The Ladies' Deposit: The 19th-Century Ponzi Scheme by Women, for Women

Hulton Archive/Getty Images
Hulton Archive/Getty Images

Sarah Howe never disclosed the methods by which she did business. After establishing the Ladies' Deposit Company in an unassuming brick building in Boston's South End around 1879, the former fortuneteller refused to solicit clients for her brand-new bank. There was no advertising, and no public announcement. Instead, members could only be referred by other members in good standing. They had to be single women, not rich, who didn't own their own homes. Deposits could only be made in amounts of more than $200 but less than $1000, and returns were set at 8 percent interest per month—an incredible amount then as well as today [PDF].

Despite the lack of advertising, word of the Ladies' Deposit Company traveled quickly among Boston's working-class women. Howe's selectiveness endeared her to potential clients, as did the fact that she presented herself as a maternal figure at a time when gender stereotypes and predatory practices often left women and their money at the mercy of men. She even invited her select few depositors to sit with her, offering small talk and compliments. The experience seemed, as one woman put it, "sympathetic."

For the single women of Massachusetts, Howe appeared to be offering a remarkable opportunity to grow their nest eggs in a female-friendly environment. But the Ladies' Deposit was far from what it appeared to be.

A CHARITABLE INSTITUTION

The Ladies' Deposit Company had not been operating for long when its exclusive nature—and its amazing returns—captured the curiosity of local newspapers. One Boston Herald investigator who tried to ask some questions at the bank was rebuffed, so in January 1880, he disguised himself as a woman and successfully got inside. His article reprinted a notice pasted inside each Ladies' Deposit-issued bankbook, which described the establishment as a "charitable institution for single ladies, old and young." When the reporter asked how their interest rates were possible, a clerk had replied, "We never disclose the methods by which we do business."

The answers to further questions were similarly unilluminating. A follow-up article in the Herald included an interview with Howe herself, who described the bank as a "Quaker Aid Society" that had first been formed in Alexandria, Virginia. She coyly claimed that she couldn't provide any further details without angering her superiors.

The more reporters mocked and prodded the Ladies' Deposit, the more business poured in. At the height of the operation's popularity, Howe was serving an estimated 1200 women from Boston and beyond—Buffalo, Chicago, Pittsburgh, Baltimore, and Washington. She bought a luxurious home worth $40,000 on Franklin Square, which she paid for in rubber-banded bundles of cash and furnished with thousands of dollars' worth of exotic plants and other decorations.

But although business was booming, it was the beginning of the end for Howe.

On September 25, 1880, the Boston Daily Advertiser ran the first in a series of articles that reignited the controversy around the Ladies' Deposit. Under the title "A Mysterious Bank," the piece detailed the "fabulous rates of interest" offered to "unprotected females," explaining that "the mystery which surrounds and attaches to [the bank] has never been fully dispelled." While the writer wasn't able to solve the mystery of the amazing interest rates themselves, they noted that no one had yet complained about losing even a dollar, which made it difficult to probe much further: "Whatever there may be that is suspicious, nothing unlawful is disclosed, and no depositor comes forward to say that she has been unjustly dealt with."

But the Advertiser's articles were enough to set tongues wagging. Soon, experts wrote in predicting a crash and theorizing that Howe could only afford to pay out her customers with the deposits of other women, a well that would soon run dry. No one used the phrase "Ponzi scheme"—this was 40 years before Charles Ponzi would garner attention for his frauds—but the Advertiser's series, printed over several weeks, proved to be key in turning opinion against the Ladies' Deposit.

As more investors who read the articles became suspicious, they demanded to withdraw their funds. At the end of that September, there was a week-long run on the bank. For a while, Howe was able to sustain the withdrawals, but she soon tried to suspend payments. In response, the Advertiser published an article interviewing seven prominent lawyers, who all said she was liable to pay her depositors' principal without delay. Not long after, as The Atlantic put it, "a storm of legal process burst upon her."

Howe was arrested upon order of the district attorney on October 16, 1880, with her bail set at $20,000. In court, she was tried on five counts of "cheating by false pretenses" by five former depositors. The nail in the coffin was Howe's claim that a Quaker fund backed the Ladies' Deposit. It became apparent during the Advertiser's investigation and her subsequent court hearing that there was no such fund, and that Howe had no connections with any Quaker organization. "She had no more hold upon the Quakers than she had upon the Pope," The Atlantic wrote.

