Amazing Mind Reader Reveals His 'GIFT'

Interviewing Witnesses

A witness is anyone who possesses direct information pertinent to an investigation. Sometimes witnesses are forthcoming and fully cooperative, other times they are reluctant to get involved and occasionally they are deceitful in an effort to protect themselves, an accomplice or loved one. There are many factors that may influence the accuracy of a witness' statement including trauma, passage of time, prejudices, influences of drugs or alcohol, age, and psychological/ physiological disorders. Finally, witnesses are interviewed in a number of different settings, ranging from a totally uncontrolled setting (outside a bank that was just robbed) to a semi-controlled environment (the witness' home or office) or in a controlled setting (the investigator's office).

With all these variables, obviously there is no single best technique to develop information from a witness. Consequently, this web tip will present a number of different concepts relating to witness interviews which the investigator will need to appropriately apply. There is, however, a single underlying principle: the more time the investigator spends talking to the witness, the more information will be learned. Regardless of how cooperative a witness may be, the investigator should never accept a witness's first version of an event as final and complete. A witness rarely initially volunteers all the information he or she possesses; the investigator must draw it out by asking follow-up questions and perhaps even consider using memory-enhancing techniques.

1. Identifying a good witness. Consider that a pedestrian was struck by a car when crossing the street. By the time the police officer arrives on the scene, ten individuals have congregated around the accident. The officer may be tempted to approach a person in the crowd and ask, "Did you see what happened?" This direct approach to locate a witness is likely to produce a response such as, "I can't help you. I just got here."
   
   The officer would be much more productive in identifying a knowledgeable witness by initially asking an individual in the crowd, "Do you know who may have seen this happen?" This question is likely to produce a response such as, "That woman over there was here when I arrived and by the way she's acting it looks like she saw the whole thing." Armed with this insight, the officer could approach the identified woman and state, "Ma'am, I understand that you were here when this happened. Would you help me out by telling me what you saw and heard?"
   
   It may also be beneficial to observe the behavior of potential witnesses in a crowd to identify a person who is likely to possess information and be willing to share it. The individual may appear animated in discussing the incident with those around them, appear approachable by exhibiting an open posture and a friendly facial expression. When the investigator attempts to make eye contact the willing witness may turn toward the investigator and return mutual gaze.
2. Interview multiple witnesses separate from each other. Consider that three people witnessed the same fight in a bar. If the investigator approaches them and asks, "What did you see?" one witness is likely to do most of the talking while the other two nod in agreement. Three individuals can witness the exact same event but their recollections of the event may differ slightly. To account for individual differences, it is important that the investigator conduct three separate interviews. This technique is also useful to identify possible biases or omissions within a particular witness' statement.
3. Create the most private environment possible for the interview. Almost every witness statement attributes blame to someone or something for the observed event. Psychologically, pointing a finger at a responsible person is difficult for most individuals. This difficulty increases substantially when a witness' statement incriminates a friend, family member or accomplice. To ease the psychological burden of implicating others, the investigator must afford the witness privacy.
   
   Once a witness is selected from a crowd it would be appropriate to escort the witness 15 or 20 feet from the crowd before asking questions about the occurrence. In some situations, it may be appropriate to place the accused person in custody in the back seat of a squad car and then privately question the witness out of the accused person's presence. There may be instances where the witness' statements will be so critical to the successful prosecution of the guilty that the investigator may choose to interview the witness in the confines of an interview room in a law enforcement center. Regardless of the circumstance, the important message is that once a witness is located the investigator should do whatever is possible to afford the witness privacy before expecting that person to provide accurate and meaningful information.
4. Do not elicit personal information from the witness (full name, address, telephone number) early during an interview. The reason many witnesses are reluctant to offer information is the fear of getting involved in the legal system (testifying in court, being named as a source of information to obtain an arrest warrant, etc.) Consequently, once an investigator identifies that a person may have information pertinent to an investigation, the information should be elicited in a casual manor, e.g., "Good evening sir. I'm a police officer investigating this incident. Can you tell me what happened?" Only after the witness has provided the desired information should the investigator elicit personal information.
   
   For much the same reason, the investigator should refrain from taking written notes early during the interview. Not only does note-taking remind the witness of the permanency of the statement, but it can be a distraction and affect the natural flow of information. Once the witness has made a complete oral statement the investigator can pull out a pen and paper and document what was said.
5. Introduce each area of the interview with an open question. Research and empirical observations clearly indicate that the most effective technique to develop full and accurate information from a witness is to start with a broad question, e.g. "Please describe the car for me" than to ask a series of closed-ended questions, e.g. "What color was the car?"; "Was is a van or sedan?" How old do you think the car was?"
   
