Field of Schemes

A gem of a story about diamond mines--real and fake!

There were other problems: The low price of gold had depressed mine investing in general, and the Bre-X scandal in Indonesia hurt all the legitimate companies. Eventually, though, we got enough money, and we began commissioning the mine in the fall of 1996.

By the end of 1872, the details of the diamond hoax were coming into focus. Subsequent investigations revealed that Arnold had cashed in on a previous gold-mining deal several years earlier; using that money, he had traveled twice to London, each time leaving from Canada under an assumed name. Once in England, he'd purchased handfuls of raw, uncut gems of low quality--in all, about $35,000 worth.

In 1870 Arnold returned to California and, with his partner, Slack, began creating a diamond field with the illusion of endless wealth. The men selected northwestern Colorado as the site for their "mine" because of its out-of-the-way location and its still-aggressive Indian population, which would discourage most prospectors from nosing around. Then, over the course of several trips to the area--each time leaving from a different Wyoming railroad station to throw off suspicion--Arnold planted the stones, scattering them about by hand, poking them into the ground with rods and, finally, covering his tracks. With the gems in place, they made their play.

In his memoirs, Harpending claimed he was taken just like everyone else. "How so many of the shrewdest men in the world could have been absolutely duped by the great diamond fraud may well be asked," he wrote in a chapter titled "Victim of Big Swindle Explains How Rough Miners Managed to Deceive Men Like Tiffany and Janin."

"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 Harpending's early and active involvement in the scheme still has some modern investigators wondering about his complicity. "I'm not so sure he was innocent," says Dan Hausel, who is researching a book on the scam. "I think he may have helped finance the hoax."

Although it was widely recognized that Arnold had perpetrated the scam, he was permitted to retire to his hometown of Elizabethtown, Kentucky. From there he deflected accusations of his chicanery with bluster.

"I see by the papers that Arnold and Slack are to be prosecuted and eminent counsel has been employed," he wrote in a letter to financiers in San Francisco. "I have employed counsel myself--a good Henry rifle--and I am likely to open my case any day on California Street." Nevertheless, after hiding for months, Arnold settled the prosecution's case against him for $150,000--leaving him with at least that much again in scammed profits.

"Arnold was no ordinary mortal," Harpending reflected at last. "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...Both [he and Slack] had the dramatic gift highly developed. On the stage they might have made the most famous actors of any time."

Howard Coopersmith: It was September 1996. I remember getting the call. I had just left the mine, and I got a call on my cell phone. They had found a 28.3-carat stone, which is about three-quarters of an inch across. It was eventually polished down to a 5.4-carat gem, which was sold to Hyde Park. They sold it to an anonymous Denver buyer that December [for $90,000].

The second big find came in August 1997. I think I was in my truck again and got another call on my cell phone. The guys at the site weren't quite sure what it was. So I came back and put it under the microscope. It turned out to be a 28.2-carat diamond, which, after cutting, yielded a nearly 17-carat gem (later appraised at more than $500,000).

So far we've mined six of the twenty largest diamonds ever found in the U.S. I'm sure we'll get even larger diamonds. There's no reason to think we won't. This is a new deposit. Nobody knows what it can produce.

Dan Hausel: About seven or eight years ago a retired USGS geologist named Lowell Hilpert took me up to the diamond-hoax site, at the foot of Diamond Peak. Within about two hours I found 4 diamonds, 17 rubies and 24 pyrope garnets. That stuff is still there.

The interesting thing is, we now know that the area that was salted is in a place where all geological indications are that you'd expect to find diamonds. Today it would be considered an active area for exploration.

Recently, a company called Guardian Minerals claimed it found some diamonds in the Green River Basin [in Wyoming, just north of the hoax site]. The chemistry there suggests that it's not favorable to diamonds. But you never know.

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