In the winter of 1872, the U.S financier Asbury Harpending was visiting London when he received a cable: A diamond mine had been discovered in the American West.
The cable came from a reliable source— William Ralston, owner of the Bank of California— but Harpending nevertheless took it as a practical joke, probably inspired by the recent discovery of huge diamond mines in South Africa.
True, when reports had first come in of gold being discovered in the Western United States, everyone had been skeptical, and those had turned out to be true. But a diamond mine in the West!
Harpending showed the cable to his fellow financier Baron Rothschild (one of the richest men in the world), saying it was a joke. The baron, however, replied,”Don’t be too sure about that.
America is a very large country. It has furnished the world with many surprises already. Perhaps it has others in store.” Harpending promptly took the first ship back to the States.
When Harpending reached San Francisco, there was an excitement in the air recalling the Gold Rush days of the late 1840s. Two crusty prospectors named Philip Arnold and John Slack had been the ones to find the diamond mine.
They had not divulged its location, in Wyoming, but had led a highly respected mining expert to it several weeks back, taking a circular route so he could not guess his whereabouts.
Once there, the expert had watched as the miners dug up diamonds. Back in San Francisco the expert had taken the gems to various jewelers, one of whom had estimated their worth at $1.5 million.
Harpending and Ralston now asked Arnold and Slack to accompany them back to New York, where the jeweler Charles Tiffany would verify the original estimates.
The prospectors responded uneasily- they smelled a trap: How could they trust these city slickers? What if Tiffany and the financiers managed to steal the whole mine out from under them?
Ralston tried to allay their fears by giving them $100,000 and placing another $300,000 in escrow for them. If the deal went through, they would be paid an additional $300,000. The miners agreed.
The little group traveled to New York, where a meeting was held at the mansion of Samuel L. Barlow.
The cream of the city’s aristocracy was in attendance— General George Brinton McClellan, commander of the Union forces in the Civil War; General Benjamin Butler; Horace Greeley, editor of the newspaper the ‘New York Tribune’; Harpending; Ralston; and Tiffany.
Only Slack and Arnold were missing— as tourists in the city, they had decided to go sight-seeing.
When Tiffany announced that the gems were real and worth a fortune, the financiers could barely control their excitement.
They wired Rothschild and other tycoons to tell them about the diamond mine and inviting them to share in the investment.
At the same time, they also told the prospectors that wanted one more test: They insisted that a mining expert of their choosing accompany Slack and Arnold to the site to verify its wealth.
The prospectors reluctantly agreed. In the meantime, they said they had to return to San Francisco. The jewels that Tiffany had examined they left with Harpending for safekeeping.
Several weeks later, a man named Louis Janin, the best mining expert in the country, met the prospectors in San Francisco.
Janin was a born skeptic who was determined to make sure that the mine was not a fraud. Accompanying Janin were Harpending, and several other interested financiers.
As with the previous expert, the prospectors led the team through a complex series of canyons, completely confusing them as to their whereabouts.
Arriving at the site, the financiers watched in amazement as Janin dug the area up, leveling anthills, turning over boulders, and finding emeralds, rubies, sapphires, and most of all diamonds.
The dig lasted eight days, and by the end, Janin was convinced: He told the investors that they now possessed the richest minefield in history.
“With a hundred men and proper machinery,” he told them, “I would guarantee to send out one million dollars in diamonds every thirty days.”
Returning to San Francisco a few days later, Ralston, Harpending, and company acted fast to form a $10 million corporation of private investors. First, however, they had to get rid of Arnold and Slack.
That meant hiding their excitement— they certainly did not want to reveal the field’s real value. So they played possum. Who knows if Janin is right, they told the prospectors, the mine may not be as rich as we think.
This just made the prospectors angry. Trying a different tactic, the financiers told the two men that if they insisted on having shares in the mine, they would end up being fleeced by the unscrupulous tycoons and investors who would run the corporation; better, they said, to take the $700,000 already offered— an enormous sum at the time— and put their greed aside.
This the prospectors seem to understand, and they finally agreed to take the money, in return signing the rights to the site over to the financiers, and leaving maps to it.
News of the mine spread like wildfire. Prospectors fanned out across Wyoming. Meanwhile Harpending and group began spending the millions they had collected from their investors, buying equipment, hiring the best men in the business, and furnishing luxurious offices in New York and San Francisco.
After a few weeks later, on their first trip back to the site, they learned the hard truth: Not a single diamond or ruby was found. It was all a fake. They were ruined. Harpending had unwittingly lured the richest men in the world into the biggest scam of the century.
How did they pull this stunt?
Arnold and Slack pulled off their stupendous con not by using a fake engineer or bribing Tiffany: All of the experts had been real. All of them honestly believed in the existence of the mine and in the value of the gems.
What had fooled them all was nothing else than Arnold and Slack themselves. The two men seemed to be such rubes, such hayseeds, so naive, that no one for an instant had believed them them capable of an audacious scam.
The logistics of the con were quite simple. Months before Arnold and Slack announced the discovery of the diamond mine, they travelled to Europe, where they purchased some real gems for around $12,000 (part of the money they had saved from their days as gold miners).
They then, salted the “mine” with these gems, which the first expert dug up and brought to San Francisco. The jewels who had appraised these stones, including Tiffany himself, had gotten caught up in the fever and had grossly overestimated their value.
Then Ralston gave the prospectors $100,000 as security, and immediately after their trip to New York they simply went to Amsterdam, where they bought sacks of uncut gems, before returning to San Francisco.
The second time they salted the mine, there were many more jewels to be found.
The effectiveness of the scheme, however, rested not on tricks like these but on the fact that Arnold and Slack played their parts to perfection.
On their trip to New York, where they mingled with millionares and tycoons, they played up to their clodhopper image, wearing pants and coats a size or two too small and acting incredulous at everything they saw in the big city.
No one believed that these country simpletons could possibly be conning the most devious, unscrupulous financiers of the time.
And once Harpending, Ralston, and even Rothschild accepted the mine’s existence, anyone who doubted it was questioning the intelligence of the world’s most successful businessmen.
In the end, Harpending’s reputation was ruined and he never recovered; Rotschild learned his lesson and never fell for another con; Slack took his money and disappeared from view, never to be found.
Arnold simply went home to Kentucky. After all, his sale of his mining rights had been legitimate; the buyers had taken the best advise, and if the mine had run out of diamonds, that was their problem.
Arnold used the money to greatly enlarge his farm and open up a bank of his own.