   When asking an open question the investigator should not influence the witness' statement by making assumptions within the question. Witnesses are often nervous when talking to an authority figure and may be eager to please the investigator by saying what they think the investigator wants to hear (or already knows). Consider that a woman heard a loud noise coming from the liquor store across the street and saw a person run out of the store following the sound. As it turns out, the liquor store was just robbed and the clerk was shot dead. It is improper to ask this witness "Describe the man who robbed the liquor store" because the question assumes that the robber was a man and that the person being described is the person who robbed the liquor store. Rather, the investigator should ask "Describe the person you saw leave the liquor store after you heard the loud sound."
   
   Once the witness starts to respond to the investigator's open question, the investigator should not interrupt the account. Rather, he should encourage the witness to fully respond to the question with phrases such as "please continue," "I understand," or "alright." Certainly, during the course of an open account additional questions will occur to the investigator. However, if the investigator interrupts the witness' response with a detail question, e.g."How many shots did you hear?" the interview will quickly deteriorate to an undesirable question and answer session.
6. Ask clarifying questions before detail questions. As the name implies, clarifying questions are intended to draw out further information about a topic mentioned within an open response. Examples of clarifying questions include, "Tell me more about what you heard prior to the fight;" "Describe the vehicle that struck the woman"; or "Tell me again about what caused you to step out of your house?"
   
   Detail questions seek specific answers and should be reserved for the conclusion of the interview. They fill in gaps of missing information not volunteered by the witness through the use of open or clarifying questions. Examples of detail questions are, "What time did this happen?" "What color was the car?" "Did he strike him with his left or right hand?" Because detail questions force the witness to offer specific information, they are the most likely questions to elicit false information. Failure to offer a definitive response to a detail question holds a negative connotation - the witness is stupid, the witness is uncooperative, the witness is withholding information. Consequently, witnesses are prone to lie to detail questions.
7. Memory - enhancing techniques. It is the investigator's goal to develop accurate and complete information from a witness. The previously listed techniques are designed to increase the accuracy of information. To increase the amount of information a witness recalls, consider these tactics:
   
   Traumatized witnesses should always be re-interviewed at a later date. Especially when the witness is also a victim, it is important to gain immediate information in an effort to quickly identify a possible suspect and collect relevant evidence. Frequently, however, a traumatized witness will be able to recall further information 24 or 48 hours following the incident. After taking the initial report, the investigator should prepare the traumatized witness for a second interview with a statement such as the following:
   

"Linda, I know this has been difficult for you and I really appreciate your assistance. In cases like this, I have found that a person will remember more about what happened if given some time to think about it. I would like to talk to you again tomorrow afternoon to update you on our investigation and to find out what else you remember. Would that be alright?"

Have the witness write down their recollections. Many individuals are kinesthetic thinkers in that the act of writing will help stimulate and organize memories. This should not be introduced as a "written statement" but rather as a technique to assist the witness' recollection. For example, the witness may be given a sheet of paper with the numbers one through ten listed as a column and asked to write down, in sequence, ten recollections about the event. Once this task is completed, the investigator can ask the witness to try to add two more recollections following each of the ten points.

Consider using cognitive interviewing techniques. These specialized techniques are specifically designed to enhance a person's recall. They require a cooperative witness and should be utilized in a controlled environment. The witness should be relaxed and comfortable. It may also be appropriate to ask the witness to close their eyes to help concentrate.

The first technique involves recalling the incident in reverse order. The witness would be asked to start their story with the last recollection, and working toward the first recollection. The investigator could also ask the witness to tell their story from a different perspective. For example, in a hit and run accident, the witness could be asked to tell the story from the victim's perspective.

A second concept within cognitive interviewing involves asking hypothetical questions about the recalled event. In the process of answering these questions, further memories may be stimulated within the witness. Examples of these questions include:

"Did he remind you of anyone you know?"
"Why do you think he was dressed the way he was?"
"What do you think the man did for a living?"
"Where do you think he was from?"
"Did the man mention any names?"


Conclusion

Developing accurate and complete information from witnesses is critical to any criminal investigation. This information may determine whether or not a crime was committed, the direction in which an investigation goes and the identification of the perpetrator of a crime. Yet, too often, investigators engage in procedures that fail to identify valuable witnesses to a crime, or question witnesses with techniques that result in missing or erroneous information. Of primary importance, investigators need to create a private environment to interview witnesses which will, in turn, allow for more structure within the interview. Specifically, the investigator should start the interview by asking open questions followed by clarifying questions. Only at the conclusion of the interview should the investigator ask detail questions, take written notes and obtain personal information about the witness.

Credit and Permission Statement: This Investigator Tip was developed by John E. Reid and Associates Inc. Permission is hereby granted to those who wish to share or copy the article. For additional 'tips' visit www.reid.com; select 'Educational Information' and 'Investigator Tip'. Inquiries regarding Investigator Tips should be directed to Janet Finnerty johnreid@htc.net. For more information regarding Reid seminars and training products, contact John E. Reid and Associates, Inc. at 800-255-5747 or www.reid.com.

