Scandal!: Ponzi’s fate

The Museum is opening a new exhibition, Scandal! Financial Crime, Chicanery and Corruption that Rocked America, on April 29th and we’ve been doing a lot of research on different topics ranging from the first major financial scandal in the United States to the history of Ponzi schemes and instances of egregious disregard for corporate governance.  Unfortunately, we won’t be able share all of the information and interesting tidbits we’ve amassed over the last few months. Instead of letting these juicy facts go to waste, we’ve decided to share some of them via the blog.

It wouldn’t be possible to put on an exhibition on financial scandals without a portion dedicated to Charles Ponzi, the namesake of the Ponzi scheme.  We’ve been researching Charles Ponzi and two other infamous Ponzi artists.  Each of the three men paid for their crimes after their schemes unraveled. Although all three men’s fates have garnered attention and been featured on the covers of newspapers around the world, Charles Ponzi’s is probably the most prolonged and intriguing. 

Ponzi’s scheme was exposed in 1920 by investigative reporting by the Boston Post (the paper is now defunct, but won a Pulitzer in 1921 for their coverage of Ponzi’s crimes) and financial reporter Clarence Barron (founder of Barron’s and a famous financial journalist of his time).  Ponzi was charged by the Federal Prosecutor for two indictments to which he reluctantly pled guilty and served only three and a half years of a 5-year sentence in federal prison.  During his federal prison sentence the state of Massachusetts additionally charged him with 22 charges of larceny for the same scheme, and he was forced to immediately return to court.  Nearly penniless in jail, Ponzi represented himself in court, and to the surprise of many (especially the prosecutors), Ponzi was actually quite deft in the courtroom.  On the state charge of larceny he argued that a promise of profits is not a crime because it is simply a promise and in regards to investments, promises may be broken when circumstances change. His aptitude for law panicked the state prosecutors who changed the charge to only 12 indictments (this seemed advantageous to Ponzi at the time but worked to his disadvantage when he was tried for them in another case later) and was acquitted on all charges by a jury. 

After his early release on parole in 1924, Ponzi’s freedom didn’t last long because only a few months later the state of Massachusetts responded with a vengeance and charged Ponzi with five of the remaining indictments he had originally been charged.  He was forced back to court in February 1925.  This trial ended in a deadlock, requiring a third state trial later that year.  Having effectively been tried four times for the same scheme, Ponzi was found guilty again on this third state trial.  Before he was sentenced, though, he escaped to Florida and elsewhere in the South where he attempted another scheme but gave up, traveled around the Southern United States where he requested a deal of a presidential pardon in exchange for his immediate deportation (which neither President Coolidge not Mussolini acknowledged) and eventually surrendered himself to authorities to serve seven years in jail. Ponzi was released early again on parole in February 1934.  As the Bennington Evening Banner from July 1934 here reports, the United States continued hunting Ponzi after his release from state prison and pursued his deportation. He petitioned the charges against him, claiming double jeopardy, as the Bennington Evening Banner reports on his request for pardon from Massachusetts Governor Joseph Ely:

He urged that the state conviction and a federal conviction of using the mails to defraud were based on the same offense and that only one charge of moral turpitude was involved. Whether or not he succeeds in halting execution of the federal deportation order which has been pending for some months since his release from the Massachusetts state prison Ponzi will remain in this country until Sunday at least.

In the meantime he planned to apply for a writ for habeas corpus.

Ponzi’s appeal was denied yet again, and he was deported back to his homeland in Italy where he lived for a short while before moving to Brazil.  He attempted to find his fortune there but died in poverty there in 1948.

Women of Wall Street: Victoria Woodhull

Born into poverty in Ohio in 1838, Victoria Woodhull went on to become one of the most notable—and perhaps most infamous—women of her time. In addition being the first woman to address Congress and the first woman to run for president, Woodhull was also the first woman to open a brokerage on Wall Street when she started Woodhull, Claflin and Co. with her sister Tennessee in 1870. She was an outspoken suffragist, activist and proponent of free love—which in the late 19th century, meant a woman’s freedom to choose whether to remain married, or indeed, whether she wanted to marry at all.

