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Charles Ponzi Essay

2143 words - 9 pages

In criminology there are numerous theories as to the causes of different types of crime. These theories are extremely important in the continuous debate of the ways in which crime should be managed and prevented. Many theories have surfaced over the years. These theories continue to be explored individually and in combination, as criminologists search for the best solutions in ultimately reducing types and levels of crime. These theories include rational choice theory, social learning theory, and biology amongst many others. In this case study strain theory will be used to describe the reasons behind the white collar crimes of Charles Ponzi.
Charles Ponzi was born Carlo Ponzi in Lugo, ...view middle of the document...

He arrived in Boston in November of 1903 only arriving with two dollars and fifty cents in cash and “one million dollars in hopes” in which never left him. Ponzi began working odd jobs, including a dishwasher in a restaurant. In 1907, he moved to Montreal, in which he began work as a teller at Bank Zarossi. The bank was formed to cater to the new Italian immigrant population and charged high interest rates to their customers. Eventually, Bank Zarossi became bankrupt because of bad loans and Ponzi was left broke. Soon thereafter, he was sentenced to three years in a Quebec prison after he was caught forging a bad check. When he was released from jail, Ponzi got involved in yet another criminal venture, smuggling Italian immigrants across the border into the United States. This too landed him in jai in which he spent two years behind bars in Atlanta.
Ponzi returned to Boston, where he married stenographer Rose Gnecco in 1918. He worked various jobs, but none of those positions lasted long. It was during this time, Ponzi got the idea for the great scheme that would earn his name a place in history. He received a letter in the mail from a company in Spain that contained in it an international reply coupon which can be exchanged for a number of priority airmail postage stamps from another country. Ponzi realized that he could turn a profit by buying IRCs in one country, and exchanging them for more expensive stamps in another country.
Ponzi’s plan was to send money to agents working for him in other countries, who would buy IRCs and send them back to the United States. Ponzi would then exchange the IRC for stamps worth more than he paid for them, and sell the stamps. Ponzi reportedly made more than 400 percent on some of these sales. Not satisfied with running the profitable scheme on his own, Ponzi began to seek investors to turn even higher profits.
He promised investors outrageous returns of 50 percent in 45 days, or 100 percent in 90 days. Ponzi paid these investors using money from other investors, rather than with actual profit. These manipulative actions made him very rich, he reportedly made $250,000 a day.
Ponzi's scheme began to unravel in August 1920, when The Boston Post began to investigate his returns. The investigation set off a run on Ponzi's company, with investors trying to pull their money out of it.
Charles Ponzi was arrested on August 12, 1920, and charged with 86 counts of mail fraud. Owing an estimated seven million dollars, he pleaded guilty to mail fraud, and subsequently spent fourteen years in prison. Rose divorced him in 1937, and Ponzi died penniless in Rio de Janeiro, Brazil, on January 18, 1949.
Charles Ponzi’s elaborate scheme is an exceptional example of a white collar crime. The term "white-collar crime" was coined in 1939 by the sociologist Edwin Sutherland, who defined it as a "crime committed by a person of respectability and high social status in the course of his occupation" (Podgor, Israel, 1)....

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