The courts never recovered all $9.5 million deposited with the Securities
Exchange Company. Most investors received about a third of their original stake. That third took eight years to find as court-appointed receivers worked feverishly to wring out dollars wherever they could. Carlo had spent money like a drunken sailor. He hosted lavish parties and scoffed at Prohibition, uncorking only the finest bottles of French Bordeaux. He hated that rotgut wine his friends drank at the speakeasy. It tasted like potato vodka cut with fermented cranberries. But where had all the money gone? Had it really disappeared down the gullets of New Englanders drunk on wine and good times?
Many years later, while the world waged war in Europe and Asia, Ponzi sat alone on a stool inside a grotty Brazilian bar. He could not drink the wine in this godforsaken place. Instead, he slugged down his cold beer and slammed the dead soldier on the wooden counter.
Three stools over, a big-butted hooker appraised him carefully, considering whether she could toss the sixty-something drunk. He was only five-two after all.
No money. Not worth the hassle
, she decided.
Carlo returned her stare. He sighed wistfully and remembered his past life on the edge, the frenetic pace of robbing Peter to pay Paul. By and by, his thoughts trailed to Rose and her letter from two weeks ago. “It was fun while it lasted,” he remarked to the prostitute. “Best show in Massachusetts since the Pilgrims landed.”
He’s daft,
the big-butted hooker concluded. She said nothing. With every ounce of vacuum in her one remaining lung, she drew from an unfiltered cigarette. When she exhaled, a blue smoke ring crowned the funny old man’s head.
Charles Borelli may have been the king of Ponzi schemes. It was Charles Kelemen who perfected the scam. Charlie solved the problem that had plagued every Ponzi since Carlo the first. And the pupil became the professor.
Robbing Peter to pay Paul was a scheme that always ended badly. The flow of new money inevitably slowed. There was never enough as exiting investors clamored for the gargantuan returns they had been promised.
“Double your money in ninety days.”
Today’s SEC will live forever. But the Securities Exchange Company
sowed the seeds of its own collapse by accepting $10,000 on Day 1. In effect Ponzi had promised to return $160,000 by Day 365. Multiply that commitment by a hundred investors, by a thousand investors, by ten thousand investors and the pressure to raise money must have been overwhelming. The bookkeeping alone was a nightmare, especially without computers. There were no real investments, just lifestyle. It was that way with all the Ponzi disciples who followed.
Charlie’s fix was simple. He used the redemption language of hedge funds to ply his trade. Lockups, redemption notices, and the like—they made it harder for investors to exit and minimized the frenzy of raising new money. The legalese bought Charlie the time to dupe Betty Masters, pay Susan Thorpe, and skim some money for himself.
Damn him.
Those cuts on Charlie’s arms made sense now. Nobody had been torturing him for information. The wounds weren’t the by-product of someone seeking a confession. I knew what had happened.
Charlie swindled the wrong person.
The realization was far from comforting. If anything, it distressed me further. I could almost predict what Fitzsimmons would say. “Well, chowdahhead, here’s how it looks. You ran a Ponzi scheme with your best friend. Nothing like a letter from SKC to give investors confidence. But something snapped. I’d say Sam Kelemen was that something. Didn’t you say she’s smoking hot?”
Charlie’s dead. Money’s gone. What am I missing?
CHAPTER FORTY
Growing up in the land of might-could manners was a mixed blessing. Pro: I learned to ladle out generous helpings of syrupy respect no matter what the day brought. Charleston gave me the tools to become a top producer, the grace to speak like an ambassador even when “Eat shit and die” was the right thing to say.
Con: I hated conflict, Wall Street’s one constant. Our industry encouraged skirmishes. Clients, money, and investments—we wrangled over everything. Warring with Radio Ray was learned behavior. I preferred to avoid both hostilities and tough questions that put people on edge.
