THE GREAT DIAMOND MOUNTAIN Chapter Six

 

I can imagine what William Ralston felt when his assistant Mr. Colton handed him the telegram from Professor King. His shock, and probably anger at this previously unknown (to him) interloper,  who dared to  question his dream, must have been overwhelming. But this was quickly followed by reports from the London newspapers detailing the bizarre Americans who had bought junk diamonds in bulk. 

Wrote the London Times, “....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, admiral of the San Francisco money armada,  wasted no time in moving to minimize the damage to his finances.

First he made arraignments to repay every investor in full. That million dollar hit to his personal finances did hurt, 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 restore at once the full trust of men like 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.  But those interested in the short con,  are always opposed to having a cop on the beat. 

Next Ralston moved to get his money back. He hired the best detective he could find, long time San Francisco Captain of Detectives, Isaiah Wrigley Lees (above). 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 (above) had championed innovations such as photographing all arrested suspects, and originated the rouges gallery of their photographs. Lees  was now granted a leave of absence from the department, and Ralston provided him with a salary and an expense account to find out everything he could about the Great Diamond Mountain con.

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.  By tracking the aliases they had used in Amsterdam against shipping manifests Lees could confirm that Arnold and Slack had sailed – in both 1870 and 1872 – from the Canadian port of Halifax. The Windsor and Annapolis Railway had been completed in January of 1872,  connecting the U.S. State of Maine with Nova Scotia, and that seemed the obvious path they had taken to avoid American ports and American customs agents.

Although John Slack was was nowhere to be found at the moment, the Pinkerton agency easily tracked down Philip Arnold, living amongst the 2,000 residents in his home town of Elizabethtown, Kentucky. And far from hiding, Arnold had followed the example of his mark, William Ralston. 

Slack had invested his ill-gotten gains in a troubled bank run by Thomas Polk, now renamed the Arnold and Polk Bank (above, b;g; right). 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 (above) at 422 East Poplar street, in the hills on the north side of “E”town, along with 500 acres of farmland where he started breeding horses, hogs and sheep.

Arnold and Slack were both indicted for fraud in San Francisco, but Philip Arnold (above) 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.  

Philip Arnold's feisty talk assured public opinion would materialized firmly behind the local boy who had outfoxed the west coast robber barons.  He even hired a lawyer or two. The con man turned banker was dug in like a tick on a Kentucky mule, and banker 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 less than a third of what he personally 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 (above), 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 pockets full of rocks.  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 (above), 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.  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 (above).  It seems he had gotten away with 4 or 5 million dollars out of  the diamond hoax, and even after his deal with Ralston he was doing pretty well.  Unfortunately, he would not live long to enjoy it. 

Just five years later, on Tuesday, 20 August 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, a chastized Holdsworth left the bar and returned a few minutes later with a double barreled shotgun.

According to the Breckenridge News,  Arnold was just leaving the bar when he saw Holdsworth approaching. Arnold pulled his revolver and fired twice. He missed both times. Holdsworth returned fire with one barrel, missing Arnold but hitting 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”.  Encouraged,  Arnold reloaded twice, and 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 antagonist wounded, one innocent bystander killed and two more noncombatants injured - a typical gun fight.

Philip Arnold did die, just not quickly. The 49 year old lingered for almost a year, finally dying  of pneumonia on 8 August, 1879.   At least he outlived his victim,  William Ralston.  Arnold's 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 now, a century later, 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 irony is that Arnold's hardware store has now become a law office.

In a footnote - Arnold's nemeses, Henry Hardworths, was not satisfied with having mortally wounded Arnold. He also sued him for $7,600 for injuries suffered in the bar fight. Henry lost the case. 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. Evidently he had no money for  William Ralston to recover. But the silent con man missed the mines of his youth and continued his profession as a prospector in the  New Mexico silver strike boom town of White Oaks, where he became “one of the oldest and most universally respected citizens...” of Lincoln County.  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 that act rocketed him to fame as a paragon of virtue and science, which saw him made 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  Professor King  married Ada Copeland, an ex-slave who had moved from Georgia to New York. What was dark about this marriage  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. Over the next 13 years he continued this divided life, black man James Todd at home, and world renown white geology professor Clarence King while away from home. Ada and James/Clarence  had five children together, but Clarence did not reveal his true identity to poor Ada or the children until December 1901. And did it via long distance, from his death bed in Arizona. The lesson here is that everybody is lying to somebody, usually to themselves. 

