Hi I'm the History Guy, I have a degree in history, I love history, if you love history
too this is the channel for you. Late at night on November 25th
1870, two bedraggled looking men clutching a leather sack knocked on the office door of
San Francisco businessman George Roberts. They explained to him that they had arrived in the
city too late to put their parcel into the Bank of California, and asked him if he would be willing
to put their bag in his safe for the night. Well of course that made Mr. Roberts wonder what was
in the bag. The two men were tightened up but George Roberts was a clever businessman and he
was able to wheedle some information out of them on the solemn promise that he would tell nobody
else. Well, if the two men hoped that George Roberts would keep their secret, they would be
sorely disappointed. He was apparently contacting friends almost the instant they left his office…
because what was in the bag was simply too good a business opportunity for a man like George Roberts
to ignore. The bag was filled with uncut gems: rubies, emeralds, sapphires, and lots and lots
of diamonds. And the discovery of what was quite apparently the richest gem field in the Americas
is a story that deserves to be remembered. Philip Arnold hailed from Elizabethtown,
Kentucky. He was poorly educated, he had been an apprentice to become a Hatter when he decided to
enlist in the army to serve in the war against Mexico in 1845. After the war he become one of
the hundreds of thousands of 49ers who had come to California to strike it rich during
the gold rush. He'd worked in mining operations throughout the West, making enough money to buy a
farm and start a family in his native Kentucky, although he continued to work in the West and
only returned home periodically. In 1870 are left his job working for a company that manufactured
drill bits for mining, and went to partner with his cousin a man named John Slack who
was also a veteran of the Mexican War and also a 49er, and the two of them had worked together
at a silver mine in New Mexico and they would not to seek their fortune in diamonds and by
November of that year the two prospectors had managed to fill a bag with uncut diamonds and
George Roberts the man upon whose door they had knocked wanted a piece of the action.
One of the first people that Roberts contacted was William Chapman Ralston, one of the richest
men in San Francisco and the founder of the Bank of California, and Ralston contacted a colorful
mining financier named Asbury Harpending, who have been involved in mining in the West to manage the
project. Before they knew it, the two backcountry prospectors had some of the richest people in San
Francisco asking to be their partners. Harpending said of them, they had all the manner of a couple
of simple-minded fellows who had stumbled upon something great, and bewildered by their good
fortune were simply afraid to trust anyone with their momentous secret. But the promise of more
money than they could ever imagine was too much to pass up and they sold 50% of their stake.
They were given in advance of $50,000 roughly the equivalent of $900,000 today and told to go back
to the mine and bring back more gems as proof of its value. They returned in the summer of 1871
with a burlap bag brimming with gemstones. Harpending took the bag to a meeting of the
ambassadors, dumping them on the table and what he described as “a dazzling many colored cataract
of light”. They sent 10% of the jewels to New York to be appraised by the most knowledgeable
jeweler in America, Charles Louis Tiffany the world-famous founder of Tiffany & Company.
According to Harpending, Tiffany's assessment was, “Gentlemen these are beyond question
precious stones of enormous value.” Eventually he estimated the value of the gems just 10% of those
that are Arnold and Slack had brought back that summer and $150,000, making the whole bag worth
a staggering 1.5 million dollars. The group that recruited more investors notably George
B McClellan who had been commander of the Army of the Potomac during the Civil War and had once run
for president, and Benjamin Franklin Butler, who had been a Major General during the Civil War,
and was now congressman who would be helpful the investors considered in securing the land if the
gem field turned out to be on federal property. Now more than ever, the wealthy group of investors
wanted to buy out the two Kentucky miners who had discovered the gems. They gave them
another hundred fifty thousand dollars on the promise that they would bring a
bonafide mining inspector to inspect the claim, Harpending engaged Henry Janin, of whom he said,
as a great mind expert and consulting engineer, he was without peer in the United States,
perhaps in the world. In June of 1872 Janin and Harpending traveled with Arnold and Slack by
train from St. Louis to the tiny town of Rawlins Wyoming. There they had a grueling four-day track
to the site. What they found there amazed them. They found a high mountain Mesa where diamonds
could literally be discovered merely by kicking the dirt. Harpending said, for more than an hour,
diamonds were being found in profusion together with occasional rubies, emeralds, and sapphires.
Janin assured me that the discovery location alone which we had partially examined was certainly
worth many million dollars. The investors quickly bought out Arnold and Slack, they received another
$150,000 and then sold out some $300,000 in stock. The total take was some six hundred fifty thousand
dollars, nearly twelve million in 2018 dollars. That was a tidy sum but nothing compared to the
value of the gem field. The wiley bankers had taken the claim from the miners who found it,
for a steal. As Harpending noted, “thus the decks were cleared”. But even they did not
have a real appreciation of the value of their claim that actually occurred by coincidence.
