The Ponzi Behind the Scheme

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On today's episode of Timeless Wisdom, I don't know if there is anybody who has a financial anything named after him that is as famous or infamous as Ponzi. I don't think he fascinates people. They don't even think of him when— in fact, I didn't know it was named after a guy, so I, I assume that I'm, I'm in the majority in that way. We all heard of the scheme, but we don't know the guy.

That's coming up on Timeless Wisdom with Dennis Prager.

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Welcome to Timeless Wisdom with Dennis Prager. Hear thousands of hours of Dennis's lectures, courses, and classic radio programs. And to purchase Dennis Prager's Rational Bibles, go to DennisPrager.com.

All righty, everybody, you're listening to The Dennis Prager Show. I thank you for doing so. And while there is a lot in the news that I want to talk to you about I want to talk first to Mitchell Zukoff, who is a professor at Boston University, professor of journalism, who has written a book about something that has always fascinated me, and I suspect I'm not alone. I suspect that 98.423% of you listening has heard of the idea of, or the nonsense of, or whatever you wish to call, or the evil of a Ponzi scheme. Where people, uh, pay in money, some get more money, but eventually a lot of people lose all their money. Well, it's actually named after somebody. There was a guy, Ponzi, and Charles Ponzi is the guy who developed this. And Mitchell Zoukhoff of Boston University has written The True Story of a Financial Legend Ponzi, this is Dennis Prager and welcome to the program.

Thank you.

Hi, thank you. It is, uh, as soon as I saw this book was written, I knew that I had to have you on. I don't know if there is anybody who has a financial anything named after him that is as famous or infamous as Ponzi.

Even Capone didn't get, uh, you know, a submachine gun named after him. That's right.

Yes, I mean, when you think— I cannot think of a parallel. This Ponzi fascinates— I guess I don't think he fascinates people. They don't even think of him. When in fact, I didn't know it was named after a guy. So I assume that I'm in the majority in that way. We all heard of the scheme, but we don't know the guy.

You know what's funny? I think you were right when you said 98.423% had heard of Ponzi schemes. I think the, the other half of that equation is that 1.577 actually knew about Charles Ponzi.

Oh, right, exactly. And you're one of them. Why did you write this book?

For that very reason. You know, I was a journalist for a long time at the Boston Globe, and to tell stories that people didn't know has always been a passion of mine. And the fact that there was this Charles Ponzi— I was a banking reporter in Boston when banks were failing left and right, and someone said to me out of the blue, you know, banks haven't failed like this since the days of Ponzi. And when I heard Ponzi, like the scheme, and I said, yeah, he was a Boston guy.

Uh-oh.

And it set me down the path.

You know what you just said? You like stories— what did you say— of the unknown, or what was the word you used?

Stories that haven't been told.

That's it.

Do you know, I have found doing this program, those are my favorite interviews, the stories that have not been told. I had an author on about the, the one gold coin that's a double eagle.

The Eagle Book. Yes, yes.

I tell you, I sat, I sat at the microphone riveted for an hour. I, I could not believe, and how much you learn about, about history, not just about that unknown item.

Yes.

And so, uh, I, I believe, and I'm gonna let you— believe me, I'm gonna let you talk. But I just have to tell you and my listeners, I think the best way to learn history is through the micro, not, you know, a history of America in the 1920s may be wonderful, but if you take one person in the 1920s, you may learn more.

I couldn't agree more. And in fact, that is such an important way to look at this book. And I think in a lot of books like this, narrative histories where, you know, Ponzi couldn't have existed at any other time. You have, you know, World War I is over, Prohibition is in effect, the stock market's revving up, you've got immigration, you know, people pouring into our shores, you've got, you know, the U.S. population for the first time ever has become more city-fied, more urban than rural, women have just gotten the right to vote. There's a tremendous amount of change going on, tremendous uncertainty, and that is all the backdrop. You could write a book about each one of those items I just mentioned, but if you see it through the prism of Ponzi scheme and how this guy could possibly operate like this and rake in millions upon millions of dollars in such a short time, it all comes together.

What year was it?

1920.

And the war— let's put everything in context. The war is over in '19.

Yep.

Uh, now, now expecting the post-war prosperity So there is an optimism in the air.

Precisely.

