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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 suspicious 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 diamoudiferous 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 Arnolds 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 all 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 hank. 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 fellowcountrymen with a wealth of cheap, almost worthless gems.
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 hank 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 goodday 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.
A foremst San Franciscan, director of Diamond Co.