Part 8: Prison and Trial
On 19 August 1920, Charles Ponzi appears before Federal Judge Clarence Hales to answer mail fraud charges.
The charge sheet says that Ponzi devised a plot to defraud investors, and as part of that scheme, he sent them mail claiming that he could give them 50% interest on their notes while knowing that it was impossible.
As soon as the courtroom doors open, there is chaos as hundreds of people waiting to see Ponzi scramble for seats, and it takes a while for court security to restore order. But, as he sits in the dock, Ponzi looks relaxed and cheerful, and he constantly waves or nods to relatives, friends, well-wishers, and admirers.
A federal jury indicts him on two 43-count indictments on 1 October 1920. His attorneys are aware of the substantial evidence against him and warn that if he is found guilty on all counts, he may face a term of up to 20 years in jail. As a result, with Ponzi's approval, the attorneys negotiate a compromise with the prosecution, agreeing that Ponzi will plead guilty to only one count that carries the shortest prison sentence.
The judge sentences Ponzi to the maximum of five years in prison, saying, "The defendant devised a plan that, according to his counsel's admission, defrauded men and women. It won't do to have the public and the rest of the world believe that someone can carry out a plot like this, with the help of the US, without serious consequences."
Ponzi spent only three and a half years in the Plymouth Federal Prison before being paroled for good behaviour and freed in November 1924.
Shortly after his release, Massachusetts state prosecutors charge him with four counts of larceny. They had prosecuted him twice for identical offences while he was still in federal prison, but both times they were unsuccessful. The jury finally finds him guilty on all counts on 26 February 1925.
On 11 July 1925, Massachusetts Superior Court Judge Sisk renders his decision, sentencing Ponzi to seven to nine years in prison for being a "common and notorious thief." He does, however, delay the sentence pending the outcome of Ponzi's appeal.
While his larceny appeal in Boston is continuing, Charles Ponzi travels to Jacksonville, Florida, in the hopes of benefitting from the state's land boom. Florida has become a real estate moneymaking dream for speculators during Ponzi's stay in federal prison. The value of land in Miami has soared by 560% between 1921 and 1925, and Jacksonville has recently become Florida's first city to reach 100,000 residents.
Ponzi arrives in Jacksonville on 28 September 1925, and he dreams of making enough money to repay all his Boston investors.
Because his name has become synonymous with fraud, he disguises himself as Charles Borelli, then establishes Charpon Land Syndicate, a real estate company that plans to sell ten million lots of property around rapidly growing Jacksonville.
Ponzi buys 100 acres for $16 per acre with funds raised from his few remaining friends, subdivides each acre into 23 smaller sections, and tries to sell each one for $10. He calculates that he will make 500% on his initial investment if he can sell all of the parcels. In addition to selling land, Charpon intends to sell shares of the company to investors who want profits rather than land. He promises a 200% return in 60 days to lure such investors. By 9 November 1925, Ponzi has collected $7,000 from investors.
Regrettably, Ponzi lands in Florida at the start of a campaign geared at deterring speculative land transactions. In February 1926, Prosecutors charge Ponzi at the Duval County Court with violating Florida trust and securities laws. A jury finds him guilty, and on 21 April 1926, the trial judge sentences him to a year in prison.
On 28 May 1926, the Supreme Court of the State of Massachusettes upholds Ponzi's larceny convictions, and Judge Fosdick of the Superior Court in Boston then orders Ponzi to appear before his
court on 1 June 1926 for sentencing. When Ponzi fails to appear in court as ordered, the judge issues a warrant for his arrest. Still, Ponzi telegraphs the judge from Jacksonville, Florida, explaining that he only received the order the day before and requesting an extension of 10 days. "I'm on bail here and need permission to leave the state. I also need to take care of my affairs." On receiving the telegraph, the judge revokes the warrant and gives Ponzi until Monday, 7 June, to appear.
When he doesn't show up in court on 7 June, rumours spread that Ponzi has fled the country. Then, on 22 June, Boston police send out circulars requesting for assistance to have ponzi arrested. The circulars describe him as follows:
Name: Charles Ponzi or Charles P. Benelli.
Age: 45
Height: 5 feet 2 inches
Hair: Dark chestnut mixed with grey
Eyes: brown
Occupation: Thief
Ponzi approaches the captain of an Italian ship docked in Tampa, Florida, and asks to join his crew as a waiter. The captain immediately hires him, and the ship sets sail. However, it stops in Houston, Texas, and New Orleans, Louisiana, before heading to Italy. Houston spot Ponzi and telegraph Boston police to ask if they should arrest him. However, on 25 June, the ship leaves Houston just before the authority to arrest him arrives.
When Texas cops learn that the ship's next stop is New Orleans, they ask their New Orleans counterparts to lure him off the ship and arrest him.
In New Orleans, a customs officer boarded the ship and requested that the second officer sends Ponzi to the customs house to get cargo documents certified. On arriving at the customs house, George Lacy arrests Ponzi and later transfers him to Houston, where prosecutors charge him with being a fugitive from justice. Massachusetts attorneys file for the extradition of Ponzi to Boston.
On 2 February 1927, Ponzi is transferred to Boston to begin his seven to nine years sentence for larceny.