Janin happened to run into a team of government geologists, including Clarence King, on the train
from Oakland. King was a Yale trained geologist who was in charge of an immense federal mapping
project called the 40th Parallel Survey. They decided to visit the site in October of 1872.
They, too, were amazed as raw gemstones were easily found laying about. They were able to
survey more thoroughly and even dug a 10-foot beak trench where the greatest diamond deposit
should be. What they found astounded them. They rushed back to San Francisco to tell
the new owners of their discovery. On November 11th 1872 they told the startled investors the
amazing news they had about their famous gem claim. It was...utterly...worthless. The gems
had been scattered about salted and ordered to fool investors, some of the wealthiest men in
America had been taken to the cleaners by a couple of backcountry rubes. Filiberto might
not have had a lot of education but he was no dummy. He hadn't stumbled upon George Roberts
business by mistake. He knew exactly who George Roberts was and exactly to whom he was connected,
and he knew the best way to get George Roberts to sink the hook on their con was to get him to
"solemnly promise" not to tell anybody else. They've gotten the diamonds to bait the con
from Arnold's former employer. He worked for a company that made drill bits, diamond drill
bits. Diamond drills used chips of low quality industrial grade diamonds, and he had stolen the
raw diamonds from there. He and his cousin had then added raw gems: opals, emeralds, rubies,
and sapphires they'd bought from Native Americans when they had been miners in New Mexico. When they
got that first $50,000 advance they hadn't gone back to to mine diamonds, they hop a ship for
London and under assumed names bought thousands of low quality, uncut diamonds on the market
for just $20,000 and then Charles Tiffany valued just a tenth of those to be worth over $150,000.
They use some of their next advance to purchase more stones to salt about a half acre of ground
in far northeastern Colorado near a low mountain still called, Diamond Peak, and those had fooled
their investors. But how did they do it? How had they fooled a respected mining engineer,
and the most knowledgeable jeweler on the continent? It turns out Charles Tiffany and his
lapidary actually had almost no experience with uncut stones as stones were almost exclusively
cut in Europe and had appraised them as if they were for higher quality than they really were and
Henry Janin assured by Tiffany's valuation didn't even consider fraud, in addition the mine engineer
had been promised an option to buy a thousand shares of company stock shares that would have
been worthless had the mine been fake the thought does not seem to have even crossed his mind. All
the experts' confidence reinforced each other. Philip Arnold moved back to Kentucky
where he bought 500 acres of land that he put in his wife's name. The two were indicted for
fraud by a grand jury, but the investors were too embarrassed to pursue criminal charges.
Arnold denied that he had salted the claim but he did end up settling with one of the investors for
$150,000, but that means he still came out far ahead on the deal. He died of pneumonia in 1878.
John Slack seemed to disappear, but a 1967 book on the Great Diamond Hoax asserted that he became
an undertaker and died in New Mexico in 1896. Thats unproven, but if it's true it raises an
interesting question because the man who died in 1896 only left his family about $1,000 and
that means what happened to the rest of the money that he made in the Great Diamond Scam.
To understand why this could happen so easily you do have to understand the period. These investors
had made millions of dollars on the California Gold Rush, they had great faith that the mineral
values of the western United States could bring untold wealth, they had seen it happen. It was
all too easy to believe. Far too easy, it seems, because emeralds sapphires and rubies had nowhere
else in the world been found alongside diamonds. According to Harpending, "that fact ought to
have made a goat do some responsible thinking." Of course the hero of the story is Clarence King,
the Yale trained government geologist. He became famous for his role in covering the Great Diamond
Hoax and was one of the great geologists in American history. His survey mapped
an extensive part of the West between the Rocky Mountains in the Sierras. He authored
several famous books and three mountains are named after him. In 1879 when Congress
consolidated all the national surveys and created the United States Geological Survey,
he was named as its first director. He died of tuberculosis in 1901 at the age of 59.
It's hard to figure out what lesson to take from the Great Diamond Hoax of 1872. There is some
delicious irony in two Kentucky rubes fooling some of the most prominent men of the day,
but crime pays is never a good lesson to take. Maybe the best lesson is that science
wins in the end. In any case, it is a ripping yarn, history that deserves to be remembered.
I'm the History Guy and I hope you enjoyed this edition of my series, 5 minutes of history,
short snippets of forgotten history five to ten miles long. And if you did enjoy them please go
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