April 18, 2016

The ghost of a handsome, charismatic and debonair Italian man who died in 1949 continues to haunt the Western world. The information recorded about the life and times of this man has revealed the following: He attended the University of Rome before he landed in Boston, USA, in 1903 with only US$2.50 in his pocket. Notwithstanding the measly sum in his pocket when he landed in Boston, he thought big and dreamt of millions of dollars. He became an infamous criminal. His name was Charles Ponzi. He distinguished himself as an extraordinary conman to have his name become synonymous with 'fraud'.

Ponzi was best known for the financial crimes he invented, perfected and committed repeatedly, when he conned investors to give him millions of dollars and paid them returns with other investors' money. His name is now immortalised by the term, 'Ponzi scheme', the name given to the scheme that he invented and which, over time, was adopted by fraudsters in the Western world. In fact, just recently when the police scooped down on several persons in Montego Bay and arrested eight of them, the media reported that they were allegedly part of a 'Ponzi scheme'.

Ponzi was, reportedly, very clever. It is said, for example, that when he was serving time at a prison in Canada, he wrote to his mother to say that he was working at a Canadian prison.

He perfected the art of scamming when he received a mail that contained an internal reply coupon [IRC], which was exchangeable for postage stamps from another country. The plan was to buy IRCs in one country and then exchange them in another country for 400 per cent more than what he bought them for. To increase his profits beyond 400 per cent, he got investors and promised them 50 per cent on their money in 45 days. Ponzi paid the investors from money he took from other investors rather than from profit. This scheme netted him US$250,000 per day. It allowed him to live a lifestyle of luxury that took him all over the world. By 1920, Ponzi was a rich man.

In August 1920, he was arrested and charged with 86 counts of mail fraud amounting to about US$7 million. He pleaded guilty and spent 14 years in prison. In January 1949, he died poor and penniless in Brazil.

The Ponzi scheme was subsequently copied by Bernie Madoff and years later by many others in the United States and the Caribbean, to include the present-day Jamaican scammers. Madoff is now in prison having been sentenced to a term of 150 years. He was also ordered to make restitution in the sum of US$170 billion.

A few years ago, when scamming reared its ugly head in Jamaica, there was no proper legislative silver bullet to secure its demise. Those caught were charged either at common law or for offences under various existing legislations, like the Larceny Act. However, approximately three years ago, Parliament, in its wisdom, enacted a very draconian piece of legislation, The Law Reform (Fraudulent Transaction) (Special Provisions) Act, 2013, to combat this scourge popularly called 'scamming'.

We are yet to see how effective the legislative measures will be in eradicating this serious crime, but while we wait, let us hope that those who dream of earning millions of dollars overnight, through fraudulent transaction schemes, are guided by a profound lesson gleaned from Charles Ponzi's life, which is simply: You reap what you sow.

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