Carlo Ponzi

[Hollander]

PONZI'S MONTREAL LINK
Carlo Ponzi not only lived in Montreal, it was there that he had his first taste of the swindle that would eventually carry his name
John Kalbfleisch, Special to the Montreal Gazette
Published: Sunday, July 05, 2009

MONTREAL - Thanks to convicted fraudster Bernard Madoff, millions of people now know what a Ponzi scheme is: a swindle that pays unusually high returns to investors from money ponied up by later investors rather than from any actual profit earned.


Less well known is that Carlo Ponzi, whose name the swindle bears, not only lived in Montreal as a young man but had his first taste of the swindle here.


In July of 1907, when Carlo Ponzi arrived in Montreal from Italy by way of Boston, he was just one more among thousands of penniless Italian immigrants then flooding into the city, with one big difference: while most were prepared to make their way through honest but grinding physical labour, Ponzi became implicated in a dishonourable course.

Ponzi would eventually become as infamous in his own day as Madoff is in ours. But in July of 1907, when he arrived in Montreal from Italy by way of Boston, he was just one more among thousands of penniless Italian immigrants then flooding into the city, with one big difference.


While most were prepared to make their way through honest but grinding physical labour, Ponzi became implicated in a dishonourable course. There would be fraud, and the victims would be his own hard-pressed countrymen.


Ponzi first emigrated to Boston in 1903. It is said he had rang up enormous gambling debts in his native Italy and was on the run from vindictive mobsters. Perhaps he was, though it's wise to remember that Ponzi was always a con man, and these details, like so many about his life, came from Ponzi himself.


In Boston, he managed to find various low-paying jobs, though nothing that promised him the riches he dreamed of. After three years, he decided to remake himself in Montreal. He had heard that a man named Luigi Zarossi had already moved there from Boston and was doing well as a cigar maker.


Ponzi stepped down to the platform in Bonaventure Station with no baggage and just $1 to his name. But at 25 he was as optimistic as ever. A new moustache signalled his new resolve.


He quickly discovered that Zarossi had moved on from his humble beginnings as a cigar maker. He still had a tobacconist's shop, on St. James Street, but a little farther along the street he now also ran Banca Zarossi. It was a small bank, to be sure, but it was close to the business heart of Montreal. Ponzi, posing as one Charles Bianchi, with connections to the wealthy but fictitious Bianchi clan in Italy, swanned in through the door and asked for a job. He was at his charming, insinuating best and the 47-year-old Zarossi hired him.


The bank especially catered to the growing community of Italian workers who felt unwelcome in the more traditional Montreal financial houses. It offered interest as high as six per cent where other banks paid just two per cent, and also handled transfers of funds to immigrants' families back in Italy. No wonder the deposits flooded in.


Ponzi was a diligent worker and Zarossi soon made him a teller with added responsibilities. But a serious problem was looming. So quickly had the bank's deposits grown that the promised interest, if paid at the full six per cent, would mean bankruptcy. Some loans the bank had made were also going bad. Zarossi didn't hesitate. He began dipping into the deposits to cover his losses as well as interest as it came due, calculating that new deposits would keep the scam afloat.


And so they did, at least for a while. However, by the middle of 1908, depositors were becoming suspicious and were demanding their money back. Zarossi knew the jig was up. He packed a bag with cash and bolted for Mexico.


Long before Zarossi absconded, Ponzi probably had some notion of what his boss had been up to, but chose to keep quiet. Indeed, some sources state he actively connived with Zarossi. In any event, no charges were brought against him.


Late in August 1908, Ponzi walked into the office of a former Zarossi customer, Canadian Warehousing Co. There, he spotted a book of blank cheques and, when no one was looking, stole one. He later filled it in for $423.58, payable to himself, and forged the signature of Damien Fournier, the company's manager, at the bottom.


It was smaller than the Banca Zarossi fraud, but this time Ponzi didn't escape. Made suspicious by his sudden spending spree, the police came calling and, in November, he was sentenced to three years in St. Vincent de Paul Prison. Ever the charmer, he spared his mother any news of this misfortune, his letters assuring her that he was now employed as a special assistant to a prison warden. After 20 months he was released for good behaviour.


Imprisonment didn't chasten him. Within days of his release, he was caught trying to smuggle five Italian workmen into the United States and this time was sent to prison in Atlanta, Ga., for another two years.


On his release, he returned to Boston and by 1919 was involved in a pyramid scheme for which his name is now a byword. It was perpetrated on a far grander scale than what had been managed during his Montreal apprenticeship, and it all came crashing down not long after, in the summer of 1920.


