Bernie Madoff may have pulled off the biggest of all Ponzi schemes in recorded history, but it’s not like he came up with the idea.  That honor belongs to Charles Ponzi, right?

Wrong.

We had Ponzi schemes before we had Ponzi.

Charles Ponzi reigns as the namesake for pyramid schemes these days, but he didn’t invent them.  They’ve been around for quite some time and it’s not hard to imagine that they predate Peter and Paul (as in “robbing Peter to pay Paul”, which was the expression generally utilized for such acts of malfeasance before Ponzi did his thin).

Take for instance, Ms. Sarah Howe.  She was pulling a Ponzi in 1880, long before Charlie P. figured out how to bilk people out of their money.  Howe as actually a double-dipper.  She wasn’t just doing the pyramid, she was going it by going after people who’d tend to trust her the most at the time–other women.  That makes Howe a Ponzi-ist and an affinity scammer (sort of like Bernie Madoff).  Apparently, she set up a women-only program, promising an 8% return on everybody’s cash.

The only way that could happen, though, is if she kept getting more women to dump money into the scheme. Obviously, her luck ran out.  There’s not a lot of information online about Howe, but the Wikipedia entry that mentions her pre-Ponzi scheme references a book that might be of interest to those who’d like to learn more about her–and Mr. Ponzi.

She wasn’t the only person “robbing Peter to pay Paul” to beat Pozi to the punch, though.

Nineteen years after Howe, but still 21 years prior to Ponzi in 1899, a guy working for a little tea company near Wall Street came up with a plan.  William F. Miller started telling people, including his bible students, that he could produce a 10% per week return on their investments because he had picked up some golden information by being so close to Wall Street.

He grabbed the cash with both hands while he could, keeping the deal afloat by paying old investors with the money from the new ones.  When it was all said and done, he was sentenced to prison.  He didn’t get his sentence as a rich man, though.  In one of those great ironies, Miller was cheated out of his money by a couple of con artists who were apparently better at playing the grift than Mr. “520%” Miller.

He ended up skirting most of his sentence, receiving a commutation from the Governor.  Apparently, that decision was less about mercy than it was about convincng t Miller to testify against other bad guys.

The interesting thing about these pre-Ponzi schemes is that they bear such a striking resemblance to Bernie Madoff’s swindle.  The names and the centuries change, but the song remains the same.

Give me your money.  I’ll invest it and give you a great return.  In reality, I’ll use your money to pay off the other people I’ve suckered.  You’ll get your money after I find a new mark or two. Eventually, someone figures it out and it all goes down the tubes.

It’s amazing how history repeats itself, isn’t it?  You can draw a pretty straight line through the gutter to connect Sarah Howe, W.F. Miller, Bernie Madoff and a slew of people who who plied their dastardly trade during the intervening years–including the guy who had this great investment opportunity involving postal coupons, the one and only Charles Ponzi.