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Before Charles Ponzi, There Was Sarah Howe

How the work of an iconic female scammer was erased from history

If you’re in the mood for a sausage fest, try Googling “Ponzi scheme.” You’ll get a couple million hits proffering the expansive, history-making criminal enterprises of men like Bernie Madoff, Jeffrey Epstein, and of course, Charles Ponzi — the guy credited with inventing the infamous sham investment scheme. 

Thing is, the Ponzi scheme wasn’t invented by Ponzi, or even by a man at all. It was invented by a woman, for the express purpose of scamming other women. In fact, the entire scam involved no men at all. We just don’t want to believe it, says historian Robyn Hulsart, because we don’t want to believe that women can be that good at being bad. But as the story of Sarah Howe, a 53-year-old widow and true inventor of the Ponzi scheme proves, that’s not always the case. 

The same year Thomas Edison was in New Jersey pioneering the lightbulb, Howe was in Boston, pioneering a new kind of white-collar crime. Without a husband since the age of 24, Howe was used to living on her own, scraping by through any means necessary. She worked as a fortune teller and clairvoyant, conning people out of their money by pressing her fingers to her temples, closing her eyes in consternation and pretending to forecast their futures. A little practice doing that made her adept at weaseling herself into positions and odd jobs she wasn’t terribly qualified for. Despite having zero medical training, she worked as a physician for a stint, and even picked up a couple of shifts in a Boston-area sanitarium where she worked with mentally ill patients for seemingly no other reason than because she could. 

One day in 1879, however, Howe was struck with an idea. What if she created a banking fund for women that masqueraded as a charitable organization, but secretly directed funds into her waiting coin purse? She called it the “Ladies’ Deposit” and set to work plotting her scheme. 

The Ladies’ Deposit, she decided, would only take money from “unprotected females,” women who were financially independent from men and wanted to keep it that way. They made the perfect mark — since money was considered “men’s work,” women whose finances weren’t being handled by men or guardians tended to make smaller deposits. Banks then saw them as a waste of time and were happy to overlook what they were doing. Plus, says Hulsart, they were spinsters. They weren’t exactly “held in high regard by society,” so they had an extra layer of protection from watchful eyes. 

As an unprotected spinster herself, Howe had a strategic window into the minds of her marks. In order to win them over, she furnished her bank in New Bedford, Massachusetts with rich, ornate and overtly feminine accents and used language like “overworked, ill-paid sisterhood” that she knew would appeal to the kind of independent, chichi lady she was after. Howe was such a pro at luring women to her bank that the New York Times said her “intimate knowledge of the mental workings of her own sex puts male swindlers and male novelists to shame.” 

It wasn’t just her pretty bank that won her clients over, though. In order to convince them to contribute to the Deposit, Howe made them a promise that was hard to refuse: an eight percent interest rate that would double their investments within just nine months. New depositors would also get their first three months’ interest in advance, an unheard-of offer that investors alive both then and now would be forgiven for raising their eyebrows at. But she was able to quell skepticism with the following explanation: The Ladies’ Deposit wasn’t just a typical bank looking to profit off its clients; it was a also a charity for needy women, funded by kind Quaker philanthropists. Every deposit made in their accounts, she told her potential investors, would be more than just an investment in themselves. It would be an investment in women as a whole. 

That obviously went over well: By 1880, the Ladies’ Deposit had gathered roughly $500,000 from more than 800 women across New England; the equivalent of almost $13 million today. 

More unbelievably still, Howe convinced them all to put their faith in her enterprise without taking out a single advertisement. In fact, the Ladies’ Deposit operated as an underground venture — new members had to be referred and approved by other members, creating a sort of sorority-like hush network of housekeepers, widows and schoolteachers whose investments were founded on a culture of mutual trust and silence. This allowed Howe to fly under the radar of authorities as she pilfered thousands of her customers’ dollars right under their noses, becoming so rich in such a short amount of time that she bought a $50,000 mansion in Boston with a $20,000 down payment in cash. For perspective, that would be like walking into an open house with a cool $5 million on hand. 

The gig didn’t last long, though. In 1880, rumors of a women’s bank started to leak, catching the attention of journalists at the Boston Daily Advertiser, the city’s first daily paper. Sold on the juicy hook of women crashing the male-dominated world of finance, they sent a reporter to Howe’s bank, but were flabbergasted when he was turned away at the door for being a man. Determined to get the scoop, they sent an undercover reporter dressed as a woman to infiltrate the bank. 

He must have had a really good wig, because it worked. On September 25, 1880, the Advertiser ran a series of stories exposing Howe and the Ladies’ Deposit as frauds. Her infamous eight percent returns, they revealed, were nothing more than an empty promise. She had no way to pay back the returns as advertised, and the Deposit was labeled a scam.

Here’s how the paper said it worked: When a new investor made a deposit, Howe would use their money to pay out old investors, a scheme that required a constant influx of new recruits in order to stay afloat. But as is the case with any Ponzi scheme — most of which are destined to fail — the Ladies’ Deposit would have eventually run out of new members and money, causing it to self-implode. It wasn’t quite at implosion-level when the Advertiser stories ran, but it immediately crumbled after investors began to withdraw their money following the publication of the expose. When her furious clients demanded their money back, Howe immediately relented and met their demands. She paid out $150,000 in interest and $90,000 in principal, but the Deposit eventually became insolvent, with some of her investors losing upwards of $300,000. 