Walking down Columbus Avenue, I was all Wall Street and no Charleston. Lucky for Charlie, he was dead. I wanted to pummel his face. The discussion with Susan Thorpe had pissed me off. It was not the letter per se, not the fact that Charlie Kelemen had signed my name to yet another testimonial.
It was the horror. Future discoveries would only confirm that Charlie Kelemen had no conscience. All his acts of kindness had been a sequel to the Trojan horse. “Carlo” Kelemen never saved helpless widows or battered women. That sociopath never rescued anyone.
What kind of asshole would scam Fred Masters?
Charlie forged what he needed from me, specifically the endorsement of
a nonexistent eight-figure account. I wondered whether he had manufactured the financial statements from Crain and Cravath. No one from the firm had ever called me back.
Why’d you do it, Charlie?
Like Ponzi, Charlie had lived large, all the parties, the food, and the French wine. He had even hired a driver. If I was right, Charlie had never legitimately paid a tab in his life. We had his investors to thank for underwriting the good times. He duped his wife, her family, and his friends. He fed on deception and shared the table scraps with us.
The Jeffrey Dahmer of finance.
The phone rang, cutting through my anger. In the blackness of that moment, I decided it was Mandy Maris. Just my luck, the press would arrive and make life miserable.
What’s she want?
But the caller ID on my BlackBerry said, “Unknown number.”
Not her
, I decided. We weren’t scheduled to speak until Monday anyway.
“Hello.”
No answer.
“Can you hear me?”
Still no answer. We had a connection. Traffic sounds filtered through the receiver, and I sensed a presence.
“Call me back. Or lock the keypad on your cell phone.” I hung up, assigning no significance to the call. We all had our stories about accidental dials from cell phones. My conclusion was a mistake, only there was no way to know at the time.
Instead, I focused on Sam Kelemen. She could confirm the Ponzi scheme beyond any doubt. All I needed were Charlie’s tax records. They were probably lying around the house somewhere. More pressing questions were beginning to shape my thoughts, though. Charlie’s little racket pissed off somebody. Sam, however oblivious, was his wife and a beneficiary of the fraud.
What does Sam know? Does Charlie’s killer blame her, too? Is she in danger?
Awash in the muggy heat that Saturday afternoon, I simmered outside Sam’s town house in Greenwich Village. It would be one thing to tell her about Charlie. It would be another to dig deeper.
What do you know, Sam?
“Fertility drugs make some women a little crazy,” Evelyn said years ago. We still had not conceived Finn. “You’d better hope we never need the help. There’s no telling what I might do.” Her brown eyes dilated. They turned saucer wide, as Evelyn feigned drug-induced lunacy.
The memory gave me pause. Had Sam, finally pregnant, turned ditzy from a cocktail of hormones and pharmaceuticals? I could almost hear Evelyn scream from the grave, “Sexist pig.” My cynicism gathered momentum anyway. How could Sam be so oblivious to Charlie’s Ponzi scheme? He never could keep secrets from her.
She knows.
Helen and Walter Wells, Sam’s parents, had been among the first to invest in the Kelemen Group. It was ridiculous to assume Sam had colluded with Charlie. She would never tolerate the con. She would never allow Charlie to fleece her folks. Sam was a victim, like Betty, Lila, and all the other investors, including her parents. Charlie had left her vulnerable, no income and two months pregnant.
She doesn’t know.
What would she tell her parents now? “Mom, Dad, I have something to confess. Charlie was a pathological liar. He stalked our friends and stole your life’s savings.”
Probably not. It sounded way too clinical. Not enough emotion. More likely, she would start with “rat-bastard husband” and end with “rot in hell.”
She would have exposed Charlie long ago.
Sam greeted me at the front door absent any such rancor. She looked stunning in her tight blue jeans and crisp blue blouse, still no hint of a baby on the way. We cheek-cheek kissed hello.
“Always the Southern gentleman,” Sam said, easing her embrace. She suddenly frowned. “What’s wrong, Grove?”
The question jarred me. I never could hide my emotions. People killed me in cards.