On April 25, 1881, Howe was sentenced to three years in jail on four counts of cheating by false pretenses. Later that November, she would also be involuntarily declared insolvent after trying to pay back depositors.

A RESILIENT CHEAT

Howe didn't learn any lessons from her experience with the Ladies' Deposit. Upon her release from jail in 1884, she set up a new enterprise, the Woman's Bank, in elegant apartments on Concord Street. The operation again targeted women, but offered a more humble 7 percent interest, as opposed to the Deposit’s 8 percent returns.

The Woman's Bank operated successfully for two years, until in April 1887, one woman from Maine called to retrieve her investment and found she couldn't. Howe soon absconded with an estimated $50,000 in deposits.

Next, she tried a similar scheme in Chicago. Her "Ladies Provident Aid" operated in a familiar manner, promising 7 percent interest a month, with three month's interest offered in advance. Local reporters quickly exposed Howe yet again—proving just how notorious she had become.

Forced to flee once more, Howe made her way back to Boston, where she was arrested in 1888 on an outstanding warrant. By this point, the women preyed upon by Howe received little sympathy at all. "It is plain that Mrs. Howe's methods of business would not have inveigled men," The New York Times wrote. "Men, even when they become victims of the sawdust swindlers, require to see how the tempter can find his account in the offer he makes them." The article neglected to mention that a number of men, seeing an opportunity for quick cash, had enlisted female relatives to invest in the Ladies' Deposit for them.

Howe maintained her penchant for duplicity until the end of her life. After being released from prison for the final time in 1889, she returned to her former profession of fortunetelling, charging 25 cents a reading. She died in 1892 at the age of 65, penniless and alone, but insisted until the day she died that she had not been responsible for the Ladies' Deposit. "It was not I," she said. "I did no swindling."

How Did 6 Feet Become the Standard Grave Depth?

iStock
iStock

It all started with the plague: The origins of “six feet under” come from a 1665 outbreak in England. As the disease swept the country, the mayor of London literally laid down the law about how to deal with the bodies to avoid further infections. Among his specifications—made in “Orders Conceived and Published by the Lord Mayor and Aldermen of the City of London, Concerning the Infection of the Plague”—was that “all the graves shall be at least six feet deep.”

The law eventually fell out of favor both in England and its colonies. Modern American burial laws vary from state to state, though many states simply require a minimum of 18 inches of soil on top of the casket or burial vault (or two feet of soil if the body is not enclosed in anything). Given an 18-inch dirt buffer and the height of the average casket (which appears to be approximately 30 inches), a grave as shallow as four feet would be fine.

A typical modern burial involves a body pumped full of chemical preservatives sealed inside a sturdy metal casket, which is itself sealed inside a steel or cement burial vault. It’s less of a hospitable environment for microbes than the grave used to be. For untypical burials, though—where the body isn’t embalmed, a vault isn’t used, or the casket is wood instead of metal or is foregone entirely—even these less strict burial standards provide a measure of safety and comfort. Without any protection, and subjected to a few years of soil erosion, the bones of the dearly departed could inconveniently and unexpectedly surface or get too close to the living, scaring people and acting as disease vectors. The minimum depth helps keep the dead down where they belong.

Have you got a Big Question you'd like us to answer? If so, let us know by emailing us at bigquestions@mentalfloss.com.

This article originally appeared in 2012.

11 Famous People Who Once Had Paper Routes

fillyfolly, iStock
fillyfolly, iStock

As publications evolve, so do their methods of distribution. Between the rise of suburbs and the fall of afternoon daily newspapers, many countries teemed with youthful paperboys and papergirls. But thanks to shifting trends, most print media deliverers are now adults. This year, October 13 is International Newspaper Carrier Day, and we're taking a look at some of the most influential people who’ve ever worked a paper route, including a vice president, an astronaut, a supermodel, and the star of Risky Business. "Read all about 'em!"

1. WALT DISNEY

American animator and producer Walt Disney in 1946.
Keystone, Getty Images

"When I was 9, my brother Roy and I were already businessmen," Walt Disney reminisced of his childhood. In July 1911, their father, Elias, acquired a sizable newspaper delivery route from the Kansas City Star. Although this route officially belonged to Roy, Elias took charge of its operation. Together, Walt, Roy, and Elias Disney were responsible for delivering the Star's afternoon and Sunday editions to over 600 customers. And that was only part of the Disney trio's workload: Every morning, they'd dole out around 700 copies of the Kansas City Times.