For interviewing and interrogation techniques training in Canada you may also contact The Canadian Tactical Training Academy www.ctta-global.com, tel: 514-373-8411

StopPedophilia.ca

Canada is the number two nation in the world for hosting child sex sites -- not a reputation to be proud of. About 80% of those convicted of child pornography in Canada had images of children under the age of 8; 19% had images of babies and toddlers under the age of 3.


Every child sex image is a crime scene. Each image represents the horrific sexual violation of an innocent child.And every image posted on the Internet sentences that child to lifelong pain and humiliation.

Canadian judges routinely hand out light sentences for sexual offences against children, and pedophiles are often back in the community within months, free to abuse other kids,

The purpose of StopPedophilia.ca is threefold: 1) to provide resources that will help parents and stakeholders to protect children; 2) to provide resources for victims/survivors; and 3) to provide resources for perpetrators who sincerely want help.


StopPedophiles.ca is published by Canada Family Action: FamilyAction.org

To Lie or Not to Lie: The Use of Deception During An Interrogation

If the agents involved in the recent Colombia incident are interrogated, should the investigators tell them they have evidence that they don't really have? It depends on a number of considerations.

Earlier this year a case was reported in which a detective doctored a crime lab report to use as a prop during an interrogation. While the suspect did not confess, the detective's tactics spurred legal questions regarding the use of deception during an interrogation. The legal twist was that even though the report used as an interrogation prop was manufactured by the investigator, it was based on factual verbal information provided by the crime lab. In other words, the manufactured evidence contained truthful information that incriminated the suspect but the report was not a bona fide report from the crime lab. 1

Legal Considerations

The legal test for deceptive practices during an interrogation has remain unchanged for more than 40 years. The use of deception during an interrogation must be considered within the totality of circumstances when deciding the admissibility of a confession.2 Deception that shocks the conscience of the court or community will generally result in a suppressed confession. An example of deception that "shocks the conscience" is lying to the suspect about the possible consequences he faces, e.g., telling a homicide suspect that the legislature just dropped first degree murder to a misdemeanor. Similarly, an investigator who elicits a confession after falsely telling the suspect that he is his court appointed public defender has "shocked the conscience".

A second legal guideline regulating deceptive practices, stemming from a 1989 case, makes a distinction between manufacturing evidence against the suspect (which is not permissible) and false verbal assertions (which generally are permissible). 3 In that case the investigator manufactured a fictitious crime lab report indicating that the suspect's DNA was found during an autopsy of the victim. After reading the "crime lab report" the suspect confessed. The suspect's confession was later suppressed at trial. If the investigator had falsely told the suspect that his DNA was found during the victim's autopsy this would have been permissible - but the investigator went too far by manufacturing the lab report. Other than these exceptions, there are many decisions upholding the use of verbal deception during an interrogation.

There is no per se legal restriction against the use of "props" during an interrogation. However, the prop must truly be a mere visual aid such as a blank DVD where the suspect is falsely told that it is the surveillance video showing the suspect removing property from a building. To determine whether a prop crosses the line of being improper, ask the following question: "Could an analysis of the purported evidence incriminate the suspect?" If the answer is "yes" the prop should not be used. In the DVD example, even if the DVD was labeled "Surveillance Video, May 12, 2012" anyone who played the DVD would realize that there was absolutely nothing on it that would incriminate the suspect.

Procedural Considerations

Most investigators have experienced some success with deceptive practices during an interrogation. For example, the investigator may produce a file containing a number of blank pages. As the investigator thumbs through the pages in the file he states, "This is a report from an eye-witness who saw you outside the building that night; this is a report indicating your fingerprints were found inside the building; this report shows that you made a large cash purchase two days after you went into that apartment building." A guilty person who believes that the investigator, in fact, has all of this incriminating evidence is more likely to tell the truth.

On the other hand, consider the investigator who falsely tells a suspect, "We found your fingerprint inside that house." Unbeknownst to the investigator, the suspect wore gloves during the burglary that he committed. Obviously, under this circumstance the deceptive tactic completely backfires. The investigator will lose credibility, the suspect will become more confident in his ability to lie and the interrogation will deteriorate very quickly.

Suffice it to say, lying to a suspect about having incriminating evidence is a risky interrogation tactic. To reduce this risk the investigator who anticipates the possibility of mentioning fictitious evidence during the interrogation may first test the fictitious evidence during the interview by asking a bait question.

Consider the investigator who is contemplating making a false statement during the interrogation concerning an eye-witness who saw the suspect at the scene of the crime. During the interview the investigator may ask the following bait question, "Is there any reason a witness, who was walking their dog down Washington street that night, would tell us that they saw you leave the apartment complex around 7:00?"

