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THE AMERICAN DIAMOND MINE SWINDLE
Mining history article by Harold Hough August/Sept. 2009

Salting mines was common in the Old West. However, it took an especially good scam to con canny investors like Baron Rothschild, Horace Greeley, banking tycoon William Ralston, and jeweler Charles Tiffany. And it took two great geologists to unravel what turned out to be one of the greatest hoaxes in American history.

The story began in 1872, when two government geologists returned to San Francisco to learn that two prospectors had discovered what was the largest diamond discovery in the world and that some of the richest people in the world had created a company worth $10 million to exploit it.

The two geologists, Clarence King and James Gardener, had just finished a five year exploration of the West for the Geological Survey and in their reports they insisted that there was no indication of a major precious stone deposit in the West. Now, they were being told that they had missed the largest diamond deposit in the world. To them that was not only unthinkable, it was an insult to their professional skills.

But, despite their skepticism, everything they heard indicated that the discovery was real. William Ralston had learned of the discovery when the two prospectors had deposited hundreds of uncut diamonds, rubies, emeralds, and sapphires in his vault. He had pressed them for the story of their discovery, and being a suspicious man, had carried out an investigation, which included sending mining experts to the site, who were able to pick up dozens of precious stones right off the ground.
Even though the mining experts had found what they estimated to be $100,000 in precious stones, Ralston decided to play it safe and bring in America's greatest diamond expert, Charles Tiffany. There, in the presence of US Senator Ben Butler and New York Attorney Samuel Barlow, Tiffany appraised them and called them, "precious stones of enormous value." Then, just to double check himself, he sent the stones to his lapidary to verify his valuation. The lapidary concurred and valued the packet at $150,000.

Ralston was a cautious man and well aware that scams were common in the West. So, he hired another mining engineer and consultant, Henry Janin, to go back to the claim and verify the previous report. Undoubtedly, one reason Ralston was suspicious was that the two prospectors, Arnold and Slack, had refused to show where the claim was and had insisted that anyone going out to the claim was to be blindfolded several times during the trip so they couldn't locate it. But, when Janin returned with a report that said that twenty miners could remove one million dollars of stones a month, he was finally convinced and proceeded to create a company that would exploit the claim. The two prospectors gladly sold out to Ralston for $300,000 apiece and left San Francisco, with Ralston's blessings.

FINDING THE FRAUD

Despite Ralston's diligence, the two geologists didn't believe the story because it flew in the face of the science of geology. They know that diamonds appeared in placer deposits or in pipes of metamorphic rock. They hadn't seen these conditions in the West. They also knew that rubies, sapphires, and emeralds were completely different types of stones and wouldn't be found with diamonds. Something wasn't right.

The geologists managed to meet Janin to hear his story. He spoke of a strange, conical, flat topped mountain in the middle of the desert. He had been blindfolded often during the trip, but he knew that he had been on the train 36 hours before leaving it at a small station. He had spent two days riding blindfolded on horseback before arriving at the claim. According to Janin, they traveled the whole time with the sun to their faces and the weather was perfect.

Armed with this information, King and Gardener proceeded to locate the mysterious claim. They knew that a 36 hour train ride would take them beyond Promontory Point, Utah and near the Wyoming border. They also discovered that most of the Western mountains had rain while Janin was traveling, with the exception of Northern Utah and Southwestern Wyoming. Armed with this information and the knowledge that Janin traveled south for two days, gave the two enough information to uncover the swindle.

King and Gardener studied maps of the area and soon found a mountain that fit Janin's description. It was on the edge of the Uninta Mountains, east of Salt Lake City. While Gardener remained in San Francisco, King headed to the present town of Green River, Wyoming. There, he hired a German prospector to help him study the diamond deposit.

They arrived at the top of Table Rock on the evening of Nov. 2, 1872. Before the sun set, they were finding diamonds, rubies, emeralds and sapphires just as previous visitors. But, thy saw no sign of a fraud. The next morning, they resumed their work. Suddenly, the German prospector stooped over, picked up something, and yelled, "Look Mr. King, this diamond field not only produces diamonds but cuts them also."

King ran over and looked at the stone. It was partially cut and polished, proof that the claim was salted. Now that they knew what they were looking for, they discovered more evidence of fraud. The stones had been jammed into the ground with a stick and some rocks bore the scratches of a heavy iron rod. King returned to town and wired the bad news to San Francisco. Ralston quickly sent out some company officers to verify the report and began a manhunt for the two prospectors.
As the hoax unraveled, the brilliance of the hoax became evident. Soon a report came from Amsterdam that some Americans had been buying large inferior uncut diamonds a year before. The total amount purchased was $25,000.

The reason Tiffany and his lapidary had been fooled was that they had never seen uncut diamonds before. They bought their stones cut and polished and didn't know how to grade the raw pieces or how much weight was lost during the cutting process. Tiffany's enthusiasm had infected the rest, including Janin, who knew better.

Ralston was an honorable man and reimbursed all the investors. Although he escaped blame, he was ruined and later committed suicide. Arnold was found back in Kentucky and when the courts refused to extradite him, he agreed to return $150,000 in exchange for dropping all charges. Although he was left with another $150,000, he didn't live long enough to enjoy it. He invested his proceeds in a bank and was later shot by a banker.

No one knows what happened to the con man Slack. He disappeared and was never found. One can only assume that he left San Francisco and kept his mouth shut. Clarence King became something of a national hero. Although he had many offers, he continued to survey the West for the government and was instrumental in developing the reputation of the US Geological Survey. His books on mountaineering are now considered classics. The Great Diamond Hoax reminds us how even the best of experts can be fooled. It took two unknown geologists who were more concerned with geological facts to uncover one of the greatest swindles in American history.