and gave Ponzi until Monday, June 7, to appear.
By June 12, rumors were circulating that Ponzi had fled the country. While not overly concerned, Boston authorities began preparing police circulars bearing Ponzi's likeness and criminal record. Immigration authorities had begun watching him after he telegraphed Judge Fosdick from Jacksonville. The circulars were sent out on June 22, with Ponzi still at large. The circular listed aliases Ponzi had used including Charles Ponci, and Carlo and Charles P. Bianelli. He was described as: "Forty-four years of age; height 5 feet 2 inches; hair dark chestnut mixed with gray; eyes, brown; occupation, thief."
At this point, Ponzi abandoned his policy of cooperating with authorities which had afforded him such leniency in the past. In Tampa, Florida, he boarded a ship bound for Italy. The vessel apparently stopped at Port Houston, Texas, where Ponzi attracted the attention of Texas authorities. The ship left that port on June 25, with Ponzi eluding capture. Sheriff Binford of Texas requested Ponzi's Bertillon measurements, sending Deputy Police Superintendent Hall of Boston a telegram: "Do you want Charles Ponzi? Advice return wire quick, advise fingerprint classification and if any reward." The Sheriff was notified that no reward was offered.
The lack of financial incentive did not deter the Sheriff's quest for justice, and a procedure that could charitably be described as irregular was used to capture Ponzi. Judge P. J. Morrow of the Texas Court of Criminal Appeals gives this remarkable account:
According to the testimony, [Ponzi], at Tampa, Fla., boarded a freighting vessel known as Sic Vos Von Vobis, which was under Italian registration, flying the Italian flag, and apparently manned by Italian subjects. [Ponzi] was employed for service on the vessel which was bound for Italy, but which stopped at New Orleans, La. While there, one George Lacy, a deputy sheriff of Texas, who, having no papers for the arrest of [Ponzi] and no connection with the constabulary of the state of Louisiana, arranged with a custom house officer at New Orleans to induce some person in authority on the vessel to send [Ponzi] ashore. The custom house officer went aboard the vessel and requested the second officer in charge to send [Ponzi] to the custom house for the purpose of having papers touching the cargo authenticated. The second officer directed [Ponzi] to go to the custom house, and accompanied him thereto. Upon their arrival at the custom house, [Ponzi] was forcibly taken in custody by George Lacy, who afterwards took him to a hotel and then brought him to the city of Houston, Tex., where complaint was made charging him as a fugitive from justice.
While this capture was characterized by the court as an unlawful kidnapping, there is no record of whether Deputy Lacy was ever charged (or decorated) for his crime. Grasping at straws, Ponzi appealed to now President Calvin Coolidge for clemency, but the former Governor of Massachusetts during Ponzi's postal coupon scheme ignored this appeal.
Alfred R. Shrigley, Assistant Attorney General of Massachusetts, phoned Texas authorities and arranged for an extradition hearing, arriving in Houston on July 6. A hearing was held before Texas Governor Miriam "Ma" Ferguson on July 10. "Ma" Ferguson was known to be the proxy of her husband, a previous Governor of Texas, who could no longer hold office due to an impeachment. It was noted that this was Governor Ferguson's first case heard without her husband's presence, who was out making speeches for his wife's upcoming, reelection campaign (she lost the primary). Governor Ferguson stated that if extradition was granted, it would not be until after the Texas primaries on July 24. Rather than simply examine the extradition papers for proper form and completeness as the law prescribed, she inquired into the nature of Ponzi's criminal activities and the circumstances of his arrest, requesting a brief from Mr. Shrigley covering these matters. Mr. Shrigley objected, but nonetheless complied. He had good reason to be concerned. Governor "Ma" Ferguson "was to be remembered primarily for one thing: the most extensive use of executive clemency in Texas history." Ponzi did not appear in person at the hearing, as he had refused to travel from Houston handcuffed to Police Inspector John F. Mitchell of Boston. Ponzi's counsel argued that Ponzi was kidnapped from an Italian ship and hence this matter was not within the jurisdiction of the state but was instead a matter of international law, and that theft was not an extraditable offense according to the treaty between the United States and Italy.
