Thursday, July 11, 2019

Prominent, Distinguished San Francisco 'Great Diamond Hoax of 1872' Investors Taken For A Ride Like Theranos' Backers

Horace Greeley (1811–1872). 
As C.C. Goodwin postulated in his literary masterpiece titled “The Comstock Lode,” more money probably exchanged hands in stock ownership and stock scams, as well as those who supplied all the material needs of the mining companies.

The public interest in vast riches that could be relatively easy to access was palpable in 1872.

First, there was the false claim of a mountain of riches that was reported to contain silver.

“An announcement in the Tucson Weekly Arizonian in April of 1870 catches the mood of the moment: ‘We have found it!” according to Smithsonian.com. “The greatest treasures ever discovered on the continent, and doubtless the greatest treasures ever witnessed by the eyes of man.’

“Located in the Pyramid Mountains of New Mexico, the ‘it’ was a new mine dubbed the Mountains of Silver. Bankers hurried in, miners claimed stakes, investors sought capital in distant cities and surveyors laid out a town nearby. But in the end, the much-touted venture did not yield enough of the stuff for a single belt buckle.”

Then there was the diamond rush in South Africa.

“At about the same time came news of a diamond rush in South Africa, the third major diamond find known to the world after one near the city of Golconda, India, and an 18thcentury site discovered by the Portuguese in Brazil,” according to the Smithsonian.

“Stoked by the tall tales of early 19th-century trapper-guides like Jim Bridger and Kit Carson about diamonds, rubies and other gems that could be scooped right off the ground, avaricious dreamers were soon looking for precious stones in Arizona and New Mexico, where the terrain was said to resemble South Africa’s.”

Adding to the diamond fever, diamonds were found in during the initial California Gold Rush.

“And so the stage was set for the ‘Great Diamond Hoax’, a brilliantly acted scam by two Kentucky grifters that would embroil, among others, some of California’s biggest bankers and businessmen, a former commander of the Union Army, a U.S. representative, leading lawyers on both coasts, and the founder of Tiffany & Co.,” according to the Smithsonian.

In 1872, The San Francisco Chronicle said the hoax was “the most gigantic and barefaced swindle of the age.”

What was the “Great Diamond Hoax” and how did it start?

Charles Lewis Tiffany (left) in his store, ca. 1887. What investors did not  know was that Tiffany was not qualified to judge the gems from the bogus gem field. Source: Wikipedia. Public domain.

“The diamond hoax of 1872 was a swindle in which a pair of prospectors sold a false American diamond deposit to prominent businessmen in San Francisco and New York City,” according to Wikipedia’s “Diamond hoax of 1872” page. “It also triggered a brief diamond prospecting craze in the western USA, in Arizona, New Mexico, Utah, Wyoming, and Colorado.”

The scheme began in 1871 when two Kentucky cousins, Philip Arnold and John Slack, traveled the very long distance to San Francisco, Calif.

Crucial to their skulduggery was successfully convincing potential San Francisco investors that they were privy to a diamond mine. They even produced what was said to be a bag of diamonds and deposited it in the Bank of California — which had significant investments in The Comstock Lode of Nevada in the Virginia Mountain Range.

So how could they produce a bag of diamonds? The answer can be found in an April 2014 issue of The San Francisco Chronicle.

"Arnold was a born con man, Slack his close-mouthed foil," The Chronicle notes. "The 40-year-old Arnold was a small-time miner who was working as a bookkeeper for a drill manufacturer that used diamond-headed bits. He pilfered a bag of uncut diamonds from his work and acquired some garnets, rubies and sapphires, probably by trading with Indians. These were the raw materials of the scam.

"The two crooks could not have chosen a better time to work a hoax. San Francisco was in the grip of a delirium of greed unrivaled since the Gold Rush."

Not only was San Francisco gripped with gold fever, but Virginia City and the rest of The Comstock Lode was in the midst of a silver and gold rush — at the time, the largest known deposit of silver in the world. (Quartz was also mined.)