Alright, that's the mood of the country is optimistic even though we've lost so many men.

Yes.

We've just fought a war and economically how is the country doing in 1920?

People are still waiting for the post-war bounce, the big pickup after the war that people had been expecting and people had been promised. It wasn't quite coming yet. The stock market is just starting to rev up. It'll really be later in the '20s when the real craziness starts in the market. But, you know, the optimism though is mixed with a lot of uncertainty. We've got the Red Scare going on. We've got a tremendous fear that with all these new immigrants are going to bring in new ideas, whether it's communism or whether it's socialism, fascism. And so while there's optimism and there's a lot of hopefulness and a lot of expectation, there's also uncertainty. And that is the perfect climate into which you can inject a scheme like this.

Now, who is Charles Ponzi before, uh, the scheme?

Charles Ponzi was an Italian immigrant. He was born to an aristocratic family in a town called Lugo, Italy, in 1882. He squandered his small inheritance when he was partying when he should have been studying at the University of Rome, and his family said, go to America, make your fortune there. Bright young man like you, handsome, charming, dapper, a good dresser. He washes up on the shores of Boston in 1903.

At how old?

He's 21 years old. Mm-hmm. Spends the next 15 years searching for riches, bouncing up and down the East Coast, out to the Midwest a little bit, having amazing heroic adventures including saving a woman's life by donating his own skin when she's burned in a horrible accident.

A stranger or someone he knew?

A stranger.

Really?

Who was working in a mining camp as a nurse where he was also working. And he was friendly with a doctor there. And the doctor was in Ponzi's tent one night talking about how terrible it was that Rose was likely to die. And in fact, excuse me, Pearl was likely to die. Pearl Gossett. And Ponzi said, well, what's the problem? Well, I have no one who's willing to donate skin. To save her. She was horribly burned in this kerosene explosion. And Ponzi said, take all you need. And the rest of his life he spent with enormous swaths, uh, scars, symmetrical scars on his back and on the back of his legs where the doctor had taken off chunks of skin.

That's a, that's a remarkable act. You know, this— one of the reasons this fascinates me is I talk a great deal on my program about good and evil. And, uh, how people have moral bank accounts. And in assessing Ponzi— and I don't know the damage he did yet, so, you know, we're not ready to make a judgment. I may not even make one, but I, you know, it's not, it's not all I do in life. But, but it is very important to put the man, not the scheme, but the man into context. That is, that is a very rare act of a human. And in those days It's had to have been painful. I mean, I'm sure it's painful today, but it must have been particularly painful then.

Absolutely.

He scarred his body.

He suffered from pleurisy after. It nearly killed him. He was laid up in bed for weeks and weeks after that.

Did it save the woman?

It saved her life.

How did she feel toward him?

Uh, you know, enormously grateful. She, you know, she knew that she would not be alive were it not for him. And, uh, the townspeople were gathered around and nominated him for a heroism award. So when you hear the name Ponzi or you hear a Ponzi scheme, it's immediately— you have, when you talk about good and evil, people have a one-dimensional sense of, "Oh, this is a schemer. This is a bad guy." Sometimes, as you said, it's much more complex. That makes it more interesting to me. He wasn't pure evil. He was a dreamer. Yes, he was a schemer. But he had this complexity, this moral complexity, that really showed up in the incident with Pearl Gossett.

All right, so, well, that is a very powerful story. Now, what is he doing for a living prior to the scheme?

You name it. He's working as a road drummer, which is, you know, working on road crews. He's working as a waiter. He's working in a mining camp as a male nurse. He's just sort of keeping body and soul together.

Well, then it sounds to me like he's not doing much better here than had he stayed with his aristocratic family back in Italy.

Exactly. In fact, he probably could have gotten himself a clerkship somewhere in an office in Italy, even just with 3 years of college education. But once he came here, he was so determined to live up to his mother's expectations. She had sent him here. His father had died when he was young, and she had such tremendous confidence in him. She spent his youth, in his words, "building castles in the air about what a glorious future I would have." Once he went to America, he felt as though he could not go back to Italy in shame.

You know, you never want to disappoint your mom.

That's right, just the way it is.