If the suspect offers an emphatic denial to this bait question it would be an indication to the investigator that he should not mention a fictitious eye-witness during the interrogation. On the other hand, if the suspect offered a hesitant or qualified response to this bait question, the investigator should have confidence in mentioning an eye-witness during the interrogation. The following are other procedural considerations relating to deceptive statements during an interrogation:

1. Consider deception as a last resort effort to overcome stubborn, weak denials typically offered by a guilty suspect.
2. Do not lie to a suspect who claims not to remember his actions at the time of the crime. There are reported cases of internalized false confessions where innocent suspects claim that they were convinced by the investigator that they must have committed the crime, even though the suspect had no initial recollection of committing the crime. Obviously, the use of deception by the investigator could increase the likelihood of this occurrence.
3. Do not use false evidence to threaten inevitable consequences. A number of previous web tips have addressed the dangers of convincing an innocent suspect that he or she will suffer negative consequences regardless of whether the suspect acknowledges guilt. When this tactic is reinforced with false claims that the investigator has evidence implicating the suspect in the crime, a false confession is a real possibility.

Miscellaneous Considerations

Some private companies have established internal policies that prohibit corporate investigators from making false statements during an interview or interrogation of an employee. The basis for this policy is generally based on corporate ethical considerations as opposed to legal requirements. Especially when a corporate investigation centers around administrative acts of wrong-doing, the use of deceptive practices may fall outside of the realm of acceptable standards of practice and open the employer to possible civil liability.

Police officers who work in small communities often arrest and re-arrest the same suspects, or relatives of that suspect on a regular basis. In a tight-knit community the officer's reputation will often dictate his success in developing informants and eliciting confessions from suspects. If the officer establishes a reputation of being a straight shooter and honest he is likely to be successful. On the other hand, if the officer has a reputation of lying to suspects and not being trustworthy, his ability to solve cases through gathering street information or by interrogating suspects is greatly hindered. Under this circumstance, the investigator will be more successful by establishing a reputation of being truthful.

The same advise applies to the corporate investigator who will quickly establish a reputation of either being credible or someone not to trust. It must be remembered that both innocent and guilty suspects will not cooperate with an investigator they do not trust; the one case that might be solved by making deceptive statements during an interrogation could result in the failure to resolve many future cases.

Finally, investigators who electronically record interrogations should consider their ability to explain their use of deception practices to a jury. The defense, of course, will argue that the recorded deception somehow renders the defendant's confession as untrustworthy. A competent prosecutor should be able to address this issue by educating the jury with respect to the law and emphasizing that the confession is corroborated with information only the guilty person could have provided.

Conclusion

Deceptive practices are prevalent within society and largely considered an acceptable part of doing business or preserving social relationships. When a store asks a customer to register for a free birthday gift they don't want to send the customer a gift - they want to find out how old the customer is so they can market products appropriate to someone that age. We have all been served a meal that was less than appetizing and yet, deceptively, we would finish our portion, compliment the chef and leave a generous tip. These examples involve everyday practices of law abiding citizens. What about when dealing with criminal suspects? Certainly courts and society recognize that investigators often need to resort to deceptive practices in an effort to learn the truth from a criminal suspect. Indeed, the law extends great latitude within the area of making false statements to a criminal suspect.

However, as addressed in this article, just because lying to a suspect is accepted by the courts and will generally not cause an innocent person to confess, there are other considerations that may cause an investigator to avoid making false statements to a suspect. These involve circumstances where the investigator's deceptive conduct may negatively affect the investigator's (or employer's) ability to solve the crimes, as well as affect their reputation.

1 Reported in "Austin Police Use of Doctored DNA Report in Interrogation Raises Legal Questions," Statesman.com, Jan. 30, 2012
2Frazier v. Cupp 394 U.S. 731 (1969)
3 Cayward v. Fl 552 So 2nd 971 (1989)


Credit and Permission Statement: This Investigator Tip was developed by John E. Reid and Associates Inc. Permission is hereby granted to those who wish to share or copy the article. For additional 'tips' visit www.reid.com; select 'Educational Information' and 'Investigator Tip'. Inquiries regarding Investigator Tips should be directed to Janet Finnerty johnreid@htc.net. For more information regarding Reid seminars and training products, contact John E. Reid and Associates, Inc. at 800-255-5747 or www.reid.com.

Counterfeiters' favourite, the $20 bill, to be replaced

New polymer $20 bill coming this November

By Daniel Schwartz, CBC News

Posted: May 1, 2012

 

Canada's $20 banknote is a favourite of counterfeiters. But beginning this November, the Bank of Canada will begin circulating a new polymer $20 bill that it says will be harder to duplicate.

The banknote's design was unveiled in Ottawa Wednesday morning.

In a press release, the Bank of Canada said the main reason it is issuing the new $20 bill "is to stay ahead of counterfeiting threats."

