The No. 1 Ladies’ Defrauding Agency

Rose Eveleth | Longreads | July 2019 | 12 minutes (2,883 words)

Sarah Howe’s early life is mostly a mystery. There are no surviving photographs or sketches of her, so it’s impossible to know what she looked like. She may, at one point, have been married, but by 1877 she was single and working as a fortune-teller in Boston. It was a time of boom and invention in the United States. The country was rebuilding after the Civil War, industrial development was starting to take off, and immigration and urbanization were both increasing steadily. Money was flowing freely (to white people anyway), and men and women alike were putting that money into the nation’s burgeoning banks. In 1876, Alexander Graham Bell invented the telephone, and in 1879 Thomas Edison created the lightbulb. In between those innovations, Sarah Howe opened the Ladies’ Deposit Company, a bank run by women, for women. 

The company’s mission was simple: help white women gain access to the booming world of banking. The bank only accepted deposits from so-called “unprotected females,” women who did not have a husband or guardian handling their money. These women were largely overlooked by banks who saw them — and their smaller pots of money — as a waste of time. In return for their investment, Howe promised incredible results: an 8 percent interest rate. Deposit $100 now, and she promised an additional $96 back by the end of the year. And to sweeten the deal, new depositors got their first three months interest in advance. When skeptics expressed doubts that Howe could really guarantee such high returns, she offered an explanation: The Ladies’ Deposit Company was no ordinary bank, but instead was a charity for women, bankrolled by Quaker philanthropists. 

Word of the bank spread quickly among single women — housekeepers, schoolteachers, widows. Howe, often dressed in the finest clothes, enticed ladies to join, and encouraged them to spread the news among their friends and family. This word-of-mouth marketing strategy worked, Howe’s bank gathered investments from across the country in a time before easy long-distance communication. Money came in from Buffalo, Chicago, Baltimore, Pittsburgh, and Washington, all without Howe taking out a single newspaper advertisement. She opened a branch of the bank in New Bedford, Massachusetts, and had plans to add offices in Philadelphia and New York to keep up with the demand. Many of the women who deposited with the Ladies’ Deposit Company reinvested their profits back in the bank, putting their faith, and entire life savings, in Howe’s enterprise. All told, the Ladies Deposit would gather at least $250,000 from 800 women — although historians think far more women were involved. Some estimate that Howe collected more like $500,000, the equivalent of about $13 million today. 

It didn’t take long for the press to notice a woman encroaching on a man’s space. And not just any woman, a single woman who had once been a fortune-teller! “Who can believe for a moment that this woman, who a few years ago was picking up a living by clairvoyance and fortune-telling, is now the almoner of one of the greatest charities in the country?” asked the Boston Daily Advertiser. Reporters were particularly put off by their inability to access even the lobby of Howe’s bank, turned away at the door for being men. One particularly intrepid reporter, determined to find out what Howe’s secret was, returned dressed as a woman to gain entry and more information. 

Then, in 1880, it all came crashing down. On September 25, 1880, the Boston Daily Advertiser began a series of stories that exposed Howe’s bank as a fraud. Her 8 percent returns were too good to be true. Howe was operating what we now know as a Ponzi scheme — 40 years before Ponzi would try his hand at it. 

Here’s how it worked: When a new depositor arrived, Howe would use their money to pay out older clients, so the whole scheme required a constant influx of new depositors to pay out the old ones. Like every other Ponzi fraudster, Howe’s bank would have eventually run out of new money. The run of stories in the Boston Daily Advertiser instilled enough fear in the bank’s investors that they began to withdraw their money, and eventually there was a run on Howe’s bank. 

Sarah Howe was the most unfathomable and outrageous character: a woman villain.

It took two weeks and five days from the first story published in the Advertiser uncovering Howe’s fraud before she was arrested. The press extended her victims a modicum of sympathy, describing their plights while also reminding the reader that they deserved their pain for trusting a woman with their money. “I put every dollar I had into the bank, and if I lose it I am a beggar,” one depositor told the Boston Globe at the time. “I wanted the interest so badly, that I placed a mortgage on my furniture to secure the principal to deposit. Oh! I wish I hadn’t now, for I shall have my goods sold from under my head,” said another. 

Howe, on the other hand, was spared no remorse. The Boston Herald claimed that Howe was “nearly as deaf as a post” and cross-eyed. Banker’s Magazine described Howe as “short, fat, very ugly, and so illiterate as to be unable to write an English sentence, or to speak without making shameful blunders.” This is all untrue, as Howe’s own statements to the press before her downfall suggest that, in fact, she had a sharp wit. In response to one newspaper’s critique of the Ladies’ Deposit Bank, Howe wrote: “The fact is, my dear man, you really know nothing of the basis, means or methods on which our affairs are conducted, and when shut up in the meshes of your savings-bank notions, you attempt an exposition of the impossibility of our existence, you boggle and flounder about like a bat in a fly trap.” 