If you want to see the Diamond Mountain that has no diamonds, find Diamond Wash Draw, in Moffat County, Colorado, 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 of that is the scene of the Great Diamond Hoax of 1872. If you can get there, you just might be able to pull a diamond right out of the ground. And when you do, if 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 fraud to thrive. 

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THE GREAT DIAMOND MOUNTAIN Chapter 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 beginning 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 most of the lesser quality stones were sold at a discount in lots to the lesser talented cutters in Antwerp, Belgium and London. 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 salt a diamond mine, the first thing you need are diamonds. Most of the Dutch dealers saw 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 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 headwaters of the Green River, in Utah territory.  

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 into the bars of San Francisco and salted rumors of a big diamond 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  money in their pocket, they had their investors on the hook. The money people now wanted to believe the investment was real. Now they were going to reel them in. 

It was to be expected that neither expert on this March expedition knew anything about diamonds, since nobody in California did. There are no diamonds in California. 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 was be greedy. And greed makes you stupid. 

In Oakland, on the return from the claim, Arnold and Slack collected their initial 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 cheap, substandard 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 on a buying binge. Things went quicker this time because there was less of a language barrier. But there were also fewer cutters to chose from. This time 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, Nova Scotia.

But weather held them up on this trip, and  instead of salting the mine with their new cache of $35,000 worth of low grade diamonds and sapphires, they were forced to return directly for San Francisco .  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.  But better. 

On their return, Ralston (above) 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 met 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 Jannin.

From the moment he boarded the train that August, Henry Jannin (above) was like a child being read 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, Jannin saw. Arnold must have known the man from their decades in San Francisco mining circles. Slack must have recognized the amazing avarice that drove Jannin. Once Jannin was picked, both men must have known the already $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 was 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 people 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 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. But  Philip Arnold quickly assured him that the railroad was a hundred miles away, when in fact it was just over the horizon. Lucky again, for the Kentuckians, the  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 40^th Parallel Survey, just a mile or so north of the station.

It was Arnold and Slack who took over the panning duties for Jannin. 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 Jannin and his claim on the water rights. It was a storybook voyage to a fantasy island within  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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THE GREAT DIAMOND MOUNTAIN Chapter Four

 

I  believe William Ralston (above), founder of the Bank of California, owner of much of the Comestock Silver Lode, felt he was on the verge of true greatness. He had sold $10 million in shares in his new diamond company in a single morning. Then, with the ruthlessness efficiency he was respected for, he had duped two country bumpkins into selling him their hundred million dollar find for little more than a half a million dollars. He had now reached the precipice of his fallacy.  All that was left was the swan dive back to earth.

It is easy to see how Ralston had reached his precarious perch. The Alta California newspaper reported, “We have seen a report written by Henry Jannin, a mining engineer of an established reputation, who had visited the mines, examined them and reported favorably on them. He has accepted the position of superintendent and has expressed the opinion that with twenty-five men he will take out gems worth at least $1,000,000 a month...

"Most of the diamonds found by Mr. Jannin are small, weighing a karat. One obtained previously weighed over 100 karats... Some of the sapphires are as large as pigeon eggs....The diamond mines are the property of the San Francisco and New York Mining and Commercial Company, which has... 100,000 shares of stock and they have been selling at $40, making the present market value of the whole property $4,000,000.”

In fact there was no 100 karat diamond. Jannin (above) was not the new superintendent. In fact that gentleman had been forced to sell his 1,000 shares in the claim for $40,000, to maintain his expensive lifestyle. Still Jannin had made a very nice profit.  Before the whole thing collapsed.