The front of the bill has a new portrait of Queen Elizabeth and the back has an image of the Vimy Memorial in France.

The $20 bill accounts for over half of all Canadian banknotes in circulation, according to the Bank of Canada.

The RCMP reports that 25,039 counterfeit $20 banknotes were passed in 2011, more than any other denomination. Fake $100 bills came second, with 19,466 passed.

New $100 polymer banknotes went into circulation in November and then $50 polymer notes began circulating in March. New $5 and $10 banknotes should be out in 2013.

While the critical advantage of polymer over paper currency is that they are expected to be more secure, they are also supposed to last 2.5 times longer than the paper banknotes.

Dramatic increase in counterfeiting, 2000-04

According to Michael Duncan, the assistant director of compliance at the Bank of Canada, "these new notes were born out of necessity."

What he means is that, from 2001 to 2004, counterfeiting skyrocketed in Canada. In 2004, 552,980 fake banknotes were passed here, almost six times the number in 2000.

Counterfeiting in Canada was also high by international standards.

In 2004, the Bank of Canada introduced new security features to the Canadian Journey series of banknotes. The holographic stripe as well as a ghost image watermark, security thread, see-through number, raised ink and fluorescence made the currency harder to copy.

Counterfeiting peaked in Canada in 2004 and has been dropping year after year since. Duncan says that the number of counterfeit notes detected fell from the historic peak of 470 per one million genuine notes in circulation to just 35 in 2011.

The polymer notes are part of a strategy the Bank of Canada adopted to respond to the increase in counterfeiting. The bank also put more effort into helping retailers recognize counterfeits, as well as into working with police.

Taking down counterfeiters

 

The themes of Canada’s new bank notes

 

$100 — Canadian medical innovation
$50 — Arctic research and the development and protection of Northern communities
$20 — The contributions and sacrifices of Canadians in conflicts throughout our history
$10 — Linking Canada's Eastern and Western frontiers by rail
$5 — Canada's continuing contributions to the international space program through robotics innovation

In 2006, the RCMP's Integrated Counterfeit Enforcement Team took down the largest counterfeiting operation in Canadian history. They recovered fake notes with a face value of $6.8 million.

The takedown was a result of an 18-month investigation in Toronto, code-named Operation Ophir.
At the time, the RCMP attributed another $6 million in counterfeit bank notes across Canada to the plant they had dismantled, which had used complex commercial grade printing equipment.

Another take-down — code-named Ophir 2 — by the same RCMP team, seized $4.2 million in counterfeit $20 Canadian banknotes before they entered circulation. Rehan Bawania and Taimaz Ejtehad were arrested in the takedown. At the time they were awaiting sentencing for their roles in the 2006 bust.

Sgt. Sue MacLean was involved in both Operation Ophirs. She is now the RCMP's national counterfeit coordinator.

MacLean told CBC News that so far the Mounties have seen only "one very poor replication" of one of the new polymer banknotes. It was paper not polymer, so it was surprising that someone succeeded in passing it, she added.

INTERACTIVE 'Secure' plastic banknote unveiled

Both the Bank of Canada and the RCMP stress the importance for people to quickly become familiar with the new notes, because periods of currency transition are often an opportune time for counterfeiters.

CBCNews.ca has an interactive page about the new security features on the Frontier series polymer banknotes.

 

The Real Crime Scene Investigator

For the full episode visit THE REAL CSI

The Man Who Time (Almost) Forgot

Excerpted from Fraud Magazine (www.Fraud-Magazine.com), a publication of the Association of Certified Fraud Examiners of Austin, Texas.

William H. McMasters Finally Gets His Due for Exposing Ponzi
By Cora Bullock

Photos by Eddie Arrossi

During the ACFE's 22nd Annual Fraud Conference and Exhibition, the 2011 Cliff Robertson Sentinel Award went to William H. McMasters, the Boston publicist who, in 1920, helped take down the most notorious pyramid schemer of them all: Charles Ponzi.

For the first time ever, the ACFE presented its annual Cliff Robertson Sentinel Award posthumously. Who was the person who earned such an honor, 43 years after his death? William H. McMasters, the man who exposed Charles Ponzi as a fraud in 1920.

He was Ponzi's publicist for just a short time before he realized his client was a fraudster. McMasters then wrote a scathing exposé for The Boston Post that led to Ponzi's ultimate downfall. The newspaper received the 1921 Pulitzer Prize for its Ponzi coverage. McMasters never even saw the medal and, during his lifetime, he never received public recognition for his role. It is past time to give him his due.


BRUSH WITH INFAMY
Possibly the most remarkable part of the story is that McMasters wrote the exposé on Ponzi only 10 days after Ponzi hired him. Compare that to the years of reporters' and investigators' questions before Bernie Madoff's scheme finally came crashing down.

