Crash of the Felipetas

Back in the '20s, soon after Charles ("Get-Rich-Quick") Ponzi went broke Offering Bostonians "double your money" in six months, Moran & Mack, the "Two Black Crows" of vaudeville and radio, told a story about raising pigs on their farm. The pigs cost $4 apiece and were fattened for the market, but brought only $4 when sold.

"Why, you can't make money that way," Moran would say, shocked.

"Ya-as," Mack would sigh, "we found that out."

Last week a Brazilian air force lieutenant named Luiz Felipe Albuquerque Jr., 30, also found out. Having lifted some $35 million from Brazilians in a fantastic borrow-from-Peter-to-pay-Paul scheme (and thereby out-Ponziing Ponzi, whose operations never topped $15 million), Albuquerque found that he had gone broke. On the front page of his newspaper Diario do Rio, he printed a shattering notice: "On this date, for unforeseen reasons I am closing my commercial activities . . . Those who intuitively saw that my business would fail were right . . . I shall not run away . . . My creditors will be paid . . . Remain calm, my friends . . ."

To Help Humanity. Albuquerque's friends and creditors had fallen for a scheme of classic simplicity. Starting two years ago, he offered to buy fellow officers' cars for 30% more than their value, and pay off in five months. Then he turned the cars into ready cash to invest in any likely venture (except the liquor and cigarette businesses and outright gambling; these were taboo, he said, under the Baptist principles he had been converted to while in flight training at Texas' Randolph Field in 1944). "I want to help humanity," he said. "Brazil is a country with very little money. With $500 you can't do much. But with $5,000 you can do a lot, and with $50,000 almost anything."

All he had to do was keep on borrowing more and faster than his first debts fell due. As month after month he paid off on his lOUs, air force officers in droves sold their cars for his notes, which were soon known at all air bases as felipetas. When the Air Ministry heard of his dealings and called him in, the lieutenant explained himself so convincingly that the big brass offered to sell him their cars. But he was advised to switch to a reserve commission and give all his time to business.

Out of uniform, Albuquerque did even better. He had a four-room suite of offices in Rio, and branches in three other cities; he bought a newspaper, formed an export-import firm, owned a fleet of 66 taxicabs and four taxi planes, launched a trucking business and bought a partnership in an established car-selling agency. Hourly his 22 messengers dashed out to pay off felipetas. Albuquerque declared that his greatest desire was "to put a copy of the New Testament in the hand and heart of every Brazilian."

To Pay Back Creditors. But Albuquerque could not keep paying what amounted to 72% annual interest (at 30% for every five months). He made a couple of fancy killings importing machinery from the U.S. and olive trees from Portugal. He took to trading in diamonds, speculating in real estate. Toward the end, he began hinting he had a "big backer" who could always find millions for him. Yet the crackup, when it came, caught Rio by surprise. Felipetas in hand, creditors rushed frantically to Albuquerque's Rua Mexico headquarters. Officers, janitors, housewives, merchants swarmed into the empty offices.

Creditors started unloading their felipetas. Then word got around that Albuquerque's agents were in the market buying up notes at 10% of face value. One newspaper estimated that in the first day they bought back $5,000,000 worth. From hiding, where he was reportedly reading his New Testament and praying that he might be spared to serve humanity, the lieutenant sent word through his newspaper that "I am on the eve of announcing my plan to pay back my creditors."

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