Almost immediately, the press jumped on the opportunity to use Howe’s case as a shining example of how women can’t be trusted with money. According to George Robb, a historian and author of Ladies of the Ticker: Women of Wall Street, Bankers’ Magazine wrote that “all sane persons” knew the bank was a fraud, implying only women were foolish enough to fall for the scam. The Daily Advertiser said the case revealed the “childlike ignorance and simplicity of women” and that “we must despair of teaching the female sex business principles,” while Harper’s Bazaar slapped the title of “Women’s Business Ignorance” on a full article about the Howe fraud. 

At the same time, it did everything it could to refute the fact that a woman could have possibly devised and executed such an elaborate, profitable criminal enterprise. This was Victorian America, after all; women were supposed to be pious, virtuous and gentle victims of crime, not mastermind ballers making it rain on realtors. So, in order to take her down a notch to where they believed women belonged, newspapers published a slew of shit-talking articles that centered around her appearance, her sexual history and how stupid she supposedly was.

The Boston Herald — not really a fan of women, it appears — wrote that Howe was “nearly as deaf as a post” and cross-eyed. According to Longreads, it claimed she was “born out of wedlock and ran away at 15 to marry an ‘Indian physician,’ who they also referred to as ‘her dark-skinned Othello.’” Their marriage, the Herald wrote, disturbed her mother so much that she went stark raving mad over the “heartlessness of her daughter” before she died in an asylum. The story also alleged that she then “left her first husband, married two house painters in quick succession, had been in and out of prison and even tried to lure a young girl into prostitution.” Meanwhile, Banker’s Magazine claimed Howe was “short, fat, very ugly, and so illiterate as to be unable to write an English sentence, or to speak without making shameful blunders.”

Of course, none of this was true, and was never confirmed by historians. As Robb writes in his paper on Howe, “She had to be ugly, vulgar and immoral.” The only way people could process what she did, he says, is if they made her into a monster far worse than she actually was, something we’re still doing to female criminals today (see press coverage of Martha Stewart, Jodi Arias or Amanda Knox for proof).

Nevertheless, the slander worked: By the time she was arrested just two weeks after the articles were published, Howe couldn’t even afford the $500 bail. She was tried and convicted not of fraud, weirdly, but of soliciting money under false pretenses (because of the Quaker thing), and spent three years in prison. The moment she got out, though, she was up to her old tricks. She opened a new women’s bank in Boston, and ran the same exact scheme from 1884 to 1886. After being forced to close that one down too, she gave up the game and returned to fortune telling before she died quietly in 1892. In her New York Times obituary, it was said she spent her last three months living in a boarding house, “carefully keeping from those whom she met the knowledge that she was the notorious Mrs. Howe of Woman’s Bank memory.” 

Yet, despite her notoriety, no one calls what she did a “Howe Scheme.” The only reason Ponzi’s version was memorable enough to become a namesake, says Hulsart, is because by 1920 when he pulled it off, the newspapers that covered it had a wider, more national circulation. Howe’s case, by contrast, was only covered locally. 

That, and he was a dude. “Though Howe and Ponzi did the same thing, we don’t want to believe that women are capable of crime, let alone at such an elaborate and large-scale level,” says pink-collar crime historian Kelly Paxton. “Part of the reason Ponzi got the credit was because it’s easier for people to believe that a man orchestrated that kind of scheme. In fact, I can’t think of a single crime that’s named after a female perpetrator, only female victims.” 

Female criminals are overlooked all the time, Paxton continues, bringing up the example of Freda Adler’s 1975 female criminal book Sisters in Crime. “It’s pretty much the most prided resource on female criminality, but she fought for three years to have it published,” Paxton explains. “People didn’t want to hear that women would potentially become criminals, especially back then when they were just becoming part of the workforce. So she got a lot of pushback.” Paxton herself even gets a lot of pushback today when she speaks and writes about women in crime, particularly from other women who feel she’s giving them a bad name by tarnishing their reputation. “They say it’s ‘taking away from women’s advances in society,’” she says. “But as I always say, there’s no honesty chromosome. Never underestimate a woman.”

Robb is more skeptical that there was a sexist element to history’s neglect of Howe, however. He suspects people were running similar schemes long before her or Ponzi (e.g., a German woman named Adele Spitzeder ran a similar fake bank around the same time as Howe). “It’s impossible to know who devised the first one,” he says. “So I don’t think it was so much that Howe’s case was suppressed, but like so much of history, it was probably just forgotten.” 

History has an interesting tendency to “forget” the names of women and their accomplishments — the double helix, nuclear fission and radio guidance (which is the basis for WiFi) are just a few female-made advancements credited to men. But in this case, let’s give credit where credit’s due: Sarah Howe staged the first Ponzi scheme (or should we call it the first Howe scheme?), she did it extraordinarily well and it’s because of her that I’m terrified to invest my money. 

Thanks, I think?