One day back in 1871, Philip Arnold and John Slack, two weather-beaten prospectors, had wandered into the Bank of California. With them they had carried several sacks, which they told the bank clerk, contained property of great value. For safekeeping they wished to deposit them in Ralston’s bank. In making arrangements it was necessary to state what the sack contained. “Diamonds, rough diamonds,” the duo blurted out. They had found them in a deserted mountain section of the West. As soon as the receipt was in their possession the prospectors shambled out of the bank.

Somehow or other news of those sacks of diamonds, reposing in a dark cranny of his vaults, reached Ralston’s ears. Immediately his interest was stirred. With mines of gold, silver, and refineries bulging with bullion, the thought of diamond fields stayed Ralston’s attention. Look what the Comstock had done for SF. With a diamond mine what might he not accomplish for his beloved city? Ralston saw another chance to invest his Comstock wealth in something spectacular, and he sent for Arnold and Slack to come to his office. A day came when the two roughly clad prospectors shuffled up to Ralston’s desk. They seemed bewildered in his presence. Their attitude said plainer than words that accidentally they had stumbled upon a windfall. A windfall so monstrous that they did not know how to proceed. Being in doubt, they intended to remain silent. Arnold had made it especially evident that he did not want to talk to Ralston. He was afraid of him, he claimed.

Ralston asked the bewildered duo where they had found the sacks of diamonds.

But the prospectors were ignorant of the United States geography. Accidentally they had come upon them somewhere out in the great American desert. Arnold pointed a rough thumb towards the East: “ Out there”. Perhaps it was Arizona, or Colorado, or Wyoming. He didn’t know. Anyway it was about 1000 miles to the east of Ralston’s office. Who knew, out in the great desert, where one wandered? Who cared? And the old prospector laughed. They were mining explorers. They had been looking for gold. By chance they had stumbled upon diamond.

No! They did not want to sell out their rights. True: they had no resources. To get a start, perhaps they would be forced to dispose of a small interest. But only perhaps. On no account would they part with the whole. They did not have money enough to secure title or develop their discovery. Perhaps on that account they would have to take a third party in with them. But they didn’t want an outsider.

Ralston could make nothing of the two shy, cautious, bewildered men before him. So afraid were they of making some regrettable mistake that they didn’t know what to do themselves.

Several days passed and the miners, more amenable to reason, returned to Ralston’s office. They would part with a half interest in their diamond fields, they told him, to men in whom they had implicit confidence. Patiently Ralston pointed out that negotiations were impossible unless the location of the fields was disclosed and some sort of inspection permitted.

Then Slack and Arnold proposed a strange arrangement. On its face it seemed fair enough to Ralston. If anything, it made it the offer more alluring.

They would conduct two men, to be selected by Ralston, to the diamond fields, and allow them to satisfy themselves of their extent but only on one condition: when these men had reached the wild, uninhabited district where the diamond fields lay, they must submit to being blindfolded, both going and coming back.

Full of the adventure of the thing, Ralston agreed. For one of the proposed inspectors he selected David C. Colton of the Southern Pacific, one of the most prominent and levelheaded men of big affairs in San Francisco. Ralston acknowledged that he would have absolute faith in Colton'’ conclusions.

One day Colton departed with the two prospectors. After some time he was back in Ralston’s office. He had been to the marvelous diamond country. Both going and coming back he had been blindfolded; but there he had unearthed more diamonds than he ever knew existed. There was no doubt of the genuineness of the fields or of their fabulous richness, There were acres and acres of precious stones: diamond, rubies, sapphires, emeralds. The whole terrain sparkled with them. On hearing this rose-colored report from a sane official of the Southern Pacific, Ralston went absolutely wild. There was one spot to invest his ”Belcher” millions. There million would beget million. There would be no end to what he could accomplish for San Francisco. Straightway he cabled his old friend Harpending, who was in London on mining business, regarding the diamond discovery. The first telegram was so explanatory that it cost Ralston $1100. But he did not care. Ralston wanted Harpending for his general manager. Would he catch the next boat? Harpending demurred. Ralston burned up the cable with messages. Harpending, an unbeliever in American diamond fields, “felt assured his old friend had gone mad.” Finally, at great personal sacrifice he gave up several lucrative London deals to go to his old friend’s assistance. In the meantime rumors of Ralston’s vast diamond field leaked out in London. No less a person than Baron Rothschild sought an interview with the departing Harpending. But the latter was non-committal, although he was still scouting the idea of diamond fields in his country.