Wild rumors were spun with a storyteller’s expertise, and in the social currency of the time, it was said that anyone could get rich, and quick, on The Comstock Lode — whether in Six Mile Canyon (current spelling), Virginia City or Gold Hill.

Arnold and Slack played potential investors with the expertise of a conductor leading an orchestra.

William Ralston, founder of the
Bank of California. Public domain.
“Prominent financiers convinced the ‘reluctant’ Arnold and Slack to speak out on their find,” Wikipedia states. “The cousins offered to lead investigators to their field.”


Yet investors were still not convinced, so they hired their own mining engineer to examine the diamond field.

The brothers had an answer for that.

“They planted their diamonds on a remote location in northwest Colorado Territory,” according to Wikipedia. “They then led the investors west from St. Louis, Missouri in June 1872. Arriving by train at the town of Rawlins, in the Wyoming Territory, they continued on horseback. But Arnold and Slack wanted to keep the exact location a secret, so they led the group on a confusing four-day journey through the countryside. The group finally reached a huge field with various gems on the ground. Tiffany's evaluated the stones as being worth $150,000.”

The cousins’ trickery worked for now.

“When the engineer made his report, more businessmen expressed interest,” according to Wikipedia. “They included banker {William Chapman} Ralston, Gen. George S. Dodge, Horace Greeley, Asbury Harpending, George McClellan, Baron von Rothschild, and Charles Tiffany of Tiffany and Co.

“The investors convinced the cousins to sell their interest for $660,000 ($13.8 million today) and formed the San Francisco and New York Mining and Commercial Co. They selected New York attorney Samuel Latham Mitchill Barlow as legal representative.”

The investors remind me of those who invested in the alleged fraud of Theranos — the company that promised to miniaturize blood testing but ended up in a shocking Silicon Valley scandal.

These investors, like Theranos, had distinguished and prominent board members who new little about the “gem field” they were going to commit significant sums for investment.

The “gem” investors even called in a powerful U.S. congressman to help them solidify their stake in what they thought were fields of riches.

“Barlow convinced them to add U.S. Congressman Benjamin F. Butler to the legal staff,” Wikipedia said. “Barlow setup a New York corporation known as the Golconda Mining Co. with capital stock of $10,000,000, while Butler was given one thousand shares for amending the General Mining Act of 1872 to include the terms ‘valuable mineral deposits’ in order to allow legal mining claims in the diamond fields. The U.S. Attorney General, George H. Williams issued an opinion on Aug. 31, 1872, specifically stating that the terms ‘valuable mineral deposits’ included diamonds.”

The entire scheme was a comedy of errors worthy of a Shakespearean play.

Tuesday, July 9, 2019

Professor Laments 'Anonymous' Sacrifice Of Heroic Miners

An 1879S Morgan Dollar.
The death of Mr. Wright has had a sobering effect on the gentlemanly Comstock Club in Virginia City, Nev.

My last post included author C.C. Goodwin’s prosaic and philosophical insights on the untimely death.

After Mr. Wright's wake, the professor spoke about the very real sacrifices of those who mined the silver that made many people rich — the value of which was eventually represented in U.S. coinage.

He lamented about the anonymous miners' sacrifice of health, and of the devastating price that miners' loved ones paid when a miner was injured or killed.

He felt the true value of the silver mined was in no way reflected in the wholesale and retail silver markets; essentially saying that miners were an inconvenient necessity for mine owners.

"Three days ago this piece of crumbling dust {Mr. Wright} was a brave soldier of peace,” the professor said. “I mean the words in their fullest sense. Just now our brothers in the East are fearful lest so much silver will be produced that it will become, because of its plentifulness, unfit to be a measure of values.

“They do not realize what it costs or they would change their minds.

“They do not know how the gnomes guard their treasures, or what defense Nature uprears around her jewels.