“Bad news?” she asked.
The truth will flatten you
.
I scanned Sam’s home anxiously. The brownstone felt different than last Monday, though the change was hard to pinpoint. Everything looked the
same: the octopus chandelier, the $125,000 Oriental rug, and the fourteen-foot painting. Somehow Charlie’s presence was fading, his memory already inching into oblivion.
“The news could be better,” I finally answered, unsure where to start, Ponzi scheme, closet homosexuality, or my new fears about the killer. Right now, I would have traded the decision for a cramp.
Why does the house seem so different?
“Tell me everything,” Sam coaxed. “Did you hack Charlie’s laptop?” She stroked my hair, a friendly touch, not provocative. Her blue eyes, the Siberian-husky gaze, reassured me.
“ ‘Pleaser.’ ”
“What?”
“ ‘Pleaser’ is the password.”
“Oh. Where’s the laptop?” she asked. “I’d love to look through his pictures.”
Not if he downloaded them from his favorite Web sites.
“The police have it.”
“Why’d you give it to them?” There was an edge to Sam’s voice.
“I mentioned the computer to Fitzsimmons, and he got all pissy. They picked it up from my office.”
“I wish you hadn’t said anything.” She sounded annoyed.
“I backed up all Charlie’s files on an external hard drive.”
“I’d love to get a copy.” Her tension eased.
“No prob.”
“Did you find anything?”
“You might say that. How were things with Charlie?”
I immediately regretted my question. Not because it would out Charlie. It would out Sam’s half-truth. According to Crunch, she knew all about her husband’s dalliances. Yet she had dodged my question when I asked, “You don’t suppose Charlie was having an affair?”
Now she continued to equivocate. “Charlie adored me. What else is there to know?” Her response bothered me—too flirtatious, too gamey. I was more serious.
That dog doesn’t hunt, Sam.
Looking into her cupboard, she pulled out a huge crystal wineglass and abruptly turned serious. “What makes you think we had issues?”
“The history on his browser.”
“What was it?”
“Gay porn.”
Long way from Charleston.
“I see.” Sam absently grabbed a bottle of cabernet from the kitchen counter. She poured and pondered.
Crunch was right.
Sam handed me the glass, nearly spilling the red wine. She didn’t use a corkscrew to open the bottle, which made me wonder whether she had been drinking.
No way. She’s pregnant
“Sam,” I finally said, emboldened by the wine, “would you level with me?”
“What do you mean?”
“Your marriage sucked. And you know it.”
She glowered. Unblinking and feral, Sam looked ready to pounce. “Are you here to talk about my marriage?”
What happened to the mild-mannered art history major?
“I wish you’d been more open last Monday.”
“I don’t know what to say,” Sam replied, fiddling with her bra strap. “I thought you were helping me with the Kelemen Group, not investigating my bedroom.”
“There’s more, Sam.”
“I’m listening,” she replied, bracing for the worst.
“Okay,” I said heavily, holding her eyes with mine. “I’m about ninety percent sure Charlie was running a Ponzi scheme.”
She blinked. Her blue eyes pierced mine. I saw anger, not horror. No doubt she was thinking about her parents, the venerable Mr. and Mrs. Walter Wells from Boston, still venerable but out 2 million bucks.
“What do you mean, ninety percent?” Sam asked.
“I need to see your tax files to be absolutely certain.”
“Why?”
“Nobody declares stolen money as income,” I explained.
Thank you,
Law & Order.
“Our money is gone?” she asked, tugging her bra strap furiously, almost pleading for me to confess an error.
Damn thing’s going to snap.
“I don’t know. Let’s check the 1040s.” I settled her hand and squeezed it reassuringly.
Sam led me upstairs to the home office. She said nothing, as the stairs of the Greenwich Village brownstone groaned from our weight. The risers had probably begged for mercy under the lumbering steps of her 230-pound husband.
Black-and-white photos of Charlie’s posse, AWOL from the society pages of