“Do not be so sure of that,” commented the baron, “America is a very large country. It has furnished the world with many surprises already. Perhaps it may have others in store. At any rate, if you find cause to change your opinion, kindly let me know.”

When Harpending saw those sacks empty their contents on his billiard table he kept his promise.

Being a cautious investor, Ralston started an investigation. Who were these two prospectors? Philip Arnold, he discovered, was an old California miner. Originally a California pioneer of ’49, he had come from Hardin County Kentucky. Ever since his arrival he had been mining. Several times George D. Roberts, one of the best mining men in the West and a close friend of Ralston’s had hired Arnold to investigate mining properties for him. Never had he been dissatisfied with the honesty of his work. He was and honorable old-timer.

Harpending, too had known Arnold, and had always found him reliable. As for Slack, he was a plain man-about-town of fair repute. In Ralston’s mind there were no longer any doubts as to Arnold and Slack. They were well-known and honest prospectors, “Old Forty-niners.” Still, all that hocus-pocus coming and going to and from the diamond fields deserved attention.

He decided to proceed carefully. The supply of diamonds might be quickly exhausted; only a “flash in the pan” as it were. That was not the sort of investment Ralston wanted for his Comstock winnings or for investors. Sensing Ralston’s lack of enthusiasm, Arnold offered to go back to the diamond fields, collect a couple of million dollars’ worth of diamond, bring them back to San Francisco and allow Ralston to keep them in his possession as a guarantee of his good faith.

That was fair enough. Ralston accepted. Slack and Arnold left San Francisco promising to be back in record-breaking time.

One night, shortly thereafter, Ralston received a telegram from Arnold. He was at Reno. He and Slack were on their return journey to San Francisco. He urged Ralston to have reliable persons meet them at Lathrop: “ to share the burden of responsibility.” The next morning, after a hurried conference, Harpending, who had just arrived from London, set out for Lathrop to meet the diamond emissaries and accompany them back to San Francisco. Before leaving, it had been agreed that Ralston, Rubery a London friend of Harpending, William M. Lent, and several others interested in the fields would await Harpending that evening in the billiard room of his home on Fremont Street to examine the diamond collateral.

That night an eager group assembled about Harpending’s billiard table. Along about nine o’clock the rumble of carriage wheels and the crunching of gravel on the driveway could be heard.

A moment later they heard the turning of a key in a lock and the shutting of a door. Then, all excitement, Harpending entered the billiard room. Under his arm was an awkward buckskin-covered bundle. He placed it on the table. He had a lurid tale to tell.

Ralston and Lent drew closer as Harpending began: When Arnold and Slack had reached the diamond fields they had struck and enormously rich deposit. With no trouble at all they had filled two packages, such as the one he laid upon the table, with diamond, sapphires, emeralds, and rubies. Then they had started on their return. On their way a violent rainstorm had overtaken them. They had been compelled to ford a river on a raft. The river had been greatly swollen. Accidentally one package had been washed overboard and was irretrievably lost in the flood. But that had been no loss to the prospectors. There were millions of precious stones on the fields. But time was pressing. They could not go back for more, so they had brought only one sack with them – the one on the table.

No time was lost in preliminaries. A sheet was spread out over the green-baize covering. Ralston, Roberts, Dodge, Rubery, and Lent drew closer about the table. Harpending snipped the elaborate cord-fastenings around the bundle. Taking hold of the lower corners of the sack he turned it upside down. Out gushed a cascade of many-colored stones. How they flashed and scintillated in the dim light! As fiery as pieces of stars! They looked as if they would burn holes through the sheet. There lay at least a million dollars’ worth of diamonds, rubies, sapphires, and emeralds. The ransom of a rajah! The loot of a dozen Burmah temples lay before Ralston’s startled gaze. The flush on his cheeks turned a ruby red. Such a sight was worth a kingdom.

Having gorged their eyes to the full, Lent tied up the sack and locked the gems in Harpending’s vault for safekeeping. After that, once a week on Sundays, the same group would lock themselves in Harpending’s billiard room, spread a sheet over the green baize, open the safe, take out the bundle and spill out the gems. Then they would feast their eyes and speculate over each precious stone; descanting upon its size, brilliance, and value.

These men had only one fear: there would be a great depreciation in the value of all diamonds, all rubies, all sapphires, all emeralds, when the news of the contents of their sack and of the field of precious stones was given to the world. Sighing deeply the owners would watch the gems put back into the sack and then into the stronghold until another Sunday should roll around. So far, no attempt had been made at organization. It was generally understood that Ralston, Roberts, Lent, and Harpending, and one or two others, would be in on the deal by virtue of the large sums of money they already had loaned to the prospectors. For those advances there was ample security in the gems on hand, to say nothing of the unexplored diamond fields. Now without further delay Ralston determined to get the diamond fields on a business basis. For that purpose he called a meeting and outlined his plan of action.