Many of her views were formed as a result of her first marriage– at 15, she married Dr. Canning Woodhull, who was 26, and who turned out to be an alcoholic. She had two children by him, one of whom was severely mentally handicapped. Woodhull attributed his disability to his father’s alcoholism, and was embittered by society’s expectation that she should stay with her husband in spite of it.

Woodhull and her sister used the proceeds from their very successful brokerage business to publish their radical newspaper, Woodhull and Claflin’s Weekly. In it, they waged war against Victorian morality, and covered many controversial issues that included suffrage, free love, vegetarianism and spiritualism. Part of the driving force behind the newspapers was Woodhull’s second husband, Colonel James Blood.

In 1872, the Weekly broke a story that Henry Ward Beecher, famous minister of Plymouth Church in Brooklyn who had denounced Woodhull’s views on free love, had been having an affair with one of his congregants.  Woodhull was arrested later that year for sending obscene materials (her newspaper) through the mail. Beecher was sued by his mistress’ husband in 1875, in a highly-publicized trial that was followed around the country.

Woodhull remained a focus of public attention and controversy until she left the United States in 1877, after divorcing Colonel Blood. She remarried John Biddulph Martin and lived out the rest of her life quietly in England.

First Kaufman Series Event 2010- David Walker

Thank you to everyone who attended this year’s first Kaufman Lecture and Symposia Series event on Tuesday evening. David Walker, former Comptroller General of the United States and head of the Government Accountability Office from 1998 to 2008 and current chairman of the United Nations Independent Audit Advisory Committee (see full bio here), spoke to a packed room about the current state and future of the United States and our economy. Promoting his new book, Comeback America, Walker touched on issues of fiscal responsibility, the necessity of policy and operational reforms in government, problems concerning US spending habits and values and the deficit of leadership in government, among other topics. Although Walker painted a somewhat grim picture with his statistics and forecasts, he says his book is about solutions. Signed copies of Comeback America are now available in the Museum Shop. If you would like to hear David Walker’s full speech, it is now available on the MoAF website or there is a short clip of it below.

Last Month of “Women of Wall Street” Exhibit: Profile of Abigail Adams

The Museum’s groundbreaking exhibit, “Women of Wall Street,” is on view until the end of March, which is Women’s History Month.  The exhibit was conceived in January of 2009, when Congress passed the Lilly Ledbetter Fair Pay Act, and profiles five pioneering historical figures and five of the most powerful women in finance today.

In honor of Women’s History Month, the Museum will post a blog entry about each of the famous historical figures in the exhibit, beginning with Abigail Adams.

Abigail Adams is most famous for being the wife of American statesman and former President John Adams, but few people know that she was a bond trader, or in the lingo of the times, a “stock-jobber.”   Adams’ trading activities were one of the few sources of contention between the pair; John Adams, much more conservative by nature, asked his wife to invest in land.  She would point out to him that the bonds offered a significantly higher return on capital than land (24% a year versus only 2% for land).  Indeed, she ultimately earned a return of about 400% as a result of her speculative activities.

In Adams’ time, Massachusetts coverture laws were such that legally, all of her property belonged to John.  Even so, she would set aside “pin money” (small amounts given to wives to purchase luxuries and other items) and buy the bonds through her uncle.  Many women who lived through the Revolutionary War in America had to make do without their husbands, which forced them to become independent in many ways.  Even so, women’s legal rights remained limited, something that Adams famously admonished her husband to address when she asked him to “Remember the ladies” as he was helping draft laws for the newly-founded United States in 1776.

Museum Café Opens

We are excited to announce that the Museum has opened a new café! Located on the grand mezzanine level of the museum, the café is a great spot to take in the ornate interior of the historic Bank of New York building. The menu includes coffee, gourmet espresso drinks, tea, soda, and a variety of cookies and muffins.

To celebrate the grand opening, we are offering a 10% discount on all coffee drinks this week.  If you’re on Wall Street, swing in for a cappuccino and a mint chocolate chip cookie.

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