- Historic Sites
The Great Diamond Fraud
Two slick miners fooled Tiffanys and Rothschilds until a geologist found the fake “mountain of gems”
February 1956 | Volume 7, Issue 2
In a few weeks two dazzled mining experts returned. They had little idea where they had been, but they were wild with tales of diamonds jutting out of the ground and gleaming in crevices. They brought with them another bag of jewels and deposited it in Ralston’s Bank of California with the earlier sack, which had been assayed at $125,000.
Ralston was already dreaming of a California empire. He began to plot the removal of the whole diamond industry to San Francisco. He would import miners from South Africa and lapidaries from Holland. He would control the gem market in London.
He never lost his caution. He demanded that Arnold and Slack permit him to submit the gems to Tiffany of New York, the most reputable American authority on precious stones. If Tiffany confirmed the value of the treasure, Ralston and his associates were to choose a mining expert of international repute for a final investigation of the mine.
To all of this, Arnold and Slack agreed.
Ralston lost no time in establishing the directorate of his corporation. He sent a long cablegram to his old friend Asbury Harpending and persuaded him to return from England and become general manager of the enterprise. He asked General Roberts to be a director. David Colton, an engineer whose lather had owned the hall where California declared its independence from Mexico, was elected president; Ralston became the corporation’s secretary and treasurer. This small group of men, working with showy secrecy, sketched in the outlines of a corporation with a capital stock of $10,000,000. To represent the New York affairs of the enterprise, they engaged Samuel Barlow, one of New York’s most successful lawyers.
To expedite passage through Congress of a law permitting them to claim a great area of mining land, Ralston added Senator Ben Butler to their legal staff. An influential member of the United States Senate, Butler had a strong voice in establishing mining policy.
Barlow and Butler arranged the meeting with Tiffany. It was full of drama and they provided an appreciative audience. Besides the company officials, the group included George B. McClellan, Lincoln’s deposed commander in chief and presidential opponent of 1864. Although Horace Greeley had resigned as editor of the New York Tribune , his friendship with his successor, Whitelaw Reid, would insure some valuable publicity, and he was in the audience. The impresarios also invited the president of Duncan, Sherman and Company, one of New York’s largest investment firms.
When the group assembled, Barlow dumped the contents of a huge cloth bag onto a tablecloth before Ii If any. In a few words, Barlow told the audience that a fabulous store of gems had been found in the West. Mr. Tiffany was to see if they were valuable.
Tiffany played the part of the expert with gusto, holding up each stone to the light carefully, peering at it with his jeweler’s glass.
“Gentlemen,” he finally pronounced, “these are beyond question precious stones of enormous value. But before I give you the exact appraisement, I must submit them to my lapidary and will report to you further in two days.”
For the next 48 hours, they all waited. At the announced time the group reassembled, this time to witness an even more dramatic presentation. Tiffany paused for a moment until he gained full attention. Then he stated firmly that, when cut, the gems would be worth $150,000. Since the westerners had brought only one-tenth of the treasure, the whole collection presumably would be valued at $1,500,000.
Ralston had only one more step to take before he could feel that his gem industry had a sound foundation. All that remained was a full investigation of the mine itself by a mining expert. When Ralston looked for the right man, he hit immediately on Henry Janin, a consulting engineer. Janin was one of the most dependable mining authorities in the United States. Although he had examined over 600 mines, he had never caused a client to lose a dollar. He agreed to make an appraisal, for a fee of $2,500 cash; all his expenses were to be paid, and he was to have the right to take up 1,000 shares of the stock at a nominal price.
Janin’s trip to the gem field was staged as dramatically as every other episode. Arnold and Slack led the party, all of whom were blindfolded when they left the train.
Now that they had the whole story, King and Gardner were perplexed. Diamonds, they knew, were found either in placer conditions in the alluvial deposits of rivers and creeks, or in lode conditions in rocks of heavily variegated states of metamorphosis. Rubies and sapphires required completely different conditions. King and Gardner were sure that the proper conditions had not existed in the American West. But surely Janin knew this too. Could their own information be wrong? They had to know more.
Although no one in the company would divulge anything officially, the president, David Colton, had already opened impressive offices and hired twenty clerks. He had refused fifteen offers of over $200,000 each for claims at the mining fields. He answered every request only with a glowing prophecy of the corporation’s future.
King and Gardner learned that the fever was not confined to San Franciscans. In New York, investors were besieging Barlow and Butler with demands for stock. When someone who signed his letter “An Old Miner” wrote the New York Sun that he had seen a stone worth half a million dollars taken from the gem field, which he said was in southwestern Arizona, he started a wildcat movement to that state.