Henry Vincent Greene made a simple promise to the hard-working men and women who invested their savings with him. He would “put John Smith’s money to work alongside that of John D. Rockefeller’s for our common prosperity.”
And the idea made sense. Why put money in the bank to slowly grow when it could increase by leaps and bounds in the hands of the financier Henry Vincent Greene? But was he a boy wizard of Boston’s State Street financial district or was he more like Charles Ponzi, the great fraud of the age?
Greene was born in 1888 in Lawrence, Mass., to a relatively poor family and received only a grade school education – not uncommon for the times. As an ambitious young man, he left home to move to Roxbury in Boston to take a job as a soda jerk for $12 a week. He jumped from that to the more lucrative profession of selling cosmetics and patent medicines for Armour and Company – the same firm that made Dale Carnegie a household name when he turned his sales techniques into a best-selling book: How to Win Friends and Influence People.
And Greene was cut for the Carnegie mold, as well. What he lacked in education he made up for in personality and gumption. After one failed attempt to start a fence company, he rounded up investors to back his newest idea – a bank.
Greene tried to get a national banking charter, but was rejected. The states of Maine and New Hampshire shot down his requests to set up shop there selling his securities. But he was successful in opening his doors in Massachusetts as the Commercial Finance Company in 1916 at the age of 25.
The idea was sound enough. The business would sell shares to investors, and lend out their money to other businesses. Greene rapidly assembled a team of 2,000 salesmen to call on potential investors – many of them unsophisticated laborers.
He boasted that many of his salesmen were pillars of their communities drawn from the ranks of doctors and ministers who sold the shares with the promise of “bringing the better kind of financial opportunities within the range of the small investor.”
The salesmen would take a healthy commission, along with Greene, and everyone would be happy. He built his empire up to more than $30 million by 1920 and paid healthy dividends. The H.V. Greene Co. became a wonder of State Street, with Henry living in a luxurious home in Weston and a summer place by the shore.
But in 1921, the high flying days of the company came to a crashing halt with the failure of the Massachusetts Motor Co. The company sold cars and financed them for its customers. Americans were car crazy in the 20s, and business boomed.
Greene was the money behind the badly run company, but the first signs of trouble came when Massachusetts Motors didn’t pay for some of the cars it was buying as it sold them. A closer look at the books showed that the company’s loose credit policies had allowed it to sell cars to far too many people who couldn’t afford them. Greene pledged more money to prop up the enterprise, but his pockets weren’t deep enough.
The Massachusetts Motor Co. went into bankruptcy. Soon, the Boston Legal Aid Society and attorney general began receiving complaints from H.V. Greene investors who weren’t receiving dividends.
Greene had been targeted by complaints in the past and had always silenced his detractors – who likened him to Ponzi – by making good on any requests for refunds or repayment. This time was different. He couldn’t make good and was sued for more than $14 million. His company was forced into receivership to prevent Greene and his partners from looting it further.
The state charged him with deliberate fraud, and the newspapers had a field day picking over the rise and fall of the soda jerk turned millionaire banker. As Greene’s empire worked through bankruptcy, the details were as depressing as they were familiar. He had used new investor money to pay dividends to old investors that weren’t supported by new business but were designed to spread the word that H.V. Greene was a booming investment.
When he couldn’t produce new investors, the money simply ran out. A special master concluded in 1924 that Greene personally did not defraud people, but the company deliberately overstated its value and it owed millions to its customers.
Greene vehemently denied the charges that he was another Charles Ponzi, but in 1926 he finally put the case to rest by pleading no contest to two fraud charges and paid a fine of $2,500. The rest of the charges against him were filed without finding. The government gave up its case when its chief witness would not swear that Greene had personally reviewed the printed advertising materials that were used to dupe investors. All he could say was that the marketing materials were brought to Greene’s office for approval and returned to the printer – but he did not see Greene actually look at them.