1879S Morgan Dollar reverse.
“They revile the stamp which the Government has placed upon the white dollar.

“Could they see deeper they would perceive other stamps still. There would be blood blotches and seams made by the trickling of the tears of widows and orphans, for before the dollar issues bright from the mint, it has to be sought for through perils which make unconscious heroes of those who prosecute the search.

“For nearly twenty years now, on this lode, tragedies like this have been going on. We hear it said: 'A man was killed to-day in the Ophir,' or 'a man was dashed to pieces last night in the Justice,' and we listen to it as merely the rehearsal of not unexpected news.

"Could a list of the men who have been killed in this lode be published, it would be an appalling showing. It would outnumber the slain of some great battle.

"Besides the deaths by violence, hundreds more, worn out by the heat and by the sudden changes of temperature between the deep mines and the outer air, have drooped and died.

Obverse of an 1857
Seated Liberty
Half Dime.
"The effect is apparent upon our miners. Their bearing perplexes strangers who come here. They do not know that in the conquests of labor there are fields to be fought over which turn volunteers into veteran soldiers quite as rapidly as real battle fields.

"They know nothing about storming the depths; of breaking down the defences of the deep hills.

"They can not comprehend that the quiet men whom they meet here on the streets are in the habit of shaking hands with Death daily until they have learned to follow without emotion the path of duty, let it lead where it may, and to accept whatever may come as a matter of course.

"Such an one was this our friend, who fell at his post; fell in the strength of his manhood, and when his great heart was throbbing only in kindness to all the world.

"One moment he exulted in his splendid life, the next he was mangled and crushed beyond recovery.

"Still there was no repining, no spoken regrets. For years the possibility of such a fate as this had been before his eyes steadily; it brought much anguish to him, but no surprise.


Obverse of an 1857
Seated Liberty.
"He had lived a blameless life. As it drew near its close the vision of his mother was mercifully sent to him, and so in his second birth the same arms received him that cradled him when before he was as helpless as he is now.

"By the peace that is upon him, I believe those arms are around his soul to-night; I believe he would not be back among us if he could.

"We have a right on our own account to grieve that he is gone, but not on his. He filled on earth the full measure of an honest, honorable, brave and true life. That record went before him to Summer Land. I believe it is enough and that he needs neither tears nor regrets."

A few days more went by, but the old joy of the Club was no more.

(This is my last post with regard to “The Comstock Club,” authored by C.C. Goodwin — one of the most prosaic and philosophical writers who belonged to The Sagebrush School of Writers that were dominant mostly in Nevada. The rest of the book contains many a surprise — surprises I will not mention here because, to do so, would ruin it for those who read the book.)

The Comstock Club Ends After Mining Deaths

Silver Terrace Cemetery with Virginia City in the background. © Glenn Franco Simmons.

The gentlemanly camaraderie formed at The Comstock Club was a grand notion but one that would fall apart in the end.

In this post, we find that Mr. Wright has suffered seriously injuries that ultimately led to his death. At his wake, Mr. Goodwin describes it with compassion and wisdom:

The undertaker came, the body was dressed for the grave and placed in a casket, and the Club took up their watch around it. Now and then a subdued word was spoken, but they were very few. The hearts of the watchers were all full, and conversation seemed out of place. Wright was one of the most manly of men, and the hearts of the friends were very sore.

The evening wore on until ten o'clock came, when there fell a gentle knock on the outer door. The door was opened and by the moonlight four men could be seen outside. … They were the famous quartette of Cornish miners and were at once invited in. They filed softly into the room — the Club rising as they entered — and circled around the casket. After a long look upon the face of the sleeper they stood up and sang a Cornish lament. Their voices were simply glorious. The words, simple but most pathetic, were set to a plaintive air, the refrain of each stanza ending in some minor notes, which gave the impression that tears of pity, as they were falling, had been caught and converted into music. The effect was profound.

