THE SECRET OF CAPITALISM Part Six

I can not imagine the shock and shame felt by William Ralston when Mr. Colton handed him the telegram from Professor King. His shock, and probably anger at this previously unknown (to him) interloper who was questioning his dream, must have been overwhelming. But this was quickly followed by reports from the London newspapers detailing the bizarre Americans who bought diamonds in bulk. Wrote the London Times, “The purchasers were evidently unacquainted with precious stones; they purchased without reference to size, weight or quality, the lot including diamonds, rubies, emeralds, etc. to the value of over $15,000.” Shortly there after King himself arrived in San Francisco, with full details of the salted claims. Ralston wasted no time in moving to minimize the damage to his reputation.

First he made arraignments to repay every investor in full. That million dollar hit to his personal finances was huge, but in the days before the Securities and Exchange Commission, and their meddlesome regulations, tens of millions of dollars in investments could vanish with a mere whiff of rumor against the reputation of one man. If the Bank of California was to have any future, then Ralston had to at once restore the full trust of men like the Baron Rothschild. It was at moments like these that it should be clear that a lack of government regulations is a severe hindrance to the trust which makes larger international investments possible.

Next Ralston moved to get his money back. He hired the best detective he could find, the long time San Francisco Captain of Detectives, Isaiah.W. Lees. Over thirty years of service, Lees had managed to avoid any taint of corruption while rising to the top of a department awash in payoffs and political favoritism. Lees had championed innovations such as photographing all arrested suspects, and originated the rouges gallery of their pictures. Lees was now granted a leave of absence from the department, and Ralston provided him with an expense account to find out everything he could about the Great Diamond Mountain con men.

Lees immediately set out for Europe and found, as he suspected, that there were many along Tulip Street who recognized the photographs of the two odd Americans from their 1870 expedition. And by tracking the aliases they had used in Amsterdam against shipping manifests Lees could confirm they had sailed – in both 1870 and 1872 – from the Canadian port of Halifax. A railroad had recently been completed, connecting the U.S. State of Maine with Nova Scotia, and that seemed the obvious path they had taken to avoid American ports.

Although John Slack was was nowhere to be found at the moment, the Pinkerton agency had easily tracked down Philip Arnold, living amongst the 2,000 residents in his home town of Elizabethtown, Kentucky. Far from hiding, Arnold had followed the example of William Ralston. He had invested his ill-gotten gains in an troubled bank run by Thomas Polk, now renamed the Arnold and Polk Bank. The move saved the small town from financial ruin. Arnold put the rest of his money into the safe in his two story brick Italiante home at 422 East Poplar street, in the hills on the north side of “E”town, along with 500 acres of farmland where he bred horses, hogs and sheep.

Arnold and Slack were both indicted for fraud in San Francisco, but Philip Arnold had no intention of giving himself up. His family connections in Hardin County, Kentucky, and his donations to local politicians were only reinforced by the interviews he gave to the “Louisville Courier”; “I have employed counsel, a good Henry Rifle” he announced. The feisty talk assured public opinion would materialized firmly behind the local boy who had outfoxed the robber barons, but Arnold also hired a real lawyer or two. Philip Arnold was dug in like a tick on a Kentucky mule, and Ralston was not going to get him out without an expensive, exhausting and embarrassing court fight. Rather than see himself mocked and derided in Kentucky courtrooms, the robber baron decided to cut a deal.

The details were never made public, but it seems the California banker settled for about a third of what he had lost, about $200,000. In exchange Ralston dropped all claims against the Kentucky con man.

But the bad news was just starting for the Magician of San Francisco.The capitalist sharks smelled blood in the water.  In August of 1875,fellow robber baron and close personal friend Senator William Sharon, broke a promise to Ralston and sparked the collapse of the Bank of California. Try as he might to avoid it, William Ralston ended up just like Henry Comestock, and he made the same exit The day after they took his bank away, William Ralston was found floating in San Francisco bay. His funeral was attended by 50,000 people. They loved him, they just weren't willing to lend him any more money.