I will be back. I am very interested if anybody listening has suffered from a Ponzi scheme or has been involved in any. 1-800-PRAGER-776. Mitchell Zoukhoff. The book is Ponzi Scheme: The True Story of a Financial Legend. You're listening to The Dennis Prager Show, 1-800-PRAGER- 776.

This episode of Timeless Wisdom will continue right after this.

For nearly 3,000 years, Homer's The Odyssey has shaped Western imagination. It tells the story of Odysseus as he faces monsters, shipwrecks, false comforts, and impossible choices on his long journey home. As one of the foundational works of Western literature, Homer's epic is more than mythology. It explores permanent questions about courage, duty, loyalty, family, leadership, temptation, and the search for home. In one of the epic's defining moments, Odysseus rejects the offer of immortality from the goddess Calypso, choosing instead the long and difficult journey home. His decision reveals one of the central themes of The Odyssey, that a life of duty, family, and home is greater than a life devoted to comfort or glory. Achilles chose glory. Odysseus chose home. That's why Hillsdale College has released its newest free online course, The Odyssey. Taught by Professor Benedict Whelan, the course reveals why Homer's masterpiece remains one of the greatest works of Western literature. Find this free course at hillsdale.edu/odysseus. Hillsdale.edu/startnow. The Odyssey from Hillsdale College. Go to hillsdale.edu/startnow.

Now back to more of Dennis Prager's timeless wisdom.

This is the way to learn history, my friends. You're listening to The Dennis Prager Show. My guest is Mitchell Zoukhoff, and though he is a professor of journalism, I do not want you to hold it against him. You don't know how true that is, Professor Zukoff.

I, I do.

Okay, fine, you do. Welcome to the program. And those of you in the Boston area can hear, uh, you could tell your relatives, friends, and enemies you're on WTTT right now.

I will.

Mitchell Zukoff has written Ponzi Scheme, and it is the true story of a financial legend. Uh, we were deluged with calls, you might be interested to know, uh, all saying the same thing. When I asked, have you ever been involved in or a victim of a Ponzi scheme, uh, immediately all lights lit up and said Social Security.

Ah, yes.

What do you think of that?

Well, you know, it does have certain things in common, absolutely. You have early— you know, the, the nature of a Ponzi scheme is that early investors are paid off with the money of later investors.

Right.

There's nothing underpinning it. And so certainly Social Security, uh, current people who are paying in are just paying in to the retirees now collecting. So in that sense, yes, it has the same model. One thing I would say it makes it clearly different is that there's no trick to it. Nobody is claiming that it's anything but that. And so, uh, You know, the difference in a real Ponzi scheme—

Oh, that's a good— that, no, that's very good. It's an eyes-opened Ponzi scheme.

Exactly. That's right. You know, nobody's pretending that we're really investing that money or keeping it in a lockbox or whatever you want to call it. It's straightforward. Early investors are being paid with money from later investors. So yes, the model fits. The trick, again, in a real Ponzi scheme is that people are misled that it's something else going on, that we're really investing in some great—

All right, so, so let's go back and we'll take calls here. 1-800-PRAEGER-776. Uh, here, well, for— let's take a couple right now. In fact, in Forest Park, Illinois, WIND James. Hello, James. Dennis Prager, Mitchell Zuckoff.

Hello. I, I, I came up with that same comment. It's Social Security, it's Ponzi scheme. It's, it's only going to work as long as we've got enough people paying in to cover the retirees, right?

So how do you, uh, uh, do you accept, uh, Professor Zukoff's statement that at least our— it's not being portrayed as anything else?

Well, you know, at various times politicians have said, oh, we're putting it in the Social Security lockbox. But yeah, I guess pretty much everybody does know what it is, right?

There's no lockbox for it in a Ponzi scheme, is there, Professor?

There is not.

No, that's the whole point. Tyler, uh, Tyler, Texas. Cliff on K-Sky. Hello, Cliff. Dennis Prager, Mitchell Zoukhoff.

Good morning, Dennis.

Hi.

Hi. Uh, I guess you want some background on the scheme that I was taken in.

Yeah, if you could do it quickly, sure.

Yes, it was a company here called Mobile Billboards, and they was structured so that an investor purchased a billboard frame from them and simultaneously would enter into a leaseback agreement with Outdoor Media Company, which is part of the lawsuit, and they would receive a lease payment equivalent to about 13% annually. So what was going on then, they would sell these, and they sold about $60.5 million of these systems before they were shut down by the Securities Exchange Commission.