Disney kept distributing KC newspapers until he was 15 years old. To hit all the houses on his itinerary before school started, the animator-to-be would wake up at 3:30 a.m. and usually work until 6 a.m. He'd then retrace his steps after classes ended. "During the winter months," Disney noted, "it was always dark and bitter cold [in the morning] … many times, I had to plow through three feet of freshly fallen snow, breaking my own path as I went.”

2. MARTIN LUTHER KING, JR.

Martin Luther King, Jr talking with someone.
Reg Lancaster, Daily Express/Hulton Archive/Getty Images

Growing up, King earned spending money by working as a paperboy for the Atlanta Journal-Constitution. He landed the gig with some help from his father and frequently used his newspaper funds to purchase books. At age 13, the future Civil Rights hero became the youngest person to assistant manage one of the AJC's delivery stations. Four years later, King—then a sophomore—wrote a passionate letter to the editor of the same publication condemning the historic mistreatment of African Americans. His father would subsequently write that he had "no intimation of [King, Jr.'s] developing greatness" until the publication of said letter, "which received widespread and favorable comment."

3. JOE BIDEN

Joe Biden giving a speech.
Frederick M. Brown, Getty Images

America's 47th vice president used a childhood paper route to hone his people skills—and work on his speech mechanics. Biden had a noticeable stutter as a boy (some classmates in a prep school Latin course took to calling him "Joe Impedimenta"). In 1955, his family relocated to Mayfield, Delaware, and Biden got himself a paper route shortly thereafter. The job presented him with a lingual challenge at first. "I lived in dread of Saturday mornings when I had to go collect [money] from people I was just getting to know," Biden has said. To make small talk with his assigned subscribers go smoothly, young Biden "learned to anticipate the conversation to come." Then he'd rehearse some sentences that might prove useful in the discussion.

"My next-door neighbor was a big Yankees fan, and I'd always check the Yankee box score, because I knew he'd ask, and I knew I'd have to say something [about the team] without making a fool of myself," Biden recalled in his autobiography. "I had played out the entire conversation before he opened his front door."

4. EARL "THE PEARL" MONROE

Former professional basketball player Earl 'The Pearl' Monroe in 2015.
Mike Coppola, Getty Images

Inducted into the Naismith Memorial Basketball Hall of Fame in 1990, Monroe was a prolific scorer who spent 13 seasons in the NBA and helped the New York Knicks win their most recent world championship in 1973. (His number, 15, has been retired by the team and now hangs in the rafters at Madison Square Garden.) A native Philadelphian, Monroe entered the newspaper carrier game with some parental help. "In junior high, I had a paper route that my mother [Rose] and I built up until it was profitable," wrote Monroe in his autobiography. On deliveries, the teen would often be accompanied by his mom. "[She] did everything to help me when I was growing up," Monroe said. "She really didn't want me being out there by myself."

5. KATHY IRELAND

Model Kathy Ireland at a fashion show in 2018.
Astrid Stawiarz, Getty Images for AHA

Kathy Ireland was one of the most recognizable supermodels of the 1980s, posing for Sports Illustrated on several occasions before launching what turned into a global licensing company valued at $2 billion. Her success in the business world was foreshadowed by a historic newspaper-delivering stint. Ireland was raised in Santa Barbara, California, where—at age 4—she used to sell hand-painted rocks. When she was about 10, an advertisement calling for new paperboys appeared in one of the local newspapers. "Are you the boy for the job?" it asked. Young Ireland responded by writing a pointed letter to the editor. "No, I'm not the boy for the job, I'm the girl for the job, and I can do it just as well as any boy," she declared. "I think I deserve a chance." And she got one: Ireland became Santa Barbara's first-ever papergirl. By the time she retired from that gig, the budding mogul had made 120,000 newspaper deliveries and was voted her district's carrier of the year for three consecutive years.