 Nevertheless, as soon as she was caught, a backstory for Howe emerged in the papers. The Boston Herald published a story with the headline “Mrs. Howe’s Unsavory Record,” claiming 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.” The paper claimed the marriage caused her mother such distress that she wound up dying in an asylum “raving over the heartlessness of her daughter.” 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. Basically none of this can be confirmed by historians, but it didn’t matter. Sarah Howe was the most unfathomable and outrageous character: a woman villain. As historian George Robb writes in his paper about Sarah Howe, “She had to be ugly, vulgar and immoral.” The only way her story could make sense to readers was if Howe was some kind of abomination — a complete outlier both physically and mentally.  

 “I’m sure she was just a normal-looking person,” Robb told me. “Until the whole thing unraveled, when people talked about her, no one described her as anything other than an ordinary person.” But in Victorian-era Boston, the idea that a woman criminal could be an “ordinary person” was impossible. “People were comfortable with the idea of women as victims,” Robb told me. “The men were the crooks, the men were doing the manipulation. The women were the victims. They needed to be protected by other men.” 

Howe wound up standing trial in Boston, and was ultimately convicted (although not of fraud, but soliciting money under false pretenses — for claiming that a Quaker charity was backing the venture). She spent three years in prison, and when she got out, in classic scammer fashion, she tried the whole thing again.

“I think there’s a similarity between being a fortune-teller and making money on the stock market, making predictions about the future”

Next, Howe opened up a new Woman’s Bank on West Concord Street in Boston. She kept the scheme going from 1884 to 1886, offering depositors 7 percent interest and gathering at least $50,000, although historians think the number might be far higher. This time, however, Howe was never prosecuted. After being caught and closing down her bank, she gave up the game and returned to fortune-telling and doing astrology readings for 25 cents each. She died in 1892, at the age of 65, no longer wealthy, but still notorious enough to warrant an obituary in the New York Times that read: “For three months she had been living in a boarding and lodging house, carefully keeping from those whom she met the knowledge that she was the notorious Mrs. Howe of Woman’s Bank memory.” 

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Sarah Howe was, in some ways, a product of her time. In the late 1800s, the United States was moving out of a period marked by “free banks,” in which there were very limited rules governing banks, and into a system of national banking more familiar to us today. Money was flowing into the economy, and financial advisers were telling their clients to put their cash in banks that were now more stable than they had been in the past. This advice was often targeted at women, who couldn’t use their money to, say, start their own endeavors. But they could put their money in stocks and banks, and many of them did. In fact, during that time, women were often the majority of depositors and shareholders.

But there were very few regulations on banks. The stock market was relatively new. For women like Howe, it presented an unregulated place where money was changing hands purely on the basis of confidence. And as a fortune-teller, Howe had plenty. “I think there’s a similarity between being a fortune-teller and making money on the stock market, making predictions about the future, and getting people to believe that you know something about how the trends are going to play,” Robb said. 

At the time there was little fear when it came to watchdogs or regulators. Howe could start her own bank with no real procedure or oversight. “Anybody could form a bank!” Robb said, “If you could get people to give you money you could call it a bank. You advertise, you rent a fancy office space, people come and give you money. It was amazing how much money you could make before anybody caught you.” As much as people love to point fingers at Howe, very rarely do people consider the complete lack of oversight that allowed her to prey upon these women. “It’s so much easier to pick individual villains and say, ‘Oh it’s these nasty scheming people who are the problem, the capitalist system can do no wrong, it’s perfect and self-regulating and we don’t want to mess with that. It’s these individual crooks that are the problem.’” 

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In spite of her crimes, Sarah Howe is not a household name. It’s not called a Howe scheme after all, it’s a Ponzi scheme. When Howe is mentioned at all, it’s as a punchline. She’s forever stuck as a historical fun fact. “She’s become an anecdote in history, but she should be as famous or more famous than Ponzi,” historian Robyn Hulsart told me. “There’s nothing about what she did that doesn’t fit the definition of a Ponzi scheme.” (In fact, Howe wasn’t even the first to execute this type of scam. At least two other women pulled off Ponzi schemes before her — one in Berlin, the other in Madrid.) 

It’s become popular now to say that we’re living through the golden era of the scammer. “We’re living in a scammer’s paradise,” Sarah Jeong told Willamette Week recently about our current era, “not just economic scams, but intellectual scams, too.” Elizabeth Holmes, Anna Delvey, Fyre Fest, Ailey O’Toole, Jennifer Lee, Anna March — the list is long enough that everybody from WIRED to The Cut called 2018 “the year of the scam.” As the United States recovers from the fraud that was that housing market bubble, we’re in another era of deregulation. President Donald Trump and the Republican run Senate, have gone on what has been called a “deregulation spree,” increasing the cap at which banks become subject to more stringent rules from $50 billion in assets to $250 billion. Robb pointed out that we never seem to actually learn. “Whenever there’s a big boom cycle in the economy everybody screams to deregulate,” he told me, and with deregulation comes increased risk for frauds like Howe’s. 