—so because all the money they would rake in was from the next buyer, right? Yeah, well, that— so that, that's a good example, I guess.

Yeah, I've heard of the billboard scheme. You have? Oh, that's very interesting. There's— there— they take every variety. You can— you, you name the product and somebody's tried to turn it into a Ponzi scheme, I believe. All right, we have seen—

all right, well, we'll talk about some of the, the better known schemes later. Let's first go back to Ponzi right now. Ponzi— if I'd have met Ponzi In 19— when did the scheme happen again?

20 what? He got the idea in 1919. In 1920 is when it really took off.

All right, so had I met him though in 1915, I'd have thought this is an altruistic, indeed heroic man who, like so many others, wants to make his way as an immigrant in America.

You would, with a couple of small exceptions. One thing I didn't tell you is that although he was having this heroic adventure, he also had some misadventures during those same years when he was bouncing around. Yeah, one was up in Montreal. He was working in a bank, and believe it or not, the banker who ran the place was engaged in some version of the Ponzi scheme of robbing Peter to pay Paul. Now, Ponzi wasn't involved, but when it all collapsed, Ponzi needed to get out of there fast because he thought he'd be swept up in it. He forged a check, and he ended up serving some prison time up there in Canada, in Canada, in Montreal. Huh. So, and then on his way out, he tried to make some money when he was— he was allowed to cross over the border back into the United States. He brought some Italian immigrants with him who were undocumented, and he got nabbed by immigration for illegal immigration, and he spent some more time in prison, this time down in Atlanta. So he's a real mixed bag. Nothing he did in those two incidents— no, exactly.

Well, they were not nearly as evil as the skin he gave— Precisely. —was good. So, so far he has a moral bank account with Prager anyway.

Okay, good.

I agree. I think that's a good accounting. All right, fair enough. So, uh, we're up now to 1919. The war is ending or over, and he is not really moving in the direction that would bring his mother back in Italy pride. Exactly.

Okay, go on. Then there's truly a eureka moment. He had been writing to people over in Europe looking for ideas, business schemes, business plans, not just schemes but legitimate businesses. And in one of the letters that was sent back to him, a little piece of paper fluttered out of the envelope, and it was something called an international reply coupon. It was a really unusual, really mundane form of international currency.

Right, I remember it. I used to send it to radio stations.

Okay. Yep. Exactly. It basically was a way to send a self-addressed stamp envelope overseas, so that one post office would recognize this currency. You could buy a stamp with it in any country in the world, right? Ponzi recognized that after World War I, currencies around the world were depreciated, had been devalued by the war. So the same IRC, the same postal coupon you'd buy in one country at one value, conceivably was worth a different amount and more in another country. It— this is arbitrage. This was currency exchange. This was, believe it or not, both legal and theoretically possible, that if you could buy an enormous amount of these things, these postage stamps if you will, in one country and sell them in another country where they were worth more, you could become rich.

Why would they be worth more in another country?

Because they had not— their values had not been adjusted to reflect the depreciated currencies of European economies. So, uh, you could buy, let's say, 5 for a dollar in Boston, and in Barcelona you could buy 20 for a dollar because the Barcelona— the Italian currency was so devalued. Oh, I see.

So, well, all right, that's perfectly legal. That's called speculating. Exactly.

People do it. Hey, there are currency traders on Wall Street doing it today.

That's how, uh, Soros made his money.

Precisely. Yeah, okay, exactly. So Ponzi realizes, wait a second, this is great. All I need though is money to get started. I have to go invest money to make money. He goes to a bank. He had no credit. He had—

okay, hold on. All right, no, no, don't be sorry, you're leaving me in, uh, in suspense here. 1-800-DENNIS-PRAGER-776. The book Ponzi's Scheme, Mitchell Zukoff. And we'll return in a moment. How the scheme develops. Coming up.

This episode of Timeless Wisdom will continue right after this.