On July 23, 1920, Boston Municipal Court judge Frank Leveroni and William S. McNary, treasurer of the Hanover Trust Company, called McMasters - by then a well-known publicity agent - into Leveroni's office to meet Ponzi. They wanted to know if McMasters would consider working for Ponzi, who had become a major Hanover Trust stockholder.

Ponzi was dashing - he wore an expensive suit and was incredibly charming and confident. He outlined his plan for a massive financial empire. He purportedly sent money overseas to be exchanged for local currency, and then his contacts bought postal coupons and mailed them to Ponzi, who exchanged them for stamps, which businesses bought in bulk for a reduced price. (See sidebar: "Who was Charles Ponzi, and what was his scheme?" below.) The bottom line was he was raking in hundreds of thousands of dollars a month from investors with the promise of a 50-percent return rate on their money within 90 days.

McMasters' suspicions began as early as the very first meeting because the rate of return seemed a little too fantastic, but he was honest about his prospects. "I was not averse to having a millionaire for a client, especially one who evidently wanted to spend money lavishly," McMasters wrote in a 1949 accounting of the story.

As his newly hired publicist, McMasters scored Ponzi an interview with The Boston Post (which then had the largest circulation in New England) shortly after his first meeting with Ponzi. The front-page story the next day drew investors like flies to honey. A line formed at Ponzi's office at 6 a.m., and he collected more than $3 million (US $34 million in today's dollars) in just one day. McMasters recalled Ponzi swaggering among the crowd, reassuring them that his staff would help them all.

The story spread like wildfire to "the front page of practically every newspaper in the United States," wrote McMasters. People could not get their money to Ponzi fast enough.

But Ponzi's numbers bothered McMasters. How could it possibly be true for Ponzi to give the returns he was promising? The answer, of course, was that he couldn't.

THE BRICKS START TO CRUMBLE
On July 26, at McMasters' insistence, he and Ponzi went to visit District Attorney Joseph C. Pelletier, U.S. Attorney Daniel J. Gallagher and Massachusetts Attorney General J. Weston Allen. McMasters

Said Dr. Faith Dickerson of her grandfather, William H. McMasters, "He took very principled positions. He maintained them and  fought for them. He was not easily swayed by criticism. He was determined, resolute."

told Ponzi these interviews would increase public confidence in his business, but secretly McMasters wanted to put himself and the Post "in the clear," as he later wrote. Understandably, Ponzi was reluctant, but, incredibly, he said he would go.

Pelletier agreed with McMasters that something unusual was going on, and he told Ponzi to close his offices until a public accountant had audited his books. (Pelletier offered Ponzi an additional day's grace before opening his books, but McMasters insisted that Ponzi close his offices that day.)

They marched into Gallagher's office, then on to Allen's office, where, for three hours, they asked question after question. McMasters wrote that Ponzi put on a good show. "When he was cornered, he used the old technique that such a question could not be answered as it would disclose his financial secrets to the big bankers of Wall Street and Threadneedle Street and the Paris Bourse [then the financial centers of England and France]," wrote McMasters. "Once, Attorney General Allen said to him, ‘Mr. Ponzi, if you can do these things that you claim, you will be the greatest Italian whoever came to America.' To this, Ponzi smiled and said, ‘Don't forget Columbus, Mr. Allen!' "

According to McMasters, once Ponzi's offices closed, a few nervous investors demanded their money back, which Ponzi quickly refunded, but most of his clients still had confidence in him.

McMasters wanted to confirm his suspicions, so while the books were with the accountant, he talked to investors outside of Ponzi's office for two days, observing their ticket stubs, which showed how much Ponzi owed them. "… That he was hopelessly insolvent had become a fixation in my mind," he later wrote. It was time to act.


IT ALL COMES CRASHING DOWN McMasters approached Richard Grozier, the Post's assistant editor and publisher, about running an exposé on Ponzi. Grozier balked because he was afraid Ponzi would sue him for libel. However, McMasters got a promise from Nathan Tufts, the district attorney of where Grozier lived, that the publisher would be immune from lawsuits if the article proved untrue. So, McMasters wrote the article with the spectacular headline, "Declares Ponzi Is Now Hopelessly Insolvent." Grozier paid him $6,000.

That Monday morning of Aug. 2, "when Ponzi opened his Boston office … the line was more than a half-mile long." McMasters wrote of terrified investors in tears, some even fainting. But Ponzi paid off these investors for more than a week. He sued the Post for $5 million, and he made speeches railing against the paper. Even the attorney general told McMasters on the day the article appeared that he had made a mistake in running such a scathing story before any official reports.

However, McMasters persevered. He responded with another Post article on Aug. 3, which ran with a separate article by a reporter who confirmed with Pelletier his conversations with McMasters and Ponzi. McMasters then asked the attorney general to request that investors mail letters saying how much Ponzi owed them. The "overwhelming" response helped prove his exposé — there were simply too many investors owed too much and not enough money to pay them.

