THE MONEY PIT
part 1 of 2
In 1977, when the inactive Glory Hole mine near Central City was being promoted as a tourist attraction, a visitor seated himself near the rim of the mine's chasm and began eating a picnic lunch of fried chicken. The 900-foot-long gorge blasted down through 300 feet of rock has a crude grandeur that tends to impress sightseers. Few would go out of their way to stare at the large hole on Quartz Hill had it occurred naturally. But the men who made it found a lot of gold down there.
The picnicker might have been ruminating about those untold fortunes as he sat looking into the rubble of the Glory Hole, perched at a vantage point just fifteen feet from an abandoned mine shaft. He probably didn't realize that active gold mines are considered much safer than inactive ones. "The ground just opened up," says a state mining official. The man and his lunch disappeared down the collapsing entrance shaft into the underground portion of the mine. It took days to recover the body.
The picnicker wasn't the first or the last visitor to be taken at the Glory Hole. The mine's founder, a Chicago dentist and entrepreneur named Dr. William Muchow, discovered as early as the 1930s that the Glory Hole could prove more profitable as a means of raising capital than as a working gold mine. Modern con men came to the same realization, including a fast-buck artist from California who ran a multimillion-dollar gold-bullion scam involving the Glory Hole and another mine in the early 1980s. Two local men were killed, their relatives believe, because they uncovered the hoax. Dropped down a 400-foot mine shaft, their bodies and their pickup truck weren't found for nine years.
Nobody knows exactly how much wealth was extracted from the Glory Hole--or how much gold may still be inside Quartz Hill. Postcards for sale in Central City say $200 million in gold was pulled from the pit before steady mining stopped in 1959. A historical sign on a road above town says $89 million in gold was produced by all the thousands of mines in Gilpin County. If historians can't sort such things out, it matters little to the miners, who tend to put more stock in hard rock than hard figures.
"There's more gold left in Gilpin County than was ever taken out," says Norman Blake, who owns 57 mines in the area. The former director of the state Division of Mines, Blake estimates that 90 percent of the gold discovered in the county is still underground. Don McCoy, a geologist hired by Glory Hole owner Colorado Chain O' Mines, Inc., values the mine's existing ore reserves at $5.3 billion. Others scoff at that figure. "All sorts of figures have been put out about that mine over a lot of years," laughs Van Cullar, a geologist and former Gilpin County commissioner who lives in Black Hawk.
But gold mining is a business where men will crush and sort through two tons of rock to get an ounce of metal--and consider themselves lucky. There has always been a tolerance for dross, whether in the mining or in the figuring. As Harvard geology professor Hugh McKinstry wrote in his 1948 tome on mining geology, "Ore reserves consist chiefly of hopes."
The hopes of three men are now tangled up in a convoluted legal battle for control of the Glory Hole and more than 100 other Chain O' Mines properties in and around Central City. Harold Caldwell, 74, claims to be trustee for the land, mines and milling equipment mothballed by Muchow when price controls and inflation made gold mining unprofitable. Robert Barnes, also 74 and a judge in Texas, wants to put the Glory Hole and other mines on the auction block to satisfy an $18.5 million judgment he won against Caldwell following what he describes as a Texas land scam pulled by Caldwell. Caught in the middle is 32-year-old Scott Hobbs, a handyman at a Fedco store in Southern California who says an auction will steal his family's inheritance--a stake in Chain O' Mines passed on to him and his relatives by his great aunt, Nettie MacDougall, one of the company's ten original investors.
"We've got judges lying, lawyers lying and other people lying," says Hobbs, who lives in Newport Beach. "You expect something like this in the Old West, but not in 1994."
Hobbs has allied himself with Caldwell in the dispute. But last year a Colorado district judge called Caldwell's purported trusteeship "a classic textbook case of fraud." Judge Kenneth Barnhill of the Jefferson and Gilpin County combined courts ruled that Caldwell is not a trustee at all but the actual owner of the properties. Because of that, Barnhill ruled, the Glory Hole and other properties must be auctioned off to pay Robert Barnes. But that sale will now have to wait until a personal bankruptcy filed by Caldwell in California this fall is resolved.
Meanwhile, Hobbs has filed a complaint with the Texas Judicial Conduct Commission against the Hidalgo County judge whose judgment against Caldwell included $10 million in punitive damages on a debt that was originally $1.25 million. The judge should have recused himself from the case, says Hobbs, because for years he has known Barnes, who, as a visiting state district judge, routinely works in the same courthouse. "It's so damn crooked," Hobbs complains of the situation.
Judge Barnes and the judge who heard his case, Joe B. Evins, admit knowing each other professionally. Both deny any wrongdoing.
"Hobbs is living a fairy tale," says E. Alan Hampson, a Lakewood attorney who represents Barnes. As part of Barnes's case against Caldwell, Hampson scoured 20,000 pages of documents to piece together a paper trail on Harold Caldwell. Like his great-aunt, who signed over the assets of Chain O' Mines to Caldwell 25 years ago, Scott Hobbs is being bamboozled, says Hampson. "Harold's got him fighting his battles for him."