For nearly 3,000 years, Homer's The Odyssey has shaped Western imagination. It tells the story of Odysseus as he faces monsters, shipwrecks, false comforts, and impossible choices on his long journey home. As one of the foundational works of Western literature, Homer's epic is more than mythology. It explores permanent questions about courage, duty, loyalty, family, leadership, temptation, and the search for home. In one of the epic's defining moments, Odysseus rejects the offer of immortality from the goddess Calypso, choosing instead the long and difficult journey home. His decision reveals one of the central themes of The Odyssey: that a life of duty, family, and home is greater than a life devoted to comfort or glory. Achilles chose glory. Odysseus chose home. That's why Hillsdale College has released its newest free online course, The Odyssey. Taught by Professor Benedict Whelan, the course reveals why Homer's masterpiece remains one of the greatest works of Western literature. Find this free course at hillsdale.edu/odysseus. Hillsdale.edu/startnow. The Odyssey from Hillsdale College. Go to hillsdale.edu/startnow.

Now back to more of Dennis Prager's timeless wisdom.

Dennis Prager here, and boy, am I waiting to hear how this happens. Ponzi Scheme, the biography of Charles Ponzi, the guy who invented the Ponzi scheme. And we're not talking about Social Security because all of you called in on that immediately. The True Story of a Financial Legend. All right, we're in 1919. Ponzi, just to summarize for those who either don't have good memories or just tuned in, Ponzi's an immigrant from Italy, uh, is both a heroic man, literally gave blocks of skin from his body to a, to a woman that he was, you know, wasn't even involved with, just a woman who had been burned and needed to live getting skin and yet got in trouble with some little financial bad things, also smuggling some Italian immigrants in from Canada. It's now 1919. Is this now after the war? Just after the war, yes. Alrighty, go ahead. So he has discovered that you can make money with international reply coupons, which is legal.

Yes, go ahead. But he doesn't have the money. It takes money to make money. He's going to need some kind of bankroll to go and buy these International Reply coupons and bring them back here and figure out how to make the logistics work. So he goes to a local bank and the bank just about laughs him out the door. He's got no credit. He doesn't want to reveal his plan to them because he thinks they'll steal it. So he goes around, tries to borrow money from other places. No luck. So he decides, "I've got to go to the public. I've got to take my idea out and offer people tremendous profits. I'll share these profits, but they need to give me the seed money. So he offers, he opens up a little storefront, not a real storefront, a little office in downtown Boston on School Street, right around the corner from Boston City Hall, and basically hangs out a shingle calling himself the Securities and Exchange Company. This is before the SEC exists. Only in America.

Only in America. And that's what he's thinking.

Only in America. The SEC isn't even around yet. Right. So he gets the name. Okay. He had it first. So people start slowly dribbling in because he's offering such amazing profits. He will increase— he'll give you 50% interest in 45 days. 50? 50. 5-0. Now this is a time— banks were paying what they are now, a few percent a year. So people tentatively started giving him money. A few, a few. And when the time came for them to redeem their coupons, to redeem their certificates, he was ready to pay with money from later investors because he still hadn't figured out the logistics of his plan. He offered to give them their money back, but what he did was said, of course, here's your money, but of course, if you want to invest again, you can double it, you know, again, you know, you can keep the—

Oh, of course, people think of, oh my God, look, I could obviously get 50% more, but why not do it again?

Okay, take another spin of the wheel, right? So they did, and money starts pouring in, and Ponzi gets a little nervous. He's really still trying to figure out—

of course, I was just going to ask you that. How does the guy sleep at night? Go ahead.

He, you know, he, he found a way. He kept trying to figure out, how do I make this work? And it became really apparent to him that there was no way to possibly— if I calculated once, just his first 18 investors, if he had been able to get enough coupons to pay them off It would have been a stack 21 feet high. Now, once he had thousands of investors, you'd have to have basically filled the Titanic with these coupons.

Oh, I'm starting to feel bad for him.

It's, you know, you can see it. The train is on the tracks.

So you don't think he's going to bed every night just, you know, laughing at the public?

I know he's not for this reason. Right around this time, he starts being treated for ulcers. It's getting to him. He wants to succeed. He is married. Part of what's driving him now is not just the love of his mother and wanting to satisfy her. He marries this beautiful young Italian-American girl, Rose Ginecco. Her father owned a little fruit stand here in Boston. And all Rose wants is a little house with a nice family, a picket fence, and her Charles. But he wants her dripping in diamonds and bathed in furs. And so he wants to make her rich and he wants to satisfy her beyond her wildest dreams.