Charles Lewis Tiffany, the man who had vouched for the value of worthless diamonds and sapphires, reestablished his reputation in 1878 by buying himself a French Legion of Honor Award. He died in 1902 at the age of 90. He left behind an estate valued at $35 million.

Shortly after paying Ralston to go away, Philip Arnold opened a hardware store at 58 public square in “E” town. It seems he had gotten considerably more than half of the money from the diamond hoax. Unfortunately, he would not live long to enjoy it. Just five years later, on Tuesday, August 20, 1878, Philip Arnold got into a bar fight with Henry Holdsworth, a clerk at a competing bank. In a story that would be familiar to anyone who watches the local news, Holdsworth left the bar and returned a few minutes later with a double barreled shotgun.

According to the Breckenridge News from Cloverdale, Kentucky, Arnold was just leaving the bar when he saw Holdsworth approaching. Arnold pulled his pistol and fired twice. He missed both times. Holdsworth fired one barrel, missing Arnold but hiting two innocent bystanders, one of them in the neck. Hodsworth then ducked behind a tree. From there he emptied the second barrel at Arnold, hitting him in the shoulder and “lacerating it terribly”. Not dissuaded, Arnold fired three more rounds, again missing Hodsworth, but this time hitting a local farmer named John Anderson, in the gut, and killing him. Since everybody was now empty, the gun fight was over, and the tally was seven rounds fired, one antagonists wounded, one innocent bystander killed and two more noncombatants injured - a typical gun fight.

Philip Arnold did not die quickly. The 49 year old lingered for almost a year, finally dieing of pneumonia on August 8, 1879. His funeral was one of the best attended in the history of “E” town, and his monument on the rolling slopes of the Elizabethtown Cemetery is one of the tallest. But over time memories of Philip Arnold have shifted and every October the residents of “E”town stage the “Philip Arnold Dead Man Rolling Bed Race”- to raise money for charity, of course. Contact the E-town Heritage Council for details. The final joke is that Arnold's hardware store has become a law office.

In a footnote - Arnold's nemesis, Henry Hardworths, was not satisfied with having mortally wounded Arnold. He also sued him for $7,600 for injuries suffered in the bar fight. He lost. But that figure came up again in August of 1884 when Henry was arrested in New Orleans for passing bad checks  in "E" town, totaling $7,000.

Arnold's partner in crime, John Slack was eventually tracked down in St. Louis, where he was working in the affiliated professions of cabinet and coffin maker. But he missed the mines of his youth and continued his profession in the silver strike boom town of White Oaks, where he became “one of the oldest and most universally respected citizens...” of Lincoln County, New Mexico. He died in 1896, at the age of seventy-six years, two months and six days, leaving an estate of $1,611.14.

The only conventional hero in our tale seems to have been the geologist and professor, Clarence King (above). He had uncovered the scam, and its fame had made him the first director of the United States Geological Survey. But there was, of course, another side to the rock hound, a human side. In 1888 he married Ada Copeland, an ex-slave who had moved from Georgia to New York. What was dark about this love story was that King hid his true identity from Ada, telling her that his name was actually James Todd, that he was a black,man and his profession was actually that of a Pullman Porter. For the next 13 years he continued this divided life, black man James Todd at home, and world renown geologist Clarence King while away from home. They had five children, and Clarence finally revealed his true identity to poor Ada and the children in a letter he wrote in December 1901, as he lay dying in Arizona.

If you want to see the Diamond Mountain that has no diamonds, find Diamond Wash Draw, in Moffat County, Coloardo, about one mile south of the Wyoming state line and a quarter mile east of the Utah state border. The flat topped mountain in front of you is Diamond Peak. And the square mile scrub brush plain to the north is the scene of the Great Diamond Hoax of 1872. If you can get there, you too can pull a diamond right out of the ground. And when you do you will understand why William Ralston had been so willing to believe, and why capitalism has always depended upon a mix of fantasy and a fraud to survive.

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