First, a large supply of the precious stones would be sent to Tiffany & Co, if New York, the greatest authority on precious stones in America, for examination and appraisal. If their value were proved beyond peradventure, then a mining expert would be chosen to whom Arnold and Slack would be required to exhibit the diamond fields and permit a full examination. Those would be the only conditions upon which Ralston would be willing to handle the situation.

To Ralston’s preamble Arnold and Slack readily agreed. Pending the favorable reports of Tiffany & Co. and the mining expert, Ralston agreed to take care of al incidental expenses, which already amounted to several hundred thousands. Then Ralston looked up government laws governing diamond fields. There was no existing one under which diamond lands could be located and held. Therefore a title must be procured and a law gotten through Congress. It would take plenty of money. But, as usual, Ralston shouldered it. Immediately a prominent Washington lobbyist was secured to engineer and pass an act through Congress that would cover the grounds on which their wonderful discovery had been made. After considerable delay and difficulty a bill was finally drafted, introduced, and passed. It was known as “Sargent’s Mining Bill,” and appeared May 18, 1872. In it the following passage was inserted, purposely to cover the field of precious stones: “Including all forms of deposits, except veins of quartz or other rock then in place.”

In the meantime Harpending, who had taken a little bag of the gems to Tiffany & Co., New York, displayed the stones in the presence of Mr. Tiffany, Horace Greely, General George B. McClellan of Civil War fame, and General Benjamin Butler, a lawyer of repute as well as a United States Congressman. Butler had been included because it was thought that he would be of aid in the legislation needed to acquire the diamond fields, as later proved to be the case.

“Gentlemen,” said Mr. Tiffany, with the air of a connoisseur, as he picked up a huge gem from one of the piles of stones he had been building in front of him, and held it up to the light, “gentlemen, these are beyond question precious stones of enormous value. But before I give you the exact appraisement, I must submit them to my lapidary, and will report to you further in two days.”

Within those limits, Tiffany presented his report before the aforementioned men. The stones were genuine. The lot was worth about $150,000. Ralston was stunned on receipt of that information, as the stones sent to Tiffany were a fair sample of the lot, but composed only about one tenth of those still in Ralston’s possession. It argued a total value of $1,500,00 for the whole.

All that remained now was the choice of an engineer. The name of Henry Janin suggested itself. Henry Janin was one of the best known mining engineers then living. The John Hays Hamond of his day. As a consulting engineer he was without a peer in the world. His ultra-conservatism was his only known fault. He had experted something over six hundred mines. Never once had he made a mistake. Some complained that he never took a chance. He had not an iota of gambling instinct. That was just the kind of man he wanted to expert the diamond fields, Ralston explained. One couldn’t be too careful with other people’s money. Janin valued his services at $2500, an expense that Ralston readily shouldered.

So Henry Janin was dispatched to the region of many-colored gems and made an extensive examination. His report confirmed all that had been claimed for the field of precious stones.

Gems were so plentiful, Janin averred that twenty rough laborers could wash out a million dollars’ worth of diamonds a month.

At least, the uncut jewels were worth the value of all of “Crown Point” and “Belcher” stock combined. Some $65,000,000.

Ralston was so enthused over Janin’s report that he telegraphed Harpending that he was ready to make the initial payments of $300,000 as per agreement, to Arnold and Slack. Not having ready cash, he made immediate arrangements to sell 100 shares of “Crown Point,” which was then bringing $300 a share on the San Francisco stock market.

Ralston now cleared the deck for the formation of his great diamond company. After Janin’s return from the diamond fields there was some talk of incorporating in New York, but Ralston would not listen to such heresy. “San Francisco stood ready to furnish any amount of capital required,” he wired. Moreover, all gems should be brought to San Francisco. In San Francisco they must be cut. Ralston intended to move the great lapidary establishments of Amsterdam [sic] to San Francisco, a decision which caused the Low Countrie s “no small concern”.”

San Francisco was ripe for the new company: The San Francisco and New York Mining and Commercial Company.”  It was capitalized at $10,000,000. Twenty-five gentlemen, comprising the cream of San Francisco’s financial element, men of national reputation for high-class business standing and personal integrity, were permitted to subscribe for stock to the amount of $80,000 each. This initial capital of $2,000,000 was immediately paid into the Bank of California.