6. ALAN BEAN

Former astronaut Alan Bean signs his photo in 2006.
David Livingston, Getty Images

As the lunar module pilot of NASA's Apollo 12 mission, the late Alan Bean became the fourth person to walk on the moon in 1969. He also spent 59 days orbiting Earth during a 1973 Skylab excursion and had a celebrated artistic career as well. A Texan by birth, Bean spent much of his youth delivering papers for his hometown Fort Worth Star-Telegram. "My first route was in the early mornings," Bean recalled. "Every day was the same. I pulled myself out of my warm bed and pedaled up and down the dark streets on my bicycle, loaded with folded-up newspapers. It was a lonely job, too—it seemed as if there were no one else in the whole world." Poignant words coming from an astronaut …

7. BOB HOPE

Bob Hope playing golf in England, circa 1965.
Keystone, Hulton Archive/Getty Images

Long before he became synonymous with Hollywood road comedies, Leslie Townes "Bob" Hope was helping to support his family as a Cleveland paperboy. He later returned to the job while struggling to break into the entertainment industry. "At 8, I had a paper route. At 12, I worked in my brother's butcher shop. At 18, I was out on the road singing and dancing and at 19, I was back on my paper route," Hope wryly noted.

Selling newspapers from street corners was another revenue stream for the aspiring performer. While working at his stand on 102nd Street in Cleveland, Hope managed to brush shoulders with the highest of high-rollers. "I had one regular customer whose name I didn't know; all I knew was that he snapped his face open and shut like a wrinkled old coin purse," explained the comedian. One day, the mystery patron needed change for a dime, so Hope ran across the street to procure some pennies from a local department store. According to Hope, "When I came back, my customer said, 'Young man, I’m going to give you some advice. If you want to succeed in business, trust nobody. Never give credit and always keep the change on hand. That way, you won't miss any customers while you're going for it."

A few moments later, a passing inspector came up to the stand and asked, "Do you know who that man was?" "No," replied Hope. "He's only the richest man in the world,'" announced the inspector. "That's John D. Rockefeller, Senior."

8. JAMES A. MICHENER

James Michener wearing a flower necklace.
Wikimedia Commons // Public Domain

The author of over 40 books which together sold upwards of 75 million copies, Michener is best remembered for Tales of the South Pacific. Inspired by his service in the United States Navy, the novel won the 1948 Pulitzer Prize and was later adapted into the popular Rodgers and Hammerstein musical South Pacific. But long before his travels, a young Michener was an enthusiastic paperboy from seventh through twelfth grade. Working in his childhood home of Doylestown, Pennsylvania, Michener distributed various Philadelphia-based newspapers along five different routes. "I can still remember the residents of certain entire streets that I had served the longest," he wrote in 1992. "My paper routes gave me an insight into the complexity of life in a small town that not many boys acquired."

9. TOM CRUISE

Tom Cruise leaning against a wall.
Carlo Allegri, Getty Images

Raised in a less-than-affluent household, Cruise turned to newspaper-carrying as a means of picking up extra cash. (He also raked lawns and put in some time at an ice cream parlor.) "When I was 13," the actor told Sports Illustrated, "I had a paper route and paid $50 for my first go-cart, $75 for my first motorcycle." To help meet his delivery schedule, Cruise enlisted the aid of his younger sister, Cass. "I always told her I'd pay her back. I bought her a car after Risky Business."

10. WARREN BUFFETT

Warren Buffett giving a talk.
Paul Morigi, Getty Images for Fortune/Time Inc

He's the third-richest man in the world, with an estimated net worth of $91.5 billion, and Buffett's remarkable investment acumen has earned the Nebraskan the nickname "Oracle of Omaha." But the self-made billionaire got his start distributing newspapers on behalf of the Washington Post and other publications. "You had to deliver [them] every day, including Christmas Day," Buffett has said, adding that on Christmas morning, his "family would have to wait until I had done my paper route" before the festivities could start. At age 14, Buffett filed his first tax return, which reported that in 1944 he'd earned the equivalent of $8221 in modern U.S. dollars. And, given the nature of his job, the youngster knew he was able to write off the cost of his watch and various bicycle repairs as business expenses.

11. DAVID LYNCH

David Lynch seated in a large yellow chair.
TIZIANA FABI, AFP/Getty Images

Auteur director David Lynch was so low on personal funds during the production of Eraserhead (1977) that he needed a couple of side hustles to make ends meet. In addition to working a part-time plumbing job, Lynch delivered copies of The Wall Street Journal. "I built three sheds in my back yard during that period," he claims. "They were made out of wood I found on my paper route. My route took me through two different trash areas. On trash nights, my route would take two hours instead of one because I stopped and sorted through the garbage." Hey, everyone needs a hobby.

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