An Infinite Deal of Nothing

By Martin Hedges

In one year, 1871, two audacious frauds played out. One said diamonds were lying on the desert floor waiting to be scooped up at a secret location somewhere in the American west, while the other was a mine that everyone knew. While the locals thought it worthless, London went mad for shares in the Emma mine. New research finally answers the question who was responsible.

• Language: English
• Publisher: Martin Hedges
• Release date: Nov 3, 2014
• ISBN: 9781310481253

Martin Hedges

While London's Cockneys delight in telling you they were born “within the sound of Bow bells”Martin Hedges' international yearnings began as he was lulled to sleep by the sound of jets taking off at Heathrow.He is a business journalist though he latterly took a PR role when hired by the French government, trying to convince its oldest enemy, the British, to invest in business in France. The high points of his career include being hit with a golf club by Ted Turner and introducing Boomtown Rats frontman to British press baron Robert Maxwell with a “Bob, this is Bob...” Blackadder-styleHe trained as a lawyer, though he never practised. He trained as a private pilot though he thought that him flying a plane was like giving the keys to the highway to the worst learner in driver's ed.He lives in Acton, not that strip mine of the soul in West London, but a leafy village in the ancient English county of Suffolk, where the sound of woodpeckers on 'fully automatic, safety's off' attacking insects under the bark punctuates the relentlessly demented lowing of wood pigeons.

Book preview

An Infinite Deal of Nothing

Martin Hedges

Copyright 2014 Martin Hedges

The author asserts his moral rights

Published by Acton Books UK: a Smashwords Edition

This ebook may not be re-sold or given away. If you share this book, please purchase an additional copy for each recipient.

To get rich quick was the general desire and the besetting sin of the community was its cheerful surrender of ordinary perception while thus obsessed. It was not alone the poor and the ignorant who yielded to the temptation and substituted credulousness for common sense. Sometimes even the biters were bit.

San Francisco: A History of the Pacific Coast Metropolis; John Philip Young

Chapters

Introduction

The writ

The Duel

Privateers in the Pacific

Letters of Marque

Treason

Lincoln Gold

The Defendants

Pyramid Scheme

Harpending meets Grant

Emma

Emma comes to London

Poker Bob

Emma's coming out party

What did Albert Grant know?

Photographic memory

Diamonds on the soles of their shoes

A trip to the diamond field

Simple twist of fate

'Original promoter of the speculation'

Rubery's rehearsal

The Trial

After the verdict

Conclusion: It just keeps on happening

About Martin Hedges

Other books by Martin Hedges

Appendix: What was money worth?

Introduction

While there was one man who was at the heart of the two most impudent confidence tricks of the 19th century, he was not alone. He was surrounded by many others – victims, perpetrators, or accessories. You have never heard of them. They have been left out of history. Their Dickensian names seem whimsical – names like Asbury Harpending, Professor Silliman, Rubery, ‘Poker Bob’ Schenck, Trenor Park, Marmaduke Sampson. But these were real men; very serious men, men of commerce, men of finance, in the media and in high office in government.

That timelessly powerful magnet of greed attracted this handful of men together and just as soon threw them apart. They were accomplices in a corruption so huge that at the time it shocked the world. Propelled into their conspiracy for just a couple of years, they had roles in not one but two of the century’s most impudent, most audacious attempts to defraud, exposed just months apart. Those men escaped with a lot of someone else’s money, though misplacing their honour in the process.

Some may have been weaker or more conniving than others, but this group was not uniquely villainous, nor were the men two-dimensional pantomime villains. Among them were well-respected paragons of commercial virtue and prudence and among them too there were risk-addicted chancers.

The latter half of the 19th century was uniquely vulnerable to frauds, as the pace of modernisation increased across the globe. The rest of the world aspired to replicate the fruits of Britain’s industrial revolution. So, across the British Empire and beyond, cities and countries sought advances such as gas light, piped clean water and efficient sewerage, while private entrepreneurs saw profit in tram lines, railways, docks and canals.

What we would now view as wholesale corruption was then everywhere in business – it was of the age. It may still be. The so-called ‘corporate veil’ is nowadays a lightproof curtain that just was not there in the 19th century. Nowadays, perhaps only niceties of definition may separate the ‘consultancy fee’ from the bribe.

Recklessness was not seen as such by investors, who seemed unable perceive risk correctly. The odds on any return at all were slim, but the issues put before them had the allure held by dotcoms or high tech startups these days; hence the ravenous demand. It was one of those times when supply set out to meet demand. On the supply side there were plenty of unprincipled men who would conjure up just the sort of offerings the English market wanted to hear of.

London was still where the money was. London money was always required by these infrastructure projects and it was readily provided – especially at the start of the 1870s when the Franco-Prussian War and the Paris Commune disrupted France’s place as Europe’s alternative financial centre.

Civil engineering ventures, public or private, were never risk free, but they were tame compared to mining stocks. A gambling streak endemic then and now in the City of London's very fabric saw otherwise cautious institutions bet and bet again on ventures in places as yet unmarked on the papier maché globe in the partners' office. From territories almost as remote as the moon, reports came flooding back almost daily of new deposits of the raw materials of the industrial age – coal, ores of tin, iron, lead, copper, silver, gold, even precious stones – always of untold riches.

