The Trickery of Trust – Trusting William (520%) Miller (Part 2)

Did you miss Part 1? Click here: The Trickery of Trust – Believing in Liars

William "520%" MillerWilliam “520%” Miller

William Franklin Miller began his fraudulent career in 1899, selling shares in his Franklin Syndicate to the young men in his Brooklyn bible studies class.

His role as teacher, combined with the church setting, gave him credibility as an ethical, wise person. His students never doubted his claim to have important market contacts on Wall Street.

Miller called his fictional investment fund the Franklin Syndicate. His receipts carried a picture of U. S. founding father Benjamin Franklin, implying a connection between Miller and the trusted historical figure.

William Miller gave his customers a written guarantee that, “An investment of $10 will get you a profit of 520% a year” and assured clients that investments could be withdrawn at any time, guarantying everyone risk-free profits.

Receipt in William Miller's Franklin Syndicate, bearing photo of Benjamin Franklin
Open copyright (1908). From “True Stories from the District Attorney’s Office” by Arthur Cheney Train.

For anyone who hesitated, watching friends receive $1 each week on a $10 investment provided “proof” that the Franklin Syndicate was a good deal.

Affinity Fraud

This tactic of perpetrating a fraud has come to be known as “Affinity Fraud”. In an article titled Fleecing the flock: The big business of swindling the people who trust youThe Economist describes affinity fraud as referring to

… scams in which the perpetrator uses personal contacts to swindle a specific group, such as a church congregation, a rotary club, a professional circle or an ethnic community. Once the scammer gains their trust, his scam spreads like smallpox. Most affinity frauds are Ponzi schemes, in which money from new investors is used to repay old ones, or is siphoned off by the promoters. (Fleecing the flock | The Economist)

Fleecing the Flock (via The Economist)

In 1899 Miller’s affinity scheme certainly spread like smallpox, leaping from his bible studies class to firemen, police, and Brooklyn shop owners and clerks. People listened to their friends, invested their money, and spread the word.

Out of copyright: New York Times (25 Nov, 1899)
Out of copyright: New York Times (25 Nov, 1899)

The Franklin Syndicate collapsed in November, 1899, leaving investors throughout several U. S. States and parts of Canada with nothing.  Miller’s important Wall Street friends and his stock market investments were fiction.

Miller in jail was sentenced to ten years in jail in May, 1901. Although he insisted that he had only been working as a clerk for a man named Edward Schlessenger, overwhelming evidence pointed to Miller as the architect of the fraud. Schlessenger had joined later, and quickly absconded to Europe with his share of the money when the fraud collapsed. The remainder of the money was believed to be in the hands of Miller’s lawyer.

Authorities believed that Miller’s lawyer, Robert A. Ammon, had hidden some of the fraudulently obtained money, and 6 months after Miller’s conviction, Ammon was charged for knowingly receiving stolen monies.

New York Times (8 Nov 1901)
Out of copyright: New York Times (8 Nov 1901)

But although numerous victims could testify that Miller stole hundreds of thousands of dollars, and the District Attorney had evidence Miller gave his lawyer $30,500 which Ammon deposited in his own bank account, the DA still had a problem.

The DA’s Problem 

Without Miller’s testimony, District Attorney Jerome could not prove that the money Robert A. Ammon deposited was the same money that Miller stole from investors.

Three years after Miller’s sentencing, Robert A. Ammon was still free on bail and believed to be in possession of a significant portion of the stolen money. Miller steadfastly refused to testify against his lawyer, was now sick in prison hospital and possibly dying.

So in 1903 on the eve of Ammon’s trial,  District Attorney Jerome visited Miller in prison in final desperate attempt to get the convicted man’s testimony. The visit is described in Arthur Train’s 1908 memoir, True Stories of Crime from the District Attorney’s Office.

Archival copy, via

He arraigned [Miller] in scathing terms, stating that he was a miserable swindler and thief, who had robbed thousands of poor people of all the money they had in the world, that he showed himself devoid of every spark of decency or repentance by refusing to assist the law in punishing his confederate and assisting his victims in getting back what was left of the money. (Train, Page…

This time, Miller broke down in tears and confessed to District Attorney Jerome,

“I did rob all those poor people, and I am heartily sorry for it. I would gladly die, if by doing so I could pay them back. But I haven’t a single cent of all the money that I stole and the only thing that stands between my wife and baby and starvation is my keeping silence.”

