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
King ran to the prospector and grasped the halt-cut diamond. Clearly it bore the smooth surface left by a lapidary’s tool. He knew for certain now that the field was a fraud. The ground had been “salted” with rough stones. He began to discover evidence he had previously overlooked. Occasionally he found a straight hole at the bottom of which rested a gem as though it had been pushed down by a miner’s bar. He found ant hills jammed with gems. Any crevice of rock or shale might contain a diamond, but the rock was likely to have scratches on it from a steel tool.
On November 10, King and his aide returned to the Union Pacific station and flagged a train. At the next stop, the geologist sent a brief telegram to Colton stating that the company was duped.
In San Francisco, the board of directors hurriedly identified King and established his reputation. When they learned that whatever he said about mining and geology would be authoritative, the company president, two directors and Henry Janin traveled the mountainous way to Rawlings Springs. Two days later, they sent Ralston the telegram he had been dreading. As Ralston read the telegram to his associates, they knew their dreams were dead.
By the time King returned to San Francisco, Ralston had started a nation-wide search for the men who had tricked him. He never located Slack, but found Arnold ensconced in Hardin County, Kentucky. When the Californians brought suit, the southern state refused to extradite Arnold. The courts in Kentucky were solidly in support of the successful son who had made a foray into Yankeedom and returned with a third of a million dollars. After months of wrangling, Arnold surrendered $150,000 for immunity from further litigation. The only other satisfaction the Californians got was that Arnold, who used the balance of his gains to start a bank in Elizabethtown, Kentucky, was promptly shot to death by a competitor.
The recovery of only one-fourth of what he had paid to Arnold and Slack left Ralston a heavy loser, especially since he made it a point of honor that no one else should lose a penny. Because he sold no stock and paid back to each one of the charter members the $80,000 originally invested, he was freed by public opinion of any taint.
Gradually the Californians began to understand how they had been gulled. Amsterdam gem merchants remembered that two “crazy Americans,” one talkative and the other taciturn, had been “throwing their money away” on inferior, uncut gems for almost a year before the great strike. The stones they had bought were rejects, worth less than $25,000.
The embarrassed Tiffany could offer slight excuse. His lapidaries were the best in America, but none of them had ever before seen uncut gems. Only the most experienced cutters, all of whom were members of the gem monopoly at Amsterdam, were aware how much of a raw stone is lost when its heart is fashioned into a jewel. Janin, who had sold his 1,000 shares for $40,000 before King’s discovery, had an even lamer excuse. The enthusiasm of Ralston and the reputation of Tiffany had confused him. He was convinced about the authenticity of the mine before he got off the train at Rawlings Springs.
The most acceptable explanation of how so many shrewd and reputable men were so thoroughly fooled probably lay in two facts. In the first place, Arnold and Slack must have been skillful actors. Their “air of simple rugged honesty” made them master swindlers. When they learned that Tiffany had agreed to appraise the gems they were convincingly exultant, and they were equally delighted with the selection of Henry Janin. At all conferences they affected being both nervous and relieved that they had found some honest men with whom to share their secret.
The second fact was that in the 1870’s everyone had abundant confidence in the “Manifest Destiny” of California and the West. After the completion of the transcontinental railroad, settlers began a drive for the productive lands on the coast. Their success stories added to the legends of fortunes made earlier in gold, silver and trade. At that time, anything good was expected of the West.
As for King, the fame he acquired from the exposure was almost blinding. The New York Times , the Philadelphia Enquirer , the Chicago News , and the Rocky Mountain News gave the exposé more space on their front pages than they did the arrest of Jay Gould and the first reports that Horace Greeley had gone insane, stories which broke at the same time. The London Times publicized King’s act extravagantly, including in its story the first account of how Arnold and Slack had secured the rough diamonds of Amsterdam.
Immediately, of course, rumors began to exaggerate his triumph. There is an unsubstantiated claim that officials of the corporation offered King a tremendous bribe to delay his announcement until they had sold enough stock to get their “investment” back. To this, King is supposed to have returned a declaration that is today preserved in the histories of science: “There is not enough money in the Bank of California to induce me to delay this announcement a single hour.”
Ironically, if the bribe was offered and King did say that there was not enough money in the Bank of California to tempt him, his reply had a dreadful pertinency. An investigation made soon after King’s exposé revealed that Ralston’s bank was insolvent. The next morning Ralston’s body was found in the Bay, and his whole empire crashed.