A week later, another Post article reported that Ponzi had been in the federal penitentiary in Atlanta for violating immigration laws, and he also had been convicted of theft in Montreal. The final nail in the coffin was the post office's official report that "Ponzi had never bought a dollar's worth in postal coupons abroad or cashed in a dime's worth in the United States," wrote McMasters.

Ponzi was convicted of mail fraud in 1920 (because he had used the U.S. mail to plead with investors to reinvest their money), and he served five years in jail. After his release, he still wasn't through with his schemes. He had to stand trial on state larceny charges, but while out on bail, he ran a scheme in Florida selling expensive real estate that turned out to be swampland. He was arrested and convicted of that crime, but then he tried to flee the country. Ponzi was caught yet again and served seven years in prison. After that, the U.S. had had enough and deported him to Italy in 1934. There he scammed the Italian treasury and then fled to South America. He died a pauper in a charity ward in Brazil in 1949.


LIFE OF A FUTURE FRAUD FIGHTER
In an interview with Fraud Magazine, McMasters' granddaughter, Faith Dickerson, Ph.D., a psychologist who conducts research on schizophrenia, said, "I remember visiting my grandfather and my grandmother as a very young child in Cambridge, Massachusetts, in their walk-up apartment. He was elderly, but an imposing gentleman." Dickerson accepted the Sentinel Award for McMasters at the annual conference.

A young Dr. Dickerson poses with her grandparents, William H. and Lillian McMasters.

She recalled that he always sat in the dining room of his small apartment, banging away on his typewriter, still producing work, including a column for the local newspaper, Cambridge Chronicle. "He completely had his faculties. He was stern and commanding, but very engaging and intellectualized. I don't ever remember him not wearing a suit and also a top hat when he went outside," she says.

Though he was not one to roll around on the carpet with his only grandchild, he wrote her poems and Valentines. McMasters was extremely protective of his wife, Lillian, a musician and artist, whom he married in 1911. She appeared to be vulnerable and delicate, taking naps and whisking out hankies to flutter, but she lived to be 103.

William Henry McMasters was born June 9, 1874, in Franklin, Mass., on the outer perimeter of the Boston area. His father died in an industrial accident at the sawmill plant in which he worked nine months before McMasters was born. His mother, Jane, ran a rooming house and later married a Swedish-American carpenter. McMasters worked a variety of jobs as a boy; he drove cows, picked berries, chopped wood and even watered circus animals.

Despite his impoverished background, he was intelligent and quick-witted. He attended high school at Dean Academy in Franklin, and then, at the age of 16, he left the school to learn to be a telegraph operator. He returned to high school and graduated, went straight to law school (he skipped college; back then, one didn't need a college degree to go to law school), then he left school permanently, without his degree, to volunteer in the U.S. Army Signal Corps during the Spanish-American War.

After the war, McMasters became a reporter for various Massachusetts newspapers. He eventually became a publicist, which is how his life intersected with Ponzi's.

Dickerson knew little of McMasters' role in the Ponzi story because her family didn't talk much about it when she was growing up. Ponzi was not such a household name back then. To Dickerson, McMasters had done a lot of other things that were more recent and more interesting. He worked on the Calvin Coolidge Memorial Foundation, and he corresponded with political leaders, including Speaker John William McCormack of the U.S. House of Representatives.

She knew McMasters had been involved in political campaigns, but it wasn't until after he died in 1968 and her family talked of donating his papers to the Boston Public Library that she became aware of the extent of his role in the exposé.

A closer look at McMasters' personality reveals that his Ponzi exposé was inevitable. "He took very principled positions. He maintained them and fought for them. He was not easily swayed by criticism. He was determined, resolute," Dickerson said.

McMasters worked on the publicity campaign for women's suffrage in Massachusetts. And in the 1930s, he was in the forefront in championing old-age pensions, before Social Security.

POST-PONZI DAYS
After Ponzi, McMasters enjoyed working as a publicist for such famous politicians as Boston mayor James M. Curley and John F. Kennedy's grandfather, Honey Fitz, in his run for mayor of Boston. He had worked on Calvin Coolidge's gubernatorial campaign in Massachusetts in 1918, and he maintained a lifetime admiration for the unpopular president.

McMasters taught journalism at Mount Ida Community College from 1947 to 1957. He wrote a Broadway play, "Undercurrent," several novels and many mystery stories. He was such a prolific writer, he even decided, at the age of 91, to write a poem a day for six months. He died in 1968 when he was 93.

McMasters was unhappy that he never received any public appreciation or recognition for his role in exposing Ponzi. He collected numerous articles that subsequently were published about the scheme, and they all gave Grozier and the Boston Post the acclaim.

