Tony Vagneur: High risks, embarrassing rewards |

Tony Vagneur: High risks, embarrassing rewards

In the Garden of Eden, the serpent convinced Eve to eat from the tree of Good and Evil, saying no harm would come to her, and forevermore the world has been inhabited with con men of every stripe and shape. The Great Diamond Hoax of 1872 exemplifies what happens when lies and greed intersect at the highest levels.

This was a Colorado story, although the hoax was played out from coast-to-coast and as far away as England. How could two ne’er-do-well grifters put together a scheme that attracted bankers and high-roller businessmen, spittle running down their chins in anticipation of the great rewards that awaited them?

Phillip Arnold was working for a company that made diamond-headed bits for cutting rock (such diamonds are not of comparable value to the awe-inspiring gems you sometimes see ostentatiously displayed on many women — and some men — during Aspen’s “society” seasons). Apparently, he stole a number of uncut and cast-off diamonds used for this sawing purpose, put them in a small bag and with his partner, John Slack, went to visit George Roberts, a rather shady businessman known for making quick decisions.

Roberts, impressed with the idea of a diamond mine claim, convinced the men to store them with the Bank of California, chaired by William D. Ralston, a man continually on the lookout for quick returns on promising investments and who had been clued in to the “secret” find by Roberts.

The scammers, Arnold and Slack, Kentucky cousins, never quite mentioned where this great field of easy to score diamonds was located, but after buying more industrial-grade diamonds from London and Amsterdam dealers with “down-payment” money on their claim, they salted their “mine,” located in Northwestern Colorado, and took Roberts, some others, and a nationally respected engineer on an exploratory examination of the diamond field.

Naturally, Arnold and Slack insisted that the investors be blindfolded on the journey so that they could not reveal the location. Mixed in with the diamonds were rubies, sapphires and other rare gems (most likely bought from Arizona Indian tribes) and the investors (and the engineer) were more than totally enamored with visions of great wealth.

While all this was going on, other high-dollar investors were included in the group, names that still have meaning today such as Gen. George McClellan, Horace Greeley, Baron von Rothchild and Charles Tiffany of Tiffany and Co. A diamond-mining company was formed, stocks were issued and significant amounts of money were laid out, not the least of which was $650,000 going to grifters Arnold and Slack to buy them out. Let it be said that none of these men, and Tiffany, could much tell the difference between industrial-grade or precious-cut diamonds and the scam snowballed forward.

Newspaper reports of a significant find, even though the location of the mine was still unknown, sent get-rich dreamers to all points in New Mexico, Arizona and Colorado. Such a frenzy hadn’t been seen since the 1849 California Gold Rush, even though no one knew exactly where they were going. Few wanted to be left behind.

Coincidentally, government geologist Clarence King pieced together the reports of the discovery and concluded the diamond field was in an area he had already surveyed, in Northwestern Colorado. Not wanting to be embarrassed by the fact he had missed such a significant find in his original survey, he and a couple of engineers rode to Colorado muleback in the cold of autumn to make sure they hadn’t missed anything.

In short order, they discovered the salted “mine,” precious-looking stones appearing on top of barren ground, stuck in anthills, shoved between cracks in the rocks and, after four days of examination, were certain that the whole thing was a complete hoax. Additionally, according to King, such mixtures of gemstones do not appear in nature as they were planted in the areas in question.

The investors were publicly embarrassed and chastised in the press for being so gullible. Arnold and Slack had long before slipped away and, it appears, squandered away their fortune in ways common to those who suddenly become rich, like many of today’s lottery winners.

The Diamond Hoax of 1872 was big, but not unique in its hoodwinking of supposedly sophisticated investors. In an era where a sudden, rich ore strike could make a man a millionaire overnight, it was almost just as easy to make him a fool. The possibility of instantaneous success was too strong for many, blurring the dangers that lurked in an unregulated, wide-open field. Speculation was the name of the game, and only after the deal legitimately played out could it be considered a true investment.

The word of advice then, just as it is today, “If it seems too good to be true, it probably is.” And yet, people continually fall for the “get-rich quick” schemes. Sometimes they get lucky; sometimes they don’t.

Tony Vagneur writes here on Saturdays and welcomes your comments at

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