The stoicism of the Club was completely broken down by it. When the lament ceased all were weeping, while warm-hearted and impetuous Corrigan was sobbing like a grieved child. The quartette waited a moment and then sang a Cornish farewell, the music of which, though mostly very sad, had, here and there, a bar or two such as might be sung around the cradle of Hope, leaving a thought that there might be a victory even over death, and which made the hymn ring half like the Miserere and half like a benediction.

When this was finished and the quartette had waited a moment more, with their magnificent voices at full volume, they sang again — a requiem, which was almost a triumph song, beginning:

Whatever burdens may be sent
For mortals here to bear,

It matters not while faith survives
And God still answers prayer.

I will not falter, though my path
Leads down unto the grave;

The brave man will accept his fate,
And God accepts the brave.

Then with a gentle "Good noight, lads," they were gone. It was still in the room again until Corrigan said: "I hope Wright heard that singin'; the last song in particular."

Virginia City's Silver Terrace Cemetery. © Glenn Franco Simmons.

"Who knows?" said Ashley. "It was all silence here; those men came and filled the place with music. Who knows that it will not, in swelling waves, roll on until it breaks upon the upper shore?"

"Who knows," said Harding, "that he did not hear it sung first and have it sent this way to comfort us? I thought of that when the music was around us, and I fancied that some of the tones were like those that fell from Wright's lips, when, in extenuation of Miller's fault, he was reminding us that it was the intent that measured the wrong, and that Miller never intended any wrong. Music is born above and comes down; its native place is not here."

"He does not care for music," said the Colonel. "See how softly he sleeps. All the weariness that so oppressed him has passed away. The hush of eternity is upon him, and after his hard life that is sweeter than all else could be."

"Oh, cease, Colonel," said Brewster. "Out of this darkened chamber how can we speak as by authority of what is beyond. As well might the mole in his hole attempt to tell of the eagle's flight. "We only know that God rules. We watched while the great transition came to our friend. One moment in the old voice he was conversing with us; the next that voice was gone, but we do not believe that it is lost. As we were saying of the telephone, when we speak those only a few feet away hear nothing. The words die upon the air, and we explain to ourselves that they are no more. But thirty miles away, up on the side of the Sierras, an ear is listening, and every tone and syllable is distinct to that ear. Who knows what connections can be made with those other heights where Peace rules with Love?

"Our friend whose dust lies here was not called from nothing simply to buffet through some years of toil and then to return to nothing through the pitiless gates of Death. To believe such a thing would be to impeach the love, the mercy and the wisdom of God. Wright is safe somewhere and happier than he was with us. I should not wonder if Harding's theory were true, and that it was to comfort us that he impelled those singers to come here."

"Brewster," said Alex, "your balance is disturbed to-night. You say 'from out our darkened chamber we cannot see the light,' and then go on to assert that Wright is happier than when here. You do not know; you hope so, that is all. So do I, and by the calm that has pressed its signet on his lips, I am willing to believe that all that was of him is as much at rest as is his throbless heart, and that the mystery which so perplexes us — this something which one moment greets us with smiles and loving words, but which a moment later is frozen into everlasting silence — is all clear to him now. I hope so, else the worlds were made in vain, and the sun in heaven, and all the stars whose white fires fill the night, are worthy of as little reverence as a sage brush flame; and it was but a cruel plan which permitted men to have life, to kindle in their brains glorious longings and in their hearts to awaken affections more dear than life itself."

Then Harding, as if to himself repeated: "It matters not while Faith survives, and God still answers prayer."

"This is as it seems to us, straining our dull eyes out upon the profound beyond our petty horizon (, the Colonel said. “} But who knows? We can trace the thread of this life as it was until it passed beyond the range of our visions, but who of us knows whether it was all unwound or whether in the 'beyond' it became a golden chain so strong that even Death can not break it, and thrilled with harmonies which could never vibrate on this frail thread that broke to-day?"

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