United State Senator Morris Sheppard of Texas sent a telegram, which was read in open court, stating that he had referred the matter of Ponzi's kidnapping to the Secretary of State and the Italian ambassador. The hearing was continued until a later date, and on August 2nd Governor Ferguson granted the extradition request. Ponzi, still jailed in Houston, stated that he would file a writ of habeas corpus with the district court in Houston. If this writ were not granted in the district court, he promised he would appeal to the Court of Criminal Appeals and State Supreme Court, if necessary. He was released, pending appeal, on a $12,000 bond.
On June 30, Ponzi sent a telegram to President Coolidge, and followed up with a July 12 letter to Assistant Attorney General Luhring. These remarkable and paranoid epistles could, in the minds of some, indicate that reality may have exceeded Ponzi's grasp at that point.
Judge Charles Ashe of the district court refused Ponzi's writ of habeas corpus explaining: "I had started to pronounce judgment yesterday. At that time no cases had been cited upholding the constitutionality of the indictment as returned. After the hearing this morning I am satisfied with the Supreme Court decisions on the matter of valid indictments." Ponzi's attorneys gave immediate notice of appeal to the Texas Court of Criminal Appeals, which would be meeting in October. Mrs. Ponzi and her mother-in-law sailed for Italy September first in a bid to enlist support from Premier Benito Mussolini. This is the last we shall hear of the long-suffering Rosa Ponzi. It is not known if they got back together when he returned to Italy. She was not mentioned at the time of his death.
On September 20, three Boston law officers left for Texas, hoping to bring Ponzi back in October. Victims of wishful thinking, they would arrive about four months before Ponzi's return. A few days later, on the 23rd, Mayor Oscar Holcombe of Houston refused Ponzi's offer of a warranty deed to 26 lots in Columbia, Florida to aid victims of the hurricane which had devastated Florida coastlines four days earlier. The Mayor added: "This is a very poor time for Ponzi to attempt to gain publicity at the expense of those suffering from the ravages of the hurricane."
The Texas Court of Criminal Appeals affirmed the district court's dismissal of Ponzi's writ on October 27. Ponzi moved for a rehearing and this motion was denied by the court January 26, 1927. In spite of his earlier promise, he uncharacteristically let the matter rest and did not appeal to the Texas Supreme Court. He finally left Texas on February 12 and began serving his Massachusetts prison term on February 16. He would be eligible for parole in October of 1931.
On September 28, 1927 with Ponzi still in a Massachusetts prison, the Immigration Bureau issued a deportation order for Ponzi. The warrant, however, would not be executed until he was released in 1934. The basis of his deportation order was a federal law that allowed deportation of individuals having been convicted of a crime involving moral turpitude. Ponzi challenged the order, claiming that moral turpitude involved a crime against chastity, and did not apply to his larceny conviction. Mrs. Anna C. M. Tillinghast, United States Immigration Commissioner for Boston, replied in a letter that turpitude was "an act of baseness, vileness or depravity in the private and social duties which man owes to his fellow-men or to society in general, contrary to the accepted and customary rule of right and duty between man and man." Another writ of habeas corpus was denied on June 3, 1932. On February 14, he was released from Massachusetts prison and arrested by federal authorities as an undesirable alien. Having exhausted his funds, he was unable to raise bail. Ponzi appealed the Immigration Bureau's ruling to the Federal District Court in Boston which upheld the deportation warrant on July 30, 1934. He left the United States for Italy that year. In July of 1935 he requested permission of the United States consulate to visit the country, and in September of that year he was reported to have been hit by a truck in Italy, receiving only minor injuries.
Authorities may have been concerned that Ponzi had not abandoned his love for the Land of Opportunity. In September of 1939 the FBI interviewed a California man but concluded that he "did not resemble the photograph of Ponzi in any respect."
Ponzi emigrated to Brazil sometime before World War II. The dates here are vague, leaving room for conjecture as to his activities and country of residence in the late 1930's. Nearly destitute when he arrived in Brazil, he eked out a living teaching English, receiving unemployment compensation in slack times. He reported this most ambitious scheme was an attempt to swindle the Soviet Union out of 2 billion dollars by promising to smuggle gold, adding: "What a joke on the communists that would have been."
His declining years brought infirmity, with paralysis on his left side and partial blindness. He spent his final days in the charity ward of a Rio de Janeiro hospital, and died on January 15, 1949 at the age of 67. A legal agent claimed Ponzi's body and buried him using $75 Ponzi had saved from a Brazilian government pension.