VICTIM OF BIG SWINDLE EXPLAINS HOW ROUGH MINERS MANAGED TO
DECEIVE MEN LIKE TIFFANY AND JANIN.
_Inquiry Reveals That “Salting” of Diamond Field Cost Plotters
$35,000 and Yielded $600,000 Net Profit._
How so many of the shrewdest men in the world could have been
absolutely duped by the great diamond fraud may well be asked. The
truth is it succeeded not because of the baleful craft employed in
working out its details, but because of a rawness that seemed to
disarm rather than arouse suspicion and the audacity and nerve with
which everything was carried out. That diamonds, rubies, emeralds and
sapphires were found associated together--gems found elsewhere in the
world under widely different geological conditions--was a fact that
ought to have made a goat do some responsible thinking. But it seems
to have been entirely overlooked by Tiffany, by Janin, by the house of
Rothschild, to say nothing of Ralston, Sam Barlow, General McClellan,
General Butler, William M. Lent, General Dodge, the twenty-five
hard-headed business men of San Francisco who cheerfully invested
$2,000,000 in the stock and the fifteen mining men who accompanied Mr.
Roberts to the fields, after the San Francisco and New York Mining and
Commercial Company was organized. Had serious attention ever been
directed to that single point it certainly would have prompted an
investigation that must have ended in exposure.
Again, the Tiffany appraisement of $150,000 on not more than a tenth
of the gems actually on hand is hard to comprehend, unless regarded
in connection with another fact--that valuing cut stones and valuing
stones in the rough are widely different matters. While the Tiffany
establishment had undoubted experts as to the finished diamond, it is
doubtful whether a single real expert valuer of rough diamonds was
to be found in the United States. All the lapidary work of the world
was then done principally in Amsterdam, with smaller establishments
in Paris and London. As I understood later, the Tiffany experts
satisfied themselves that the stones were actually diamonds, weighed
them, estimated the cost of cutting and net weight, applied the usual
rules for valuation, which increases enormously with the size of the
stone, made a large deduction and let it go at that. Thus the total of
$150,000 was arrived at. Knowing the immense reserves we had in San
Francisco, the question of fraud probably never entered their minds.
For, although much ingenuity and some money had been invested in the
enterprise of palming off worthless mining properties, it seemed the
height of absurdity to suppose that anyone had invested a million and a
half dollars in “salt.”
And, to do justice to Henry Janin, I think it was this valuation
that disarmed his suspicions and made him less eager to search for
traces of chicane. He said several times on the journey to the diamond
fields that he considered their genuine character established; that
his mission was mainly to estimate their extent and probable value.
As to that, the washings we made might well have satisfied any man.
Perhaps had he remained at the discovery claim, instead of exploring
the country in the neighborhood, he might have detected traces of
fraud. But he considered the most essential thing was an examination
to determine the diamondiferous area, so that his employers might
ultimately get it all.
Yet the most convincing factor of all was the attitude of the men
themselves. Arnold was no ordinary mortal. Throughout all the
negotiations, coming in contact with some of the most alert intellects
of the time, he was always serene, ready, confident--did not make a
single break. Besides he had an air of simple, rugged honesty that
impressed everyone he met. General Dodge, who thought meanly of human
nature, said in a printed interview that he would stake his life on
Arnold’s integrity. Not only that, but Arnold and Slack were willing,
even eager, to submit the diamonds to any test and to lead a party
of experts to the fields, under proper guaranty that their rights
would be protected. They seemed almost exultant when they understood
that Tiffany would value the diamonds. That, of course, would settle
everything, they said. They were equally delighted at the choice
of Janin as an expert. Both of them had the dramatic gift highly
developed. On the stage they might have made the most famous actors of
any time.
And how did a couple of ordinary prospectors secure the very large sum
undoubtedly used to finance the glittering fraud? That was a question
that puzzled many and led to all kinds of surmises about confederates,
syndicates, and so forth. But it was shown later that in 1870 Arnold
and Slack made a couple of lucky turns at selling mines and actually
had at one time in excess of $50,000 to their credit in a Western bank.
This deposit was withdrawn in bulk and was never traced afterwards,
except in the purchase of diamonds in the markets of Amsterdam and
London.
Through the agency of I. W. Lees, this end of the transaction was fully
traced and the facts published. Arnold made two trips to Europe to
purchase gems. Both times he shrewdly avoided American ports, sailing
and returning by way of Halifax. His first visit was made in the fall
of 1870. That time he confined his activities to Amsterdam and showed
great shrewdness in concealing his tracks and avoiding suspicion. He
visited the various gem-cutting establishments, bought many coarse
stones, but not enough from any one firm to make the transaction look
unusual. No one seemed to know his name, but his photograph was at once
identified by many diamond dealers of Amsterdam as the eccentric person
who seemed to have an unusual penchant for inferior stones. He was
regarded as a newly-rich American with a vulgar taste for ostentation,
who wished to overburden his family and dazzle his fellow-countrymen
with a wealth of cheap, almost worthless gems.
[Illustration: WM. BABCOCK
A foremost San Franciscan, director of Diamond Co.]
On his second trip in the early winter of 1872, Arnold went direct to
London, and there, while the conspiracy was at the most ticklish point,
he threw all caution to the winds. One of the largest dealers in the
great metropolis gave the story to the press how one afternoon a
rather rough-looking American appeared at his place of business and
asked to be shown what they had in the way of undergrade or rather
refuse diamonds. He was shown a large stock of South African stones of
the quality known as “niggerheads,” handsome enough, but of very small
commercial value. The American pawed over them apparently without the
least regard for size or quality until he had collected a great pile.
Then he asked indifferently, “How much for the lot?”
The trader hadn’t the least conception that his customer meant
business. However, he made a rapid appraisement of the stones and gave
the price at £3000, or $15,000. To his amazement, the American produced
a huge bank roll, counted off the money, had the diamonds packed in
small sacks, which he deposited in the capacious pockets of an overcoat
and elsewhere, said good-day and departed. In the photograph of Arnold,
the English trader recognized his customer at once.
As near as anyone could estimate, about $35,000 was invested in
“salting” the claims. To this should be added something for traveling
expenses, etc. The men received approximately $660,000. That left a
little over $600,000 net profit.