Miller’s Testimony

Out of copyright: New York Times, 11 Jun 1903
Out of copyright: New York Times, 11 Jun 1903

The following day, William Franklin Miller testified to his own part in the fraud. He described how his lawyer sent him to hide in Canada when arrest was imminent. He described the conversation in which Ammon insisted Miller leave his wife and baby behind in Brooklyn, and promised to look after Miller’s family and send them to join Miller shortly.

Miller had confidence in Ammon’s expertise in these matters, and so he agreed with his lawyer’s suggestions. He also agreed when Ammon suggested himself as the best person to keep the Franklin Syndicate’s money out of the hands of the authorities. Before leaving Brooklyn, Miller gave Ammon $180,500 in cash. He then left for Montreal with only $200 in his pocket.

Ironically William 520% Miller, a master of lies himself, had just fallen  victim to another fraudster’s lies. Ammon never sent Miller’s family join him. Instead, he gave Miller’s wife a mere $10 a month and threatened Miller that he would cut his family off entirely if Miller said anything to implicate Ammon.

Ammon Convicted

Ammon was convicted and sentenced to 5 years in prison based on Miller’s testimony. Two years later William Franklin Miller received a pardon for giving evidence against his lawyer and assisting authorities in recovering a significant amount of the defrauded money.

Miller moved away from Brooklyn after his release. He became a grocer and was widely known as “Honest Bill” in the small community where he lived.

Fifteen years later, in 1920, an enterprising reporter located the reformed Miller and asked his opinion of the amazing investment then being offered by a man named Charles (or Carlos) Ponzi.

Miller’s answer?

“I may be rather dense,” said Miller, “but I can’t understand how Ponzi made so much money in so short a time in foreign exchange.” (William “520%” Miller. V G Oltmann, 2014)

Ponzi’s fraudulent international postage coupon investment opportunity was very similar to Miller’s Franklin Syndicate. It’s quote possible that Ponzi got his idea for the scam from reading of Miller’s Franklin Syndicate in the newspapers of the day. Unlike Miller, however, Ponzi continued to commit crimes even after his arrest and conviction.

Trusting William Miller

It’s not surprising that victims trusted William “520%” Miller with their money. Like the 21st century’s Bernard L. Madoff, William F. Miller developed a reputation of reliability, morality, and trustworthiness, sheltering his pre-Ponzi “Ponzi Scheme” behind a web of lies.

Ponzi schemes are a graphic demonstration of the relationship between fraud and trust. The “investments” are fiction. The returns paid to early investors come from new contributions, while the fraudster pockets the remainder of the money.

Investors believe they’re getting rich, and happily provide free “advertising” for the con artist by spreading the word to friends, relatives, and anyone hungry for a better-than-market return.

Investors interpret the money they receive as “evidence” of trustworthiness.

Ponzis are common because they work. They work because the desire for amazing returns motivates victims to believe, to trust, and to invest. But Ponzi schemes are usually easy to avoid once you know this scam’s red flags.

Basically, if it seems too good to be true, it’s probably a scam. Nobody can guarantee outstanding returns at zero risk.

William "520%" MillerIf you’re curious to learn more about William 520% Miller’s famous (in 1899) fraud, check out my book on Miller. I’m fascinated by this historic fraud because it exhibits virtually all the characteristics of a modern Ponzi scheme, except for the technology. Miller’s: the charisma, the team of collaborators who – knowingly or not – roped new investors into flooding to the Franklin Syndicate, the use of affinity groups to spread the word, the widespread refusal of clients to believe they had been defrauded until there could be no more doubt, and the inevitable financial collapse.

One thing sets William Franklin (520%) Miller apart from Charles Ponzi. Miller learned his lesson after being jailed. On his release he became a quiet, reportedly honest grocer. But although Miller reformed after his release from Prison, Charles Ponzi didn’t learn that lesson. He moved from scam to scam despite his propensity for getting caught and serving repeated jail sentences.

If you missed Part 1 of this blog, check out:  The Trickery of Trust – Part 1: Believing in Liars