So perhaps the first man to realize that Raliston was actually a man on the verge of disaster was Mr. Clarence King (above). But then it was easy for Clarence to see the Diamond Mountain  for the fraud that it was because he had no money invested in it, and because he was a trained geologist. 

In fact 30 year old Clarence King knew the second he read those lurid headlines that the diamond mountain was a fraud because he knew that diamonds and sapphires (above) are never found together,  because diamonds are formed at temperatures and pressures which would crush and melt sapphires.  This was common knowledge among geologists even in 1872.  Only later would it be established that diamonds were made of carbon while sapphires were corundum, a form of aluminum.  That would explain why you can cut a sapphire with a diamond, but not the reverse.  But more than all of that, Clarence King knew the area around the alleged diamond mountain as few other people in the world could know it.

Professor King 's massive seven volume "Survey of the 40th Parallel" recorded the natural resources made accessible by the transcontinental railroad,. It had only been completed in September of 1872.  As its centerpiece it produced a topographical geological map centered on the 40^th east /west parallel, and covering 50 miles on either side, on a scale of four miles to an inch. 

And nowhere on this map or in its thousands of pages of supporting geological and biological compendiums and observations, was there even a hint of such a place as Ralston's diamond mountain.

Over dinner at the Pacific Union Club in San Francisco (above), King carefully grilled Henry Jannin about the claim. He was stunned to discover that even now Jannin was not sure of the exact location of the mine. “I was taken a long distance on a train, about 36 hours. Then we left the railroad at some small station where there was no attendant. We were brought out of the station blindfolded and put on horses” For two days, explained Jannin, they had ridden with the sun in their faces.

The consulting mining engineer described the claim itself as a curious place, “...a desert with a conical but flat topped mountain rising right out of it, and on the mountain you find everything from garnets to diamonds!”  

King realized, because he was so familiar with the area,  that 36 hours on the train would have taken Jannin into eastern Utah territory or Western Wyoming territory.  And the sun in his face for two days, meant Jannin had been ridding south from the railroad. After lunch, King consulted his maps.

And 36 hours later he arrived at the agentless railroad station of  Rawlings Springs, Wyoming.  King  hired an aging German emigrant prospector and together they set off for a mountain he had surveyed just the year before. 

And on 2 November, 1872 they crossed a creek with a sign marked, “Water Rights – Henry Jannin”.  The famous mining engineer had named the creek after it's supposed discoverer,  Immediately, King began to set up camp while the prospector went off exploring.

King was hardly finished pitching the tents when the old prospector came back holding a gem. He proudly announced, “Look, Mr. King. This diamond field not only produces diamonds,  but cuts and polishes them as well!”

The two men working together quickly became adept at finding gems. They had only to look for tool marks on the surface, to find a diamond pushed into the ground, or a sapphire jammed into a crevice in the rocks, or, often, into the side of an ant mound.  And indeed, many of the gems showed signs of having been worked over by lapidary tools. It appeared that the great diamond mine had been heavily “salted”.

The term was an invention of the colonial American frontier. At a time when salt was vital in the preservation of food, poor farmland could still be sold at a premium if the seller poured salt down a well on the property, to give the impression of a “salt lick” or mineral deposits just below ground level.  Gold and silver claims were even more easily salted, with a shot gun loaded with the appropriate mineral dust. But salting this diamond mine had required a more labor intensive approach.

A week of examining the property provided King with all the evidence he would need. On 6  November  1872  the two men headed back toward the railroad, barely 20 miles away. (It seemed Mr. Harpending had actually heard the Union Pacific engine's whistle, after all!) King did not wait for a scheduled stop at Rawlings Spring, but flagged down a passing freight train, parting  company with the sharp eyed prospector. Along the way he composed a  cable addressed to William Ralston, which he dispatched from  the next station. The message was short and sour. The great North American Diamond Mountain was a hoax.

The sound reverberating out of San Francisco that day was that of a massive ego suddenly deflating. How had so many and such wise men been so completely duped?

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