The London Rothschilds cabled that they were interested in the diamond discovery. As a result, A. Gansl, the Rothschilds’ California representative, became a member of the company. Among other directors were: Samuel Barlow and Major-General George B. McClellan of New York, who were the resident directors there, where a transfer office was to be maintained. Among San Franciscans, the directorate included: William M. Lent, Thomas Selby, whose daughter had married Ralston’s brother; Milton S, Latham, Louis Sloss, Maurice Dore, W.F. Babcock, William C. Ralston, William Willis. Lent was chosen president; Ralston treasurer; Willis secretary. David D. Colton resigned his substantial position with the Southern Pacific Railroad to become general manager. Such were the men behind the diamond fields. The biggest names in California’s Blue Book. The last word in the commercial and financial world. Men who only allowed their names to be used in 100 per cent concerns.

Handsome offices were engaged in San Francisco. Two or three secretaries were engaged to handle the voluminous correspondence.

The interests of Arnold and S were extinguished by a final payment of $300,000, making with what had been already allocated $660,000 in all. The capitalists congratulated themselves that $660,000 was an exceedingly small sum to pay for property capable of producing a million dollars a month, to say nothing of a million and a half dollars in value already in their possession. Without more ado, the honest prospectors received their money and faded into invisibility.

Not only in Ralston’s office in the Bank of California but in nearly every financial center in the world, the public was keyed up to a point of high speculative craze. “Crown Point,” “Belcher.” Sutro, Mackay, Fair, and O’Brian retired to the region of limbo.

Suddenly, like a thunderbolt from the blue, came a telegram from a small Wyoming station. It was signed by the name of Clarence King, the noted scientist, head of the Fortieth Parallel Survey.

Taking assistants, King had visited the diamond fields in order to give official national significance to a notable local discovery. Readily he had located the fields and found diamond, rubies, sapphires, and emeralds aplenty, scattered over a wide terrain. Immediately the sheer beauty of the anthills had aroused his admiration. Some were powdered with diamond and ruby dust, while others were sprinkled with pulverized sapphire and emerald particles. There were gorgeous things to behold. In the heart of every anthill he found a gem corresponding in color to the dust sprinkled over its surface.

On looking about more closely, King found diamond and sapphires in rock crevices where nature alone could not have placed them. Several times he ran into rubies and emeralds in the forks of trees; but not a gem could he unearth in the underlying bedrock, where, had their occurrence been genuine, the inevitable laws of nature must have placed them.

But when he uncovered a large diamond with the marks of the lapidary’s art still upon its face, he realized the moment had come to explode Ralston’s bubble and he had sent his telegram: “The alleged diamond fields are fraudulent. Plainly they are salted. The discovery is a gigantic fraud. The Company has been pitifully duped.” But how could Arnold and Slack have told that the expert King would examine their diamond field? With any number of unskilled workmen it would have passed muster.

Subsequently some of the “jewels” reached London, where they were recognized as South African. When Arnold’s picture was displayed, there were those who remember him as a buyer of low-grade diamonds and other jewels in the big centers of London and Amsterdam. Thus beyond a doubt the fraudulent nature of the jewel fields was exposed.

Cruel as the blow was to Ralston, as soon as he had been convinced that he and twenty-five members of the high lights of the city’s financial firmament had been duped, he called a meeting of the “San Francisco and New York Mining and Commercial Company.” The Tiffany appraisement and the reports of experts Janin and Clarence King were both examined. Then a complete recital was prepared for the public, bringing out the confidence that Ralston and his trustees had reposed in Tiffany and Janin. In conclusion, a complete acknowledgement was made of the fact that every one had been cleverly duped. Ralston intended that not the least of his enemies should ever connect his name with a fraudulent procedure. Then he made up his mind that rather than endure the whinings of faint-hearted partners he would assume the burden of expenses himself.

Philosophically he accepted the loss of his own investment. With magnanimity he restored dollar for dollar the twenty-five stockholders, who had subscribed to the $2,000,000 capital funds. And they allowed him to do so. There remained incidental expenses for lobbying, experting, etc., and the $300,000 he had paid out of his own pocket to Arnold and Slack; an aggregate loss of no less than $500,000. Thus was expended a half million dollars of his “Belcher” bonanza. This sacrifice Ralston cheerfully assumed. No person should ever even whisper that Ralston had gulled his friends. He would rather sacrifice his last dollar than let any man look him in the face and say: ”I suffered through you.”

At long last Ralston had the receipts-in –full framed. These he hung upon his office wall, where he might have a continual reminder alike of the faith and duplicity of man.