Caldwell fires back that Hampson is "known as `the Snake' by every attorney in Denver." The Lakewood resident also talks of collusion between Robert Barnes and the judges who have ruled in his favor in Colorado and Texas. "We've had half a dozen groups try to take over the Chain O' Mines since the '60s," he says. "They were kids compared to this Barnes group."
The fight to protect the Chain has busted him, Caldwell says, but he regrets none of it. "You've got to crusade for something in life," he says. Recently, according to the erstwhile mining magnate, he's had to borrow money from his attorney to buy groceries. Now, he adds, "even the dogs are going hungry."
Evidence presented during the trial before Judge Barnhill showed that at least a dozen judgments have been entered against Caldwell in various states since 1986. No money has been collected, says Hampson, who asserts that Caldwell has made a career of constructing a maze of corporations and fraudulent trusts to frustrate creditors and litigants. Even successful plaintiffs, he says, end up lost in the labyrinth, unable to get their hands on Caldwell's personal assets--which Caldwell claims don't exist.
"In court, I've dealt with a number of different con men, and Harold Caldwell is as good as any of them," says Hampson. "In the scope of his operation, he's probably better."
Miners first came to the Central City-Black Hawk area in 1859 and began tunneling through solid rock looking for gold. When they found it, they and their cohorts got to be so common that Quartz Hill looked like a berm of prairie dogs. And with more than 400 claims on the hill and only a few veins of gold, miners spent much of their time not getting along.
As mines multiplied and began running into each other, what couldn't be resolved with a simple hammer blow to the head often ended up in court, which even then was considered an awful experience. Some miners stalled in court couldn't take it and left town. Others continued punching out tunnels, shafts and each other until the 1920s, when an enterprising dentist got off the train from Chicago.
Dr. William Muchow was no ordinary tooth-puller. He was the inventor of dental floss as well as "the amalgamator," a machine that mixed materials for fillings. Muchow sensed opportunity in the cavities dotting Quartz Hill. Forming a holding company to acquire mining claims, he dubbed it the Chain O' Mines. Muchow spent the next two years raising capital and buying up claims. A persuasive pitchman, he convinced most of the other claim-holders on the hill that they could help their undercapitalized operations and end their legal stalemates by selling to the company, which would lease back to them under a profit-sharing deal.
Muchow changed the most heavily mined part of the hill--called "the Patch" for its crazy-quilt pattern of claims--to a glory-hole operation, which used explosives to systematically collapse existing mines from the bottom up to get at the minerals in their walls. Blasted rock was loaded down chutes to ore cars running through a tunnel beneath the works and out the side of the hill to a mill near Central City. When the blasting reached the surface, a pit was formed. The technique was cheaper than conventional mining because gravity did much of the work. And money rolled in: While the rest of the country was mired in the Great Depression, the Glory Hole was reportedly one of the largest mineral producers in the country.
Doc Muchow had a Barnumesque flair that brought a steady stream of fresh operating capital into the Chain O' Mines. On train trips he liked to get the attention of his fellow passengers by rolling a ten-pound ball of gold down the aisle. Once he'd retrieved it and the commotion had subsided, Muchow would fill in curious passengers on the mine that produced his ball of gold--the Glory Hole, which, fortunately for the listener, was just then looking for a few qualified investors.
The dentist was said to be such a disarming pitchman that he once talked a policeman who had arrested him into buying stock in the Glory Hole. He also was cagey, but a conviction on a stock scam in Oregon in the 1940s was the only time authorities caught Muchow on the wrong side of the line between salesmanship and flimflammery.
From the mid-1920s to World War II, Muchow ran the Glory Hole as both a gold mine and a cash cow, fattened on the green of investors impressed with the view from the observation tower he had constructed overlooking the Hole. From the perspective of mining-tycoons-to-be, the investors could survey tiny workers below loading out ore-laden rock.
But some locals say the rock wasn't all that ore-laden. When ore production flagged in the mid-1930s, says one anonymous historian who still lives in Central City, Muchow brought in richer ore from other mines he was leasing, passing it off as bounty from his showpiece mine.
To many locals, however, Muchow, who died in 1969, remains the man who brought hundreds of jobs to the area during the Depression and preserved notable buildings in downtown Central City. Though mill tailings from the Glory Hole buried the town's original train station, Muchow put new roofs on the opera house and a number of churches for free, saving them from the elements, notes Norman Blake, the former director of the state Division of Mines. "He'd treat you right if you treated him right," says Blake, who did construction contracting for the mining mogul in the 1930s and 1940s and says he sometimes had to wait six months for Muchow to pay him. The money always arrived, though--cash stuffed into a letter from Chicago containing new work instructions. "I liked the man," adds Blake.
Like more than a few others in Central City and Black Hawk, Blake is more reserved in his endorsement of the man who became Muchow's successor, Harold Caldwell. "He's a good guy," Blake says of Caldwell, "but I would never do business with him."
end of part 1
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