Hollywood comedy “The Producers” tells the story of Max and Leo, who take hundreds of thousands of dollars from investors to stage a Broadway musical, then choose the worst script, the worst director and the worst cast they can find so the show will flop and they can keep the money. Unfortunately for them the show becomes a success and they end up in jail. Of all the ways for a Ponzi scheme to fail, this is perhaps the most entertaining.
In January 1920 Charles Ponzi, a Boston-based Italian businessman with a string of criminal convictions began an investment scheme promising huge dividends on worthless postal coupons. By using one investor’s money to pay another, he fooled more and more Americans into parting with their savings. By July he was a multi-millionaire, but by mid-August he was under arrest. This dubious character gave his name to fraudulent “get rich quick” schemes that inevitably crumble and leave investors with nothing.
The spirit of Ponzi, and of Max and Leo, was found to be alive and well in California only last month. On May 31 film producer Mike Karkeh was sentenced to 27 years in prison for swindling elderly investors out of USD 9.5 million to finance films that generated no revenue. Sadly it seems that Ponzi schemes, and their victims, will always be with us.