McMasters' archives show his connection to Ponzi profoundly affected him. He spent years writing version after version of his Ponzi story and submitting these pieces to various publications. He even wrote a movie script featuring himself as the lead and hero. You can see his PR ways at work when he changed a title of one article from "The Ponzi Saga" to "America's Most Glamorous Swindler."

McMasters also kept the multiple manuscript rejection letters that publications had sent him. "He was self-directed, self-initiating and very high energy," said. Dickerson. "He didn't seem deterred by rejections. They didn't stop him from making the next effort."

His accounts are full of wonderful little details, such as when he first met Ponzi: "Then [Ponzi] gave his thin bamboo cane a dandified switch and touched the tip of one of his two-toned shoes." He noted Ponzi was 5'4" tall.

"He's really consistent in the story he tells, but it seems that [he thought that] if he kept writing and writing about his experience with Ponzi, that it would be picked up," says Dickerson. "Ironically, that's what happened, because his 1962 manuscript did finally get picked up, although 40 years after his death."

WHY NOW?
Several events helped bring the story of McMasters to light. The Madoff scandal helped everyone revisit Ponzi. "Then a book ["Ponzi's Scheme: The True Story of a Financial Legend"] came out, by Mitch Zukoff, that purported to tell the story of Ponzi and pitted the story, as most people had, of Ponzi versus the newspaper editor," says Dickerson. "My grandfather basically had been written out of the history. Everyone saw the hero as this newspaper publisher who decided to go forward with the exposé, and it just happened that my grandfather wrote it, which is barely even mentioned."

She felt distressed that, once again, her grandfather had been overlooked. But then she received what she calls a "stunning" call from Ralph Blumenthal of The New York Times a little more than two years ago, who later wrote a May 4, 2009, story for the Times on McMasters, "Found Manuscript Unmasks Details of Original Ponzi." 

Blumenthal had found a 1962 manuscript by McMasters at John Jay College that outlined his role in exposing Ponzi. "Blumenthal had come across the manuscript that was considered so precious, he couldn't photocopy it, and it was maintained in very careful conditions where there was dim light, and one had to have gloves to turn the pages," says Dickerson.

"I thought that was very ironic because my grandfather couldn't give away his story when he was alive," laughs Dickerson. "Now all of the sudden this document is so precious and kept under lock and key like this famous antiquity, which I think would have pleased him."

The Times article caught the eye of Allan Bachman, CFE, the ACFE's education manager, and he called Dickerson. The Sentinel Award made her look at her grandfather with new eyes.

"I identified my grandfather as a journalist and publicist," says Dickerson. "Fraud examiner? I never quite saw it in those terms, but now I see it fits completely."


Cora Bullock is assistant editor of Fraud Magazine.


Sidebar: 
 
Who Was Charles Ponzi, and What Was His Scheme?  
Charles Ponzi was an Italian immigrant, flashy and fast-talking and eager to make his fortune however he could. He had been convicted of theft in Montreal and served time in the federal penitentiary in Atlanta for violating immigration laws. But no one in Boston knew about that when he opened his Securities Exchange Company in late 1919 to tout his latest scheme: postal reply coupons.

In 1919, immigrants were flocking to the West, leaving behind families for whom the only communication would be through the mail. To handle the sudden influx of packages and letters, the Universal Postal Union had created postal reply coupons. When someone sent a loved one a letter, they included a postal coupon. The recipient could then buy stamps with the coupon to mail a return letter or package.

Ponzi advertised that he could make a killing by working the fluctuations of the international currency market. He promised his investors an unheard-of 50 percent return on their investment in 90 days, but he paid in 45 days.

This is how Ponzi would outline his scheme: He sends his Italian contacts U.S. dollars. They exchange that for lira, then buy postal coupons and send them back to Ponzi. Ponzi cashes in the postal coupons for stamps. He then sells them at a discount to "larger firms downtown," giving his investors their return and pocketing the rest.

People, eager to get rich quick, lined up in droves. Most investors were working-class people, offering up as little as $10, but there were plenty of them. In the month of May 1920 alone, Ponzi took in $500,000 (nearly $6 million in today's dollars).

In reality, he wasn't buying any coupons. He merely used new investors' money to pay previous investors, so he had to continually add new investors to keep running the scheme. This looks like a pyramid on a chart, hence the name "pyramid scheme." If too many investors demand their returns, or even their original investment, back at once, then the whole thing collapses.

In all, Ponzi took money from 30,000 investors, for a total of $10 million (a little more than $114 million today). Like the more recent infamous pyramid schemer, Bernard Madoff, most of his victims were of modest means, some losing their entire life savings.

(Sources: "Frankensteins of Fraud," by Dr. Joseph T. Wells, CFE, CPA, copyright 2000, Obsidian Publishing Company; and How a Master Scammer Met His Match: Ponzi vs. the Postal Inspection Service.)

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