The story of a national hoax rivaling the likes of a modern-day Ponzi scheme began in Kentucky nearly 150 years ago. It would involve the founder of Tiffany & Co. and, later, the captain of the Love Boat.
“In 1870 and 1871, Elizabethtown resident Philip Arnold traveled to Europe, where he purchased a large quantity of rough diamonds and other gemstones,” begins Jessica Gowen, communications director at the Elizabethtown Tourism & Convention Bureau. “He and his cousin, John Slack, then proceeded to plant them in the Colorado backcountry.”
Arnold next drew several moneyed moguls into his plot, including Charles Tiffany, Baron von Rothschild, editor Horace Greeley, and a couple of former Civil War Union generals. They formed a mining and investment company, and the Great Diamond Hoax of 1872 was officially underway.
“Arnold then ‘allowed’ himself and Slack to be bought out for an estimated $600,000—about $8 million today,” says Gowen.
John Scott, who has been Nolin RECC’s attorney for 35 years, describes Philip Arnold as smart like a fox.
“He didn’t push anyone to buy his ‘diamond mines,’” says Scott, who has portrayed the wily schemer for three decades on Elizabethtown’s Downtown Walking Tours. “To the contrary, he acted as if he wanted everything kept a big secret, and let all of these rich, greedy people almost beg him to sell them the mines.”
The truth eventually caught up with the diamonds and the dupes in the person of geologist Clarence King, who exposed the fraud. Arnold and Slack had the good sense to make themselves scarce, and the humiliated investors let the matter die a quick death.
Artifacts and memorabilia recalling this colossal con can be seen at the Hardin County History Museum,including photos, Arnold, Polk & Co.’s bank account register and personal checks, and six industrial diamonds. Augmenting the collection are books written about the hoax and a VHS tape of the 1968 “The Great Diamond Mines” episode from the long-running television Western series, Death Valley Days. Its star? Actor Gavin MacLeod of The Love Boat fame.
Interestingly, Arnold became something of a legend back home.
“When he returned to E’town after having ‘struck it rich’ out west from the sale of his mines, many of the locals looked upon him as a folk hero who was able to swindle some of the richest people in America and essentially get away with it,” says Scott.