Does he have any children at this time?

Not yet. They've just been married. He wanted to—

How old is he now? He is now 37. And she's 21?

She's 21. Okay. And they're— they've settled in a nice little apartment in a suburb and She just wants to have the babies, but he's saying, wait, wait till I'm a success. And things start taking off, and suddenly the money's pouring in, and he says, let's go buy a big house. They bought a beautiful mansion in the, in the, uh, suburban village of Lexington where we have Lexington.

You don't know, my heart is breaking.

Yeah, I'm sorry.

You know, it is. I, I'm living this thing. Yes. All right, hold on, we'll be back in a moment. Ponzi scheme. This is That is the way to learn history, in my opinion. Mitchell Zoukhoff and Dennis Prager, 1-800-PRAGER-776.

This episode of Timeless Wisdom will continue right after this.

For nearly 3,000 years, Homer's The Odyssey has shaped Western imagination. It tells the story of Odysseus as he faces monsters, shipwrecks, false comforts, and impossible choices on his long journey home. As one of the foundational works of Western literature, Homer's epic is more than mythology. It explores permanent questions about courage, duty, loyalty, family, leadership, temptation, and the search for home. In one of the epic's defining moments, Odysseus rejects the offer of immortality from the goddess Calypso, choosing instead the long and difficult journey home. His decision reveals one of the central themes of The Odyssey: that a life of duty, family, and home is greater than a life devoted to comfort or glory. Achilles chose glory. Odysseus chose home. That's why Hillsdale College has released its newest free free online course, The Odyssey, taught by Professor Benedict Whalen. The course reveals why Homer's masterpiece remains one of the greatest works of Western literature. Find this free course at hillsdale.edu/startnow. The Odyssey from Hillsdale College. Go to hillsdale.edu/startnow.

Now back to more of Dennis Prager's Timeless Wisdom.

Okay everybody, you're listening to the, uh, To the Dennis Prager Show, and my guest is Mitchell Zuckoff, who's written this fascinating part of sliver of American history, the biography of Charles Ponzi and the scheme. It's, it's not— the book after all is titled Ponzi's Scheme. It's the sort of history I love. Now, all right, this is the dramatic moment here. Is it fair to say, or is it because you just have sympathy for your the subject of your book, that one at this time is almost feeling bad for Charles Ponzi?

I think that's fair to say. He is completely stressed out. And now, in other frauds, the, the, the whole thing is based on the idea of when do I get out, where's my exit door. Ponzi never had one. Ponzi was not looking to get out. He was looking to make good. All evidence points to it. At one day, he was walking around literally with a $1.2 million certificate of deposit in his name, in his top pocket. Pocket. In the other pocket of his, of his suit coat, he had two first-class tickets to Italy for the, the long-awaited honeymoon he wanted to take with his wife Rose. He could have left. He was still, uh, uh, we're talking first-class, uh, ship. Absolutely. He could have just about bought the ship in, in 1919 for $1.2 million. He doesn't leave. He doesn't want to leave. He wants to figure out, and he is absolutely stressed out completely. Oh my God. How do I make good?

So he never did the international reply coupon thing.

He tried again and again and he realized finally there was no way to do it on the scale that would yield the profits on a tiny—

Ah, I can't believe it and I hate this that I'm feeling sympathy for the guy because people— But good. On the other hand, there are people who gave their life savings, I suspect.

There, certainly. But you know what, there was an element of greed there as well.

Well, to win, to make 50%, what, in 45 days? Yes. Yeah, that I would say greed is a fair statement.

That, that's—

but on the other hand, you know, I, you know, people were taken.

And I guess my goal is to say, look, Ponzi's name has been mud for 85 years. It was more complex than that. And certainly another man, a more moral man maybe a man who didn't have the pressure he felt to succeed, would have said, "You know what? I can't do this. Let me return what money I've taken in and try to make good and repay those who I can't." But the money kept coming in and he didn't want to stop it. In January, $1,700 comes in when he first starts. By March, $25,000. By May, $440,000. By June, $2.5 million.

And in— wait, $2.5 million or people?