Howe’s case also demonstrates a struggle in feminist circles that persists today: How do you balance the desire to celebrate women with the need to hold bad behavior accountable?

Howe’s legacy could and should be one that we can learn from today in the so-called era of the scam. Howe’s success was one that tells us something not just about fraud, but about economics and the conditions under which fraud can blossom into a $17 million scam. Howe was aided and abetted by the economic conditions, but she was also a wizard at her craft. What Howe mastered, beyond the Ponzi scheme, is what experts call an “affinity fraud” — going after a group of people who have something in common, and most often who the scammer has something in common with too. As an “unprotected” woman herself, Howe understood what might appeal to her clientele. She decorated the bank to create a mood and aesthetic that would appeal to her ideal mark. The Advertiser described the Ladies’ Deposit Bank this way: “The furniture, of which there are many pieces, is upholstered in raw silk of old gold figured patterns, and corresponds in tone and design with the walls. … The carpets are of a deep warm tone, and all the ornaments are rich and in good taste.” She used language that drew women in, talking about her commitment to the “overworked, ill-paid sisterhood.” Hulsart points out that it’s not unlike the language used by multilevel marketing companies like Mary Kay and Amway, which generally advertise to women through  word of mouth. “They really like to say things like ‘we’re in this together,” Hulsart says. 

Howe was so good at luring in these women that the New York Times wrote that her “intimate knowledge of the mental workings of her own sex puts male swindlers and male novelists to shame.” The same could be said of Anna Delvey, the woman who pretended to be an heiress to get access to fancy parties and accommodations, and who largely preyed upon women hotel staff and assistants to get at her wealthy marks. Or of Anna March, an L.A. literary grifter who mostly targeted women writers, promising she could help get them book deals and further their careers. “These are people who set up shop in a marginalized community and are exploiting the very real vulnerabilities of that community to make themselves more powerful and make themselves money at the expense of people who are more marginalized than them,” says Lux Alptraum, the author of Faking It. 

Howe’s case also demonstrates a struggle in feminist circles that persists today: How do you balance the desire to celebrate women with the need to hold bad behavior accountable? “There’s a strain of capitalist feminism that argues that the way that women succeed is by doing what men has always done,” said Alptraum. “And if a woman is doing a Donald Trump–esque scam it’s somewhat feminist because she’s a woman.” Even Howe received a bit of this treatment in her day. The feminist writer Gail Hamilton came to Howe’s defense, writing a letter to the Advertiser arguing that the “novel of houses and husbands, jails and lunatic asylums” that they had written about Howe were sexist bunk. Hamilton wasn’t wrong of course, the writing on Howe was indeed sexist, but she struggled between defending Howe from sexist attacks and defending her behavior. The same could be said for some of the writers who covered the tribulations of Elizabeth Holmes. 

Kelly Paxton, an expert on so-called “pink-collar crime,” told me that every time she gives a talk on the crimes that women are more likely to commit, she gets pushback. “It’s generally women who don’t like it,” she says. “They think I’m picking on women” when men commit the majority of the fraud. Paxton says that at the end of a talk she gave recently, a woman stood up and pointedly asked her: “So you’re telling me I shouldn’t hire women.” This wasn’t Paxton’s point at all, but everywhere she goes, she faces a similar question. 

According to Paxton, just like in Howe’s day, embezzlement and financial fraud are rarely reported because the victims are embarrassed. And they’re particularly embarrassed when they’ve been conned by a woman, because, in spite of so much evidence to the contrary, people still don’t think of women as capable of large-scale fraud. In our collective memory of financial fraud, it’s Charles Ponzi and Bernie Madoff who come to mind, not Sarah Howe. It’s the Oceans 8 gambit brought to life — nobody expects a lady thief. 

Paxton jokes in her presentations that she can’t wait for there to be a “Bernice Madoff,” because then finally maybe people will consider women capable of financial fraud and protect themselves accordingly. But she also points out that we have a long way to go when it comes to equity in the scamming space. “They just came out with an estimate that women will get pay equity in 2070. If you go on that, we’re not going to reach thief equity until the 2100s.” 

Rose Eveleth is a writer and producer who explores how humans tangle with science and technology. She’s the creator and host Flash Forward, a podcast about possible (and not so possible) futures, and has covered everything from fake tumbleweed farms to million dollar baccarat heists.

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Editor: Kelly Stout
Fact checker: Ethan Chiel
Copy editor: Jacob Gross