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Sunday, July 31, 2011

THE SECRET LIFE OF CAPITALISM Part Five

I believe it was pure luck that Philip Arnold and John Slack, the co-conspirators in the Great Diamond Hoax, had arrived in Amsterdam at just the right moment in history. The supply of new uncut diamonds from India had slowly dried up begining after 1800, and output from the newer Brazilian mines had shrunk by 1860 to a mere 5,000 carats a year. But beginning in about 1867, the influx of 20,000 carats a year from South Africa had revived the market. By 1870, along Tulpstraat (Tulip Street) there were seventy companies employing some 12,000 people in the grading, polishing and cutting of diamonds from South Africa. There was so many diamonds about, that after grading, most of the lesser quality stones were sold at a discount in lots to the lesser talented cutters in Antwerp, Belgium and London, England. And it was at just at this propitious moment, in the fall of 1870, that the two Kentucky con men made their entrance upon the stage.
If you are going to create a diamond mine, the first thing you need are diamonds. Most of the Dutch dealers read the Kentuckians as stereotypical 'nouveaux riches' Americans with more money than taste. And by carefully picking through the stockpiles of discarded stones from dozens of different companies, Arnold and Slack were able to turn their carefully hoarded $25,000 life savings into enough rocks to impersonate a diamond mine - if no one who looked at them had any experience with diamonds in the  rough. And that was unlikely as the industry was almost completely operated by insular ultra conservative Hasidic Jews – another lucky break for Arnold and Slack. But, as insurance, the Americans picked up a few hundred trash-heaped sapphires as well.  Having completed their shopping trip, Arnold and Slack sailed for Halifax, Canada. By avoiding American ports they greatly reduced their chances of meeting anyone who might know them, now or in the future.
We know that the pair had worked mines in Arizona, and that Philip Arnold had examined other mining claims for Ralston's bank, mostly in California and Nevada. But either man could have heard about the odd “conical” shaped mountain overlooking a worthless claim along the Utah, Colorado and Wyoming border. During the long summer of 1871 Arnold and Slack carefully “salted” their claim with a heady selection of diamonds and sapphires. Then they waited for winter, when harsh weather in the Nevada fields forced prospectors to stay close to San Francisco. And in February of 1872, just when the rock hound's cabin fever would be reaching its height, the two con men floated to the surface and spread their rumors of a big find.
As the Kentuckians anticipated, Ralston (above) eagerly took the bait and insisted on having his own experts examine the claim. Arnold and Slack made a show of reluctantly agreeing to take David Colton and Major George Roberts to the claim, in exchange for a $50,000 cash investment. And with that they had broken even on the scam. Now they were going after a profit.
It was to be expected that neither expert on this March expedition knew anything about diamonds, since nobody in California did. And since both Colton and Roberts were also investors in the mine it was easy to convince them they were about to become fabulously wealthy. All they had to do waswant to believe. In Oakland, on the return from the claim, Arnold and Slack collected their payment and then hurried off again. Ralston was told they were returning to work on the claim. In fact the pair was headed back to Europe, to fetch more diamonds.
During the spring and early summer of 1872, while Asbury Harpending was in New York, receiving Charles Tiffany's glowing appraisal of the diamonds and sapphires salvaged from the disposal bins in Amsterdam, Philip Arnold and John Slack were in London, repeating their performance. Things went quicker this time because there was less of a language barrier, there were fewer cutters to chose from, and the Kentuckian con men were more knowledgeable about what they needed. Also, with their scam approaching its apex, there was less need for secrecy. Again they sailed from and to Canadian ports – a five day sail to and from Halifax.
But something held them up on this trip, and  they did not have time to salt the mines. Instead, carrying  about $35,000 worth of low grade diamonds and sapphires, they were forced to return directly for San Fransico. But there was no need to worry, for in their absence, “Billy” Ralston had been dreaming again. He thought that, as usual, his victims were playing by a different set of rules than he was. But this time the Kentucky con men were playing the same game Ralston was.  On their return, Ralston offered the two Kentucky con men $660,000 and a percentage of future profits for the precise location of the claim, and a quit claim, once the value was confirmed by yet another expert. Any concern Arnold or Slack may have initially felt on hearing about this additional inspection was dissipated when they learned the identity of the final expert who stood between them and a fabulous fortune. He was not some mysterious South African or Brazilian diamond expert. He was Henry Janin.
From the moment he boarded the train that August, Henry Janin was like a child being read to from his favorite story book. He wanted to believe. He knew the plot so well, he could almost say the lines before they were read to him. What he expected to see, Janin saw. Arnold must have known the man from their decades in San Francisco mining circles. Slack must have known the arrogance and self satisfied self assurance, and the amazing avarice that drove Janin. Once Janin was picked, both men must have known the $330,000 in escrow and the $330,000 promised upon revelation, was as good as theirs.
The mystery of the 36 hour train ride, the darkened “abandoned” station, the blindfolds, the almost biblical wandering four day journey across the desert, everything about the trip seemed to be calculated to inspire mystery and romance. It was a perfectly calculated performance, except for Philip Arnold's final trip to “get his barrings”. On that fourth morning he must have rode off in desperation, and spent a hurried few hours salting the claim. Perhaps this is why the second trip from the railroad to the diamond mountain took twice as long as the first. But Arnold need not have worried. Greed makes peole stupid. And even so obvious a slip in their veil of conspiracy failed to awaken the would be millionaires from their slumber. Arnold returned in time to lead his audience directly to a camp site at the foot of the diamond mountain, and any lingering doubts evaporated at the first glint of bling.
Ashbury Harpending (above) had almost blown their happy ending when he had heard the train whistle on the wind. Philip Arnold quickly assured him that the railroad was a hundred miles away, when in fact it was only twenty – just over the horizon. Lucky again, for the Kentuckians, that western trains were still burning wood to supply their steam. Wood smoke is white, and seen from a distance might be a cloud on the horizon. In another decade the tiny deserted station at Rawlings Springs, where the party had left the railroad, would be a very crowded place, the skies above it darkened with a constant pall of thick black smoke, as the transcontinental trains were switched to burning coal, found in great quantities by Professor King's 40th Parallel Survey a mile or so north of the station.
It was Arnold and Slack who took over the panning duties for Janin. And this allowed them to magically  produce diamonds and sapphires with even a clumsy slight of hand. Half hour of dull unrewarding work would have discouraged any of the more zealous members of the party from panning themselves. And having been relieved of the real work, the robber baron want-a-bees could concentrate on the more enjoyable task of building castles in the air. They split up, each man wandering off to look for his own personal fortune, like Janin and his claim on the water rights. It was a storybook voyage to a fantasy island in a desert mirage. The only person who did not seem to enjoy the trip was John Slack. It appeared he was cursed with the confidence man's worst enemy – a conscious.
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