Chapter XXXI.

Rude Awakening Follows Dreams of Boundless Wealth; While Promoters Wait for Spring Word Suddenly Comes That They Were Victims of Clever Swindle.

Diamond Already Cut Reveals Fraud; Gems Had Been Carried to Scene of "Find" and Planted Like Seeds.

Just what might have happened in a single month of wild speculation had the stock of the San Francisco and New York Mining and Commercial Company been placed in any considerable quantity on the market, is hard to tell. But one thing is very certain - it would have caused a catastrophe almost without parallel in the civilized world. The public was keyed up to the point of a speculative craze such as even the Comstock never saw, not alone in San Francisco but in nearly every financial center of the earth. Millions upon millions would have been invested. The shares would have soared to fabulous figures. Banks would have advanced money on these prime securities, as was the custom in those times. And then the awful crash There would have been more ruins in financialdom than San Francisco exhibited after the fire. Every day the mails were loaded with letters from eager correspondents making inquiries for stock. The best and unanswerable proof that everyone connected with the company acted in absolute good faith is to be found in the fact that not a share changed hands.

Meanwhile, however, handsome offices were engaged, and David D. Colton was installed in all the dignity of general manager. This was long before the date of typewriters, and it required several clerks to answer letters. A large map showing the general outlines and physical characteristics of the 3000 acres claimed by the company was displayed in the office. It showed the relative position of Discovery Claim, Ruby Gulch, Diamond Flat, Sapphire Hollow, and other locations with names equally suggestive of wealth without limit. Many longing eyes were cast on that map by would-be speculators. The company had considered a plan for holding and working what was known as Discovery Claim on its own account, and granting concessions in the remaining territory for so much down in cash and a royalty on the gems recovered.

Some fifteen or more bona fide offers were made to purchase a concession for $200,000 cash and a royalty to the parent company of 20 per cent. Not only that, but the purchasers of such concession would have been able to place stock on the market and sell the shares like hot cakes. Quite a few million could have been gathered in from that source alone. Why not? Even granting that the element of gambling was strong, nevertheless, such a property had a far better backing of apparent value than nine-tenths of the wildcat mining schemes launched every week on the stock exchange.

Not only that, but three other diamond and ruby companies were organized, each with fairly representative men behind them. One of these companies exposed to public view a gem that looked like the headlight of a locomotive, seen through a fog after dark. It was known as the Staunton ruby, and was generally conceded by experts to be a genuine stone of high quality. No one seemed able to give more than a guess at its value, but the opinion was unanimous that only some rich and powerful nation could purchase it, to adorn a scepter or a crown. All of these companies were merely marking time, waiting till the great, proved, unquestioned company should say ''play ball" and start a speculative market for everyone.

But no such misfortune happened. On November 11 a telegram was received from Clarence King by the president of the San Francisco and New York Mining and Commercial Company dated from a small station in Wyoming stating that the diamond fields were fraudulent and plainly "salted." This, of course, caused a wild excitement among the officers of the company. They held a hurried meeting. They were simply stunned. King was reached by wire at once, and agreed to take a party in and prove his statements. A party was at once organized for this purpose. The members were Henry Janin, D. D. Colton, John W. Bost and E. N. Fry.

Clarence King was a geologist and engineer in the service of the United States Government, a man of some professional distinction and of talent in the literary line. It is worthy of note here that some years after the diamond story broke, King wrote a perfervid narrative entitled "Mountaineering in the High Sierras." In it he described an ascent of Mount Whitney, the highest peak in California, and dragged himself through a series of hair-breadth escapes that put every Alpine adventure in the shade. A geologist by the name of W. A. Goodyear knew something of the region, visited Mount Whitney, made the ascent on a mule with settled habits of reflection and never dismounted till he reached the top, proving that King had never been there at all. All of this Goodyear described in a widely circulated magazine. The laugh that followed broke King's heart. He died a few months later.

It was this same gentleman who late in the fall of 1872 made up his mind to have a look at the diamond fields. Notwithstanding all of our attempted secrecy, almost anyone could place his finger on our claims. Not only that, but at least two men, Berry and McClellan, had actually been at the fields, saw the old washings and the tools left by the Roberts party, and it was one of these who guided Mr. King to the spot.

Mr. King's story makes the discovery of the fraud rather a matter of deductive reasoning, whereby little straws of evidence are put together one by one and formed into the nest that holds the egg of proof. It is easier to construct this nest afterwards than before. I heard myself a somewhat different version of the story. In company with Mr. King went a middle-aged German, a sort of cross between a camp follower and a friend. Like a "super" in a great dramatic performance, he did not cut a very large figure. But many years afterward I met him in New York and he told me a very interesting story. On reaching the diamond fields, he said, notwithstanding the intense cold weather, both he and Mr. King began washing for diamonds, and naturally enough found what they were looking for. In fact, the geologist came very near being fooled as badly as anyone else - wanted to leave instantly, and thought of going to San Francisco to have a talk with the directors of the company. But the German gentleman felt differently. He was not overburdened with wealth, had never been in any place before where diamonds could be picked up without even saying, "by your leave," and he was naturally averse to leaving a place so full of delightful possibilities. So he arranged a brief respite before departure. In the meantime he was washing "dirt" to beat the band and every now and then pocketing a sparkler that he valued at a small fortune. Suddenly he came on a stone that caught his eve and filled him with wonderment. It bore the plain marks of the lapidary's art. He took it immediately to his principal. "Look here, Mr. King," he said. "This is the bulliest diamond field as never was. It not only produces diamonds, but cuts them moreover also."