From the wreckage, it emerged that Ponzi had been offering 30-per-cent interest over just 45 days, or about 240 per cent annually without compounding. Absurd as such a return was, some 40,000 people handed him anywhere from $13 million to $20 million. A U.S. federal auditor estimated Ponzi had $7 million in liabilities, about $76.5 million in today's money, but just $4 million in assets. The speed with which the bubble inflated is testimony to his customers' astonishing gullibility and greed.


Arrested once again, Ponzi explained away his Montreal conviction and prison term by saying he was no fraudster himself but had taken the fall for the fugitive Zarossi. His life in Montreal had in fact been one of penury, he said.


"I experienced the most abject destitution," he blithely told The Gazette. "I learned what it was to be penniless, hungry and friendless and to sleep on a park bench in company with the most hopeless persons on God's earth, the flotsam and jetsam of a metropolis.


"I started from one end of the city to another. I did any work I could get. I pressed clothes in a tailoring shop. I was a waiter in a cheap restaurant for a time. I washed dishes and, in fact, I did a thousand and one things, almost anything that I could do to earn enough to keep body and soul together."


The sad irony is that while this would be a tale familiar to countless immigrants to Canada, Italian or otherwise, it surely was not true of Ponzi, at least not to the degree he would have had people believe.


His 1920 arrest began a renewed series of trials, prison terms and, unbelievably, yet more scams after his various release dates. One even involved the cliche of swampland in Florida.


He eventually fetched up in Rio de Janeiro where, once again broke, he died in a charity hospital in 1949. Unrepentant to the end, he told a U.S. reporter: "I had given them the best show that was ever staged in their territory since the landing of the Pilgrims. It was easily worth 15 million bucks to watch me put the thing over."



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[Junior]

Florida man faces $880million Ponzi scheme charges in New Jersey

Fla. man faces Ponzi scheme charges in N.J. court

NEWARK, N.J. - Federal prosecutors say a Florida man accused of running an $880 million Ponzi scheme used proceeds from duped investors to fund a lifestyle so lavish he had a University of Miami athletic lounge named after him and once bought a professional athlete a pair of diamond-studded handcuffs.

Nevin Shapiro, wearing handcuffs Wednesday, stood before a judge in a Newark federal courtroom to face charges of money laundering and securities fraud. He's accused of leaving at least 60 investors in Florida, Indiana, and New Jersey with about $80 million in losses after the scheme collapsed. Shapiro remained in custody with bail set at $10 million.

His attorney, Michael Tein, acknowledged an e-mail request for comment but had not responded Wednesday evening.

Prosecutors say Shapiro, 41, of Miami Beach, used a Florida company called Capitol Investments USA Inc. to raise nearly $900 million from investors who thought they were buying into a wholesale grocery distribution business.

[Junior]

The 'mini-Madoff' Long Island Ponzi scammer sentenced to 25 years in prison
The Associated Press, New York Daily News, Saturday, October 15, 2011

A Long Island businessman called a "mini-Madoff" because he was arrested weeks after the billion-dollar swindler was sentenced Friday to 25 years in prison and ordered to pay $179million in restitution.

Unlike Bernard Madoff, who admitted cheating charities, celebrities and institutional investors out of billions, Nicholas Cosmo targeted mainly blue-collar workers in his Ponzi scheme, prosecutors said.

Cosmo, 40, admitted to taking in more than $400 million from investors; more than $80 million was lost in failed investments in commodities futures trading, prosecutors said.

[Junior]

Victims testify against alleged Ponzi schemer in $14M fraud
By John Marzulli, New York Daily News
Monday, January 23, 2012

A sweet-talking Ponzi schemer promised an 82-year-old woman that he would treat her like his mother and then swindled her and a slew of other investors out of more than $14 million, prosecutors said Monday.

They began calling dozens of victims to testify against Joseph Mazella, who allegedly guaranteed gullible investors at least 12% returns and then stole their life savings.

Mazella, 53, even preyed on friends and members of his own family, authorities said.

“He told me he would treat me like his mother," Gloria Migliore, 82, who has a cancer-stricken daughter, testified Monday in Brooklyn Federal Court.

"He told me so many things like that and I trusted him," she said. “He knew my daughter was sick because he sent her flowers."

Migliore described the $69,000 she lost as “blood money” because it was the insurance payout she received when her husband died 34 years ago.

“I told him (Mazella) it was blood money and I couldn't afford to lose it," she said, adding that she has been forced to sell her Long Island condo and struggles just to buy food.