Uh, dollars. Yeah. But then closing in on a million a day by the end of July, which is equivalent to what today? Over 100 million a day. It's about 100 to 1. Uh, no, excuse me, I'm— I shouldn't say that. It's about— it's more like 15 to 18 to 1. I'm talking about the total. But you could— you could see the scale we're talking.

So about 20 million a day in our current—

in our current, uh, Yes, and, and it was only getting bigger. People kept calling. They wanted to open up bureaus for him across the country. People were negotiating to take investments in New York, in Washington, in Texas, in California.

Did anybody ask, where are you getting the money from?

Yes, and he said he told this— his reply coupon story. He said he had developed the system that the bankers don't want to tell you about, and I am sharing it with you. And people were getting money back. Those who came and asked for their returns came in and walked out thousands of dollars richer. But most of them just came back and went for another run.

Was there a limit to how much you could put in? No, on any amount.

And reporters were taken in. I've got a copy of a certificate by a guy named Principio Santososo. And, uh, Mr. Santos Soso was a reporter for the Boston Post. He put in $300 when that was more than his weekly paycheck back in June, and the newspapers weren't even on to it.

All right, all right, go ahead. We're going to run out of time, and I wonder how he got caught.

Go ahead. The key comes in August of 1920. A young, aggressive newspaper editor who was working in his father's shadow, Richard Grosjean of the Boston Post, Grozier decides there must be something illegitimate here. No way could people possibly be making these kinds of returns. He sticks his best reporters on Ponzi. It's a weeks-long battle of wills and nerve to see who will survive. Ponzi is saying, "You're wrong about me. I'm going to own your newspaper." Most of the other papers in Boston said, "Hey, we don't want any part of this." But Grozier kept going at it. When he finally got one of his best reporters, Herb Baldwin, up to Montreal and he found out about that forged check conviction, everything started to unravel. And the house of cards that Ponzi had built—

well, and it unraveled solely because the public now didn't have faith in him?

There was this back and forth where the Globe— excuse me, where the Post was beating on him daily, and people were starting to wonder, hmm, maybe there is something going on here. And they started coming back asking for their money back. But then the pièce de résistance, the coup de grâce, was Herb Baldwin going up to Montreal, finding out that Ponzi had been on a— that particular kind of crime, a fraud, a bank check forgery, was enough to get people convinced that he must not be legitimate. And they came crashing through his doors demanding the money, and of course it wasn't— it was all gone.

So how long was he in operation? 8 months. Oh wow. Wow.

How fast? How fast? From the top, he was driving the locomobile, the most expensive car of its day. Oh, you know, my heartbreak.

I could only imagine because he so wanted to prove himself to his family.

He brought his mother over at the height of it. He hadn't seen her in 17 years. He had finally made it. So he puts her on a first-class ship. Instead of using his own tickets, he brings her over with a nurse.

So he could see. Why? I'm just curious, did anybody also report that he gave skin?

Not until after the fall.

All right, so the fall is very fast. People come to the doors and there's no money to give them. Exactly. I'm surprised he didn't shoot himself.

You know, he, he was a tremendous optimist. He kept insisting to the last that with a little more time, with a little more, he can make the IRC work.

Exactly. How long did he go to jail for?

First he goes for 2 years, um, a federal— he goes on a federal term, and then the state of Massachusetts decided they wanted a pound of flesh as well for another 7 years, and then they deport him back to Italy.

Oh, all right. Some, some final thoughts with you when we come back. Oh, what a sad story. Ponzi scheme, Mitchell Zoukhoff. I'm Dennis Prager, back in a moment.

Hi, my name is Dan Holberg. I'm calling from Rogers, Minnesota, a suburb just outside Minneapolis. I just wanted to thank Dennis for the wisdom, the rational way of looking at things. It's been instrumental in my life. I started listening to Dennis about 15 years ago, and oddly, I was praying for peace of mind and wisdom and you were introduced. And my life is not a utopia, but it has been improved, and I appreciate that. So much of it has to do with Dennis Prager. So thank you, Dennis. If you're listening to this, please know you have made a huge difference in this person's life, and it's cascaded into others that are close to me. Love you. Take care. And thanks again.