King grabbed the half-cut diamond. Everything was clear as day. Beyond the peradventure of a doubt the fields were salted. He hunted out evidence that he had overlooked before, and very soon was in possession of proof quite aside from the partly cut gem, that a wholesale fraud had been committed.

I am not giving this story as a fact - simply offering it for what it is worth, and certainly without any desire to detract from the great service rendered by Clarence King.

Mr. King reached the diamond fields on November 2, 1872. On November 10 he was back to the railroad and sent the famous dispatch - that the company was duped.

Also he waited for Messrs. Janin, Colton, Bost and Fry, the party sent from California. They went together to the diamond fields and the now plain nature of the plot was thoroughly exposed. It is not necessary to go into any of Mr. King's geological conclusions or the entire evidence upon which the conclusion was reached. Two or three facts are enough to indicate the satisfactory nature of the proof.

Mention has been made of ant-hills sparkling with minute but veritable diamond and ruby dust. Perhaps because they were so pretty no one ever disturbed them. But if somebody had taken a notion to give one of them a kick their supposititious nature would have been apparent. They weren't ant-hills at all. They were fakes; the work of a sinful man, not of the moral insect. They were also works of art; no one would have suspected guile from looking at them.

A close examination revealed three holes evidently made with a stick or some sharp instrument, at the bottom of each of which a gem rested. There is little doubt that all the "salting" was done in this way, except that as a rule the holes were carefully closed. But in such extensive operations a little reckless work was likely to slip in.

Finally, on the top of a large flat rock, several rubies and diamonds were found pressed into crevices to hold them in place. This was so grotesquely raw that it seems incredible, and led to a story that some of the diamonds were in the forks of trees. Unfortunately for the story, there weren't any trees in the neighborhood.

The party returned to San Francisco late in November. On the 25th of that month the general facts were given to the press, that the diamond fields were a fraud, and that everyone had been taken in. The excitement was intense. The Associated Press kept the wires humming with the news for days, transmitting fuller reports than were published here, although the local papers printed whole pages. Wherever a printing press ran, the world knew the story of the diamond fraud.

The trustees of the San Francisco and New York Mining and Commercial Company held various meetings and a select investigating committee was appointed. W. H. L. Barnes was the company's regular attorney. Messrs. Hall McAllister and S. M. Wilson were added to the staff to ferret out and punish those guilty of the fraud. Everyone connected with the early history of the transaction gave testimony, every line of evidence was hunted down.

Among other things, an accomplice came forward by the name of Cooper, who admitted with noble candor that he was the author of the whole scheme, though unrighteously deprived by his welching partners of his just share of the spoils. Salting mines was the commonest thing in the past, and isn't yet to be classed with the lost arts. Talking with Arnold and Clark, whom he knew personally, of how the "salting" of gold and silver mines had been overworked, he suggested the "salting" of a diamond field as a pleasing variation, and told how small diamonds, such as those used for drills, could be readily obtained. According to his story, Arnold and Slack hit greedily and a triumvirate was formed to carry on the fraud. This was nearly two years before the Janin examination. Cooper was undoubtedly a confederate, did a lot of advising and suggesting, but was kept in the dark concerning the most important details. Also, he was promised a liberal share in the booty and his confession was prompted chiefly by a desire for revenge. He gave Arnold and Slack the full credit for everything.

The statement of Cooper was made not only to the special investigating committee, but also to the grand jury of San Francisco. The latter body indicted no one.

On November 27 the trustees of the San Francisco and New York Mining and Commercial Company met for the last time. At this session it made a final report to the public, giving its brief history, the confidence placed in Tiffany appraisement and the report of Janin; the final statement that the properties it claimed to be diamondiferous were "salted' and that everyone had been cleverly duped. All its business was summarily suspended and its attorneys ordered to wind up its business at once.

Appended to the report were statements from Clarence King, describing his discoveries, from Henry Janin, confirming Clarence King, and admitting his former errors also from Messrs. Colton, Fry and Post, all denouncing the fraud.

If anything were lacking, news came from London that the diamonds we had sent there were coarse, almost valueless "niggerheads'' from the South African fields, and had been purchased in bulk there from a dealer nearly a year before, who identified them perfectly.

The late diamond millionaires, who had been rather chesty, presented a sad spectacle on the street. They were pursued everywhere with jibes and jokes. Some of them went into retirement till the storm blew over. There never was a better illustration of the joy to be found in triumphing over the sorrow and discomfiture of others.

Louis Sloss
President Alaska Commercial Co., director Diamond Co.

Milton S. Latham
Former Governor and U. S. Senator, director of Diamond Co.