Assistant U.S. Attorney John Nowak said Mazella plotted the financial crimes out of a Staten Island-based firm called Great Atlantic Group. He lured investors on plans to develop a golf course upstate and private homes in New Jersey.

Nowak said that the projects were merely pipe dreams.

Defense lawyer Ephraim Savitt implored jurors to understand that Mazella's investments went south between 2007 and 2011 at the same time the world economy tanked.

Another victim testified that she has an MBA from New York University and works at the investment banking giant Credit Suisse and was still duped.

[Junior]

Kautilya Pruthi jailed for UK's biggest Ponzi scam worth £115m
BBC News, March 8, 2012

A corrupt businessman who masterminded the UK's biggest Ponzi scam has been jailed for more than 14 years.

Kautilya Pruthi, 41, from Wandsworth, south-west London, was described as a career fraudster who persuaded nearly 800 people to invest.

His victims, who included cricketer Darren Gough and actor Jerome Flynn, lost £115m.

A Ponzi scheme is one in which returns to investors come from money paid by subsequent investors, not profits.

As he jailed Pruthi, Judge Michael Gledhill QC said many investors lost homes, pensions and their life savings.

Lavish lifestyles

Of the total loss to victims, it is thought less than £2m will be returned to investors.

"You (Pruthi) are an extremely intelligent, articulate, sophisticated and plausible liar," said the judge. "In short, a professional fraudster."

The defendant was said to have claimed investors' enterprises made short-term, high profit loans that were given to importers and exporters.

But the funds were instead used to fund lavish lifestyles including luxury homes, supercars and flights in private jets.

Aided by John Anderson, 46, from West Hampstead, north-west London, and Kenneth Peacock, 43, from Camberley, Surrey, Pruthi made £38m from the swindle, over three years.

They were found guilty of unauthorised regulated activity, and were jailed for 18 months for their part in the fraud.

Prosecutor David Aaronberg QC said Pruthi, a father of one, was believed to be the UK's most successful Ponzi fraudster.

[Junior]

Mini Madoffs’ captured in Arizona after spending 12 years on the run from authorities
The Associated Press, New York Daily News, Monday, May 7, 2012

TONOPAH, Ariz. - An Illinois couple who spent a dozen years on the run after fleeing a conviction for running a Ponzi scheme has been captured in a small community west of Phoenix, the U.S. Marshals Service said Sunday.

Nelson Grant Hallahan, 65, and wife Janet Hallahan, 54, were arrested by deputy marshals Saturday afternoon in Tonopah, a desert community 50 miles west of Phoenix. The couple had lived in several states in the Southwest during their flight and had used a number of aliases, the Marshals Service said in a statement.

The Hallahans were living apart and were arrested at separate homes, said Matt Hershey, a supervisory deputy U.S. Marshal.

The agency said it received a tip about their location after they were featured on "America's Most Wanted" the previous night.

The couple pleaded guilty in Illinois federal court to bank and mail fraud conspiracy charges and money laundering. They didn't show up for their sentencing and have been fugitives ever since.

The Hallahans lived in Peoria, Ill., and targeted family, friends and elderly victims by promising significant returns on investments. They also defrauded investors by selling interests in a tanning salon they later sold without telling investors. They were actually running a Ponzi scheme, repaying earlier investors with proceeds from new ones.

The couple used the money they stole to live a lavish lifestyle, buying yachts, luxury vehicles, designer clothes and jewelry, according to the Marshals Service.

According to a profile on the AMW website, Nelson Hallahan was a successful life insurance salesman. Janet Hallahan was his assistant and secretary, and the couple married in 1988.

Teresa Allred, 63, said she and her husband went to dinner with the Hallahans several times and had considered them friends.

They gave the Hallahans $15,000 to buy more tanning beds for the salon. Allred, who lives with her husband just outside Peoria in Morton, Ill., said the Hallahans promised them a 10 percent interest rate on the investment. But they never saw the money again.

"With friends like that, who needs enemies?" she said.

The Hallahans owed nearly $1.2 million to investors when they disappeared just days before they were to be sentenced in January 2000.

"The 12-year run from justice of the Hallahans, also known as the 'Mini Madoffs,' has come to an end," U.S. Marshal for Arizona David Gonzales said in a statement. "Their investment scams involving family, friends, and the elderly, ruined many lives."

The couple was arrested without incident. It's believed they've been in Arizona for about two years.

"I'm just glad that they've been found," Allred said. "We may or may not see our money, but at least I feel like there's a little bit of restitution."