The Great Diamond Hoax Of 1872

A good con man can fool even the savviest of people in the right circumstances. Cousins, Philip Arnold and John Slack were “prospectors” who were pretty good at conning people. The Diamond Hoax of 1872, also known as The Great Diamond Hoax, was a scam where the two prospectors duped prominent businessmen in San Francisco and New York City into buying a fake American diamond deposit. This scheme sparked a short-lived diamond rush across the western United States, including Arizona, New Mexico, Utah, Wyoming, and Colorado.

In 1871, Arnold and Slack traveled through Navajo territory with James Cooper on their way to San Francisco, collecting chrome diopsides, pyrope garnets, and ilmenites. They mixed these with some flawed industrial-grade diamonds that Cooper already had and showed them to a local jeweler and bankers, securing funding for an expedition. The men were joined by Asbury Harpending, and they bought flawed South African stones from Leopold Keller jewelers in London. Back in San Francisco, they displayed their “findings,” and Harpending took some to Charles Lewis Tiffany for appraisal. Valued at $150,000, this appraisal led to the creation of the Golconda Mining Company. As the ruse continued, they hired mining consultant Henry Janin to inspect the mine, and Arnold later acquired more rough diamonds, low-grade rubies, emeralds, and other gems in London and Paris, mixing them with more Navajo spinels, sapphires, and pyrope garnets. These were planted near Diamond Peak, Colorado, on a sandstone outcrop containing itacolumite. In June 1872, they led Janin to the site, where he declared the “mine” to be “wonderfully rich.” Janin’s endorsement of the mine attracted investors like George B McClellan, Nathan Rothschild, Tiffany, and twenty others, and they bribed Spoons Butler to pass legislation granting access to federal land under the General Mining Act of 1872.

Later, the investors persuaded the cousins to sell their stake for $660,000 (about $17.3 million today) and went on to form the San Francisco and New York Mining and Commercial Company. New York attorney Samuel Latham Mitchill Barlow was brought in as their legal representative, who then suggested adding United States Congressman Benjamin F Butler to the legal team. Barlow established a New York corporation called the Golconda Mining Company with a capital stock of $10,000,000. Butler received one thousand shares for amending the General Mining Act of 1872 to include the phrase “valuable mineral deposits,” which enabled legal mining claims in the diamond fields. On August 31, 1872, United States Attorney General George H Williams clarified that “valuable mineral deposits” covered diamonds, and the company was ready to begin mining activity.

Soon everything began to unravel. Geologist Clarence King who had led a survey team that recently completed a Geological Exploration of the Fortieth Parallel had a chance meeting with Janin on a train. King and his team were alarmed at the reports of such a prominent diamond field which their survey had not noted. I’m sure they wondered what they had miss, or maybe they suspected foul play. King sent geologist Samuel Franklin Emmons and cartographer A D Wilson ahead to investigate, with King joining them soon after. Upon locating the site, they quickly concluded that it had been “salted.” As a geologist, King knew that the various stones found in the mine were formed under different conditions and would never be found together in a single deposit. He immediately notified the duped investors.

Meanwhile, the cousins knew it was time to “get out of Dodge” before they were found out. Arnold fled to Kentucky, taking his proceeds from the scheme and bought a two-story brick house in his native Elizabethtown, as well as some five hundred acres of nearby farmland…all of which he had deeded in the name of his wife Mary. In 1873, Arnold ventured into the banking business by purchasing a defunct financial institution in Elizabethtown. In 1878, a feud with another local banker led to a shootout, leaving him with a serious shotgun wound to the shoulder. He died six months later from pneumonia at the age of 49. Slack chose a quieter life, and in 1896, he died in White Oaks, New Mexico, where he had become a coffin maker. Neither of the men ever faced charges for the scam. Law enforcement was different back then.