Are you enjoying Timeless Wisdom? We'd love to hear from you. Call 877-243-7776 and leave a review, share your thoughts, or just even an encouraging word for Dennis. Your voicemail might just make it on the show. That's 877-243-7776. That's 877-243-7776. Thanks for listening. And for your support.

Alrighty everybody, I'm so sorry I couldn't get more calls in. Some of you have stories of various Ponzi schemes, but the hour goes so fast. And the book reads like you, uh, like you speak. It's, it's really fascinating stuff. I wish you good luck on your book.

Thanks very much, Dennis Prager.

Uh, he, uh, he's deported. Charles Ponzi, the, the inventor of the scheme by which his name is known. Is then deported after 9 years in prison?

A little more even, yeah. Yeah, 1934. So he's in and out of prison much of the '20s.

Did Rose divorce him?

Well, regrettably, yes. She couldn't imagine going back to a place, to Italy, where she had never been. They had no money. But interestingly, her family, who were wonderful to me while I was writing this book, kept all the letters between them that Ponzi had sent to her over the years. And the one thing that was very clear is that their love never died. Uh, right up to the end of his life, she was sending him letters. They were talking about getting back together, and they were really sort of sweet love notes between the two of them right up to the end.

But she did marry another man only after Ponzi was dead.

Only after— oh, she stayed married to him? No, she was— she, she did divorce him in name.

She divorced him in name but kept writing love notes They both to each other. Absolutely. And he never remarried. He never remarried. And what did he—

did he die a pauper in Italy? He died— he ended up going to Rio de Janeiro to start, uh, the Italian airline was opening an office there and they hired him. And that didn't work out well and he did end up a pauper in Rio de Janeiro. He had $75 to his name. He died in a charity hospital and there was just enough left to bury him.

Uh, uh, uh, and she died at what, 96? Uh, 93. Yeah, at 93, and only married after he died. Yes, it's a very powerful story. Thank you. Well, I thank you. The book is, uh, Ponzi Scheme. And Mitchell Zukoff, what are you going to write on next? Uh, steroids?

P.T. Barnum. Are you serious? Yeah.

Is he the one who said that a sucker is born every minute?

You know, somebody said that about him.

Oh, it was about him? Yeah. Oh, I promise to have you on when you write it.

It'd be a pleasure.

All right, thank you so much. Take care. Good luck. You know, it's a very touching story, and it reaffirms my belief about having to take the moral bank account of an individual, because, you know, there are bad guys And there are, I don't know, well-intentioned losers. I didn't— he's more in that category, I guess. And I must say to you, I don't know if the bad he did ever matched the good he did with that skin story. Well, whatever your conclusion, it's another sliver of Americana brought to you on The Dennis Prager Show. Don't go away.

Tomorrow on Timeless Wisdom with Dennis Prager.

I'm going to raise with you a very difficult subject today, and one I have raised in, in a different context than this. And it is about two things, though they are utterly related, and that is psychotherapy and you're perceiving yourself as a victim. One of the reasons I am so angry at those who tell members of any given group in this world how, uh, how victimized they are is that they are ensuring that members of that group be angry and unhappy, or unhappy and therefore angry. It is, it is a staggeringly awful disservice to people to tell them, uh, to define themselves by their victim status. And there are any number of examples, but I won't give them now because I don't want to politicize this hour. You can think up your own examples of groups in this world and in this country. But I'm now talking not about groups, I'm talking about you and me and every individual There, every one of us has been a victim of something. Every one on earth. You name it. An unfair, unfair home life where parents have failed them. Bad siblings. Unfair, unfairness at school. Unfairness in the physical endowments that they may have been given from birth. I mean, it is endless. It is endless. Everybody has a capacity. Every one of you listening, I could create a biography of any of you listening, a 2-page bio or a 10-page bio, showing how much a victim you are. Now, this is not to say there are no victims. I'm not a fool. Of course there are victims. My point is, though, do you walk around with that self-perception?

Join us tomorrow to hear more on Timeless Wisdom with Dennis Prager. Visit DennisPrager.com for thousands of hours of Dennis's lectures, courses, and classic radio programs, and to purchase Dennis Prager's Rational Bibles. We want to take just a second to thank the team at Life Audio for their partnership with us on the podcast. Go to LifeAudio.com to find dozens of other faith-centered podcasts in their network, including shows about prayer, Bible study, parenting, and more.

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