Those first reports of silver and gold discoveries sent footloose men trekking across the wildernesses to the finds. In those pioneering first days many died from disease, violence, or the climate. If they lived at all most remained poorer than when they started out for the diggings.

In the second phase companies began to buy up the more profitable of the proven claims from the lucky few who had made it and become rich enough to stop digging. Typically even the most successful of those first prospectors had only been recovering a small percentage of what had been washed out from the bedrock into watercourses. Exploration moved from a moocher with a pan beside a river to shafts cut into the rock by professionals.

To work those deep mines mechanisation was the only answer. This might mean felling hundreds of trees for timber, shipping in a steam engine or diverting a river for power. Thereafter milling, smelting and refining were required – along with something like a narrow gauge railway to get the product from the mine to civilisation without relying on notoriously inefficient and dishonest teamsters of the world. All in all both labour and outside capital were a must. And because there needed to be something in it for the investment community above and beyond the safe three per cent or so that British government debt known as Consols offered, the rate of return promised by miners was high, often ridiculously so.

So the appetite for risk was there as the rewards appeared immense. Some shares did indeed produce capital growth and stockholder dividends for years. Most did not. Sadly, it is in the nature of searching for an El Dorado, that many explorations, legitimately conducted and honestly pursued, turned out to deliver little or nothing to investors, and within years they failed.

The potential for a massive confidence trick was forever present. The finds were a very long way away. The fact that both the frauds discussed in this book were in American territory not yet incorporated into the United States says much. London brokers who at best may have travelled no further than the South of France for a winter sojourn, or perhaps a Thomas Cook excursion to see the Pyramids, thus knew very little about the realities of mining in the wild world. More especially, they had no first hand knowledge of the geological precepts of where minerals occurred in the earth. Instead they relied on reports from local experts, of whom they only knew by reputation.

Above all they were used to dealing with business associates on trust and upon their honour. The ‘my word is my bond’ philosophy was the model and it still worked well domestically, though it was starting to fail even there. When a chap could be blackballed from the Stock Exchange and rejected from the better gentleman’s clubs for any attempt to deceive, this was a form of self regulation. When the chap was a foreigner who could escape the jurisdiction of clubocracy and the courts, the sanction just did not work.

That era was changing. Almost daily came suntanned men speaking strangely accented English who descended upon the City from Australia, South Africa and North and South America with plausible stories of fabulous reserves. They were unknown quantities to City men, for they had no background reputation that could be tested. In the febrile atmosphere of the early seventies boom, before the bust of 1873, warnings were played down and alarms muffled.

It is worth remembering that during the time of our story San Francisco was more distant from the banking halls of the City of London than any place in the world is in the present day. To reach San Francisco took three weeks to a month at best. And upon arrival Europeans quickly found that the whole western half of the continent was exotic, largely undiscovered and intrinsically dangerous. Leaving the relative civilisation of San Francisco or Sacramento and travelling for a day or so, the landscape could turn as hostile as today’s Afghanistan. It really was like the movies. Gun fights did happen; stagecoaches did get robbed and Native Americans did attack and kill on a regular basis.

And yet it is nowadays astounding how frequently, and without complaint, middle-aged businessmen flitted backward and forward between the comforts of the coal fires and cabs of Victorian London to the pioneer West. Flitted might not be the right word as the journey meant braving two weeks or more on the dangerous Atlantic Ocean – doubly dangerous during any season but the summer – followed by a ten-day journey on the patchwork of lines that comprised the recently completed transcontinental railway.

The pace of change in the 21st century is glacial by comparison with advances that were taking place in the middle 19th. Long and arduous as the transcontinental rail journey was, it must have seemed like time travel to older voyagers. Before the railroad was completed just a few years before in 1869 the same journey was heroically longer. A hundred and more days around Cape Horn, or much more dangerous even than that voyage, the ‘short cut’ route by the Atlantic and Caribbean to the isthmus of Panama, then by dugout canoe across the fever-ridden jungle (with a fairly good chance you or one of your party would die of yellow fever) and then by ship for another week or more up the Pacific Coast.

And when business could not be done face to face there was by the 1870s the telegraph. For the un-wired world of a generation before the transatlantic cable the idea of sending an instant message from America to England was nothing short of miraculous. By way of contrast one only has to compare the death of presidents before and after the cable was at last made to work. It was a whole 12 days before Europe found out that President Lincoln had been assassinated in April 1865. Less than 20 years on when President Garfield was shot, in September 1881, the British public read about the shooting in their newspapers over next morning’s breakfast. The cost of sending transatlantic telegrams was rapidly receding from the original £1 a word (when £1 represented somewhere from £80-£100 in today’s money). So aside from syndicated news reporting that began the traffic, private commercial information was now routinely sent.

And in just the same way the British were using these tools of communication – scouring the world seeking new markets for their products and services – it was giving others the opportunity to look more closely at the way London did business. Americans particularly saw many weaknesses in their commercial adversary’s old school ways. The more unscrupulous among them saw these weaknesses as an opportunity.

A surfeit of easy money chasing seductive propositions in colourful out-of-the-way places touted by loquacious hucksters to investors that thought they knew more than they really did – it was a bubble waiting to happen. This is the story of the frenzy that overtook two continents when two of the biggest-ever bubbles burst and they became known round the world as the Great Diamond Scandal and The Emma Mine Fraud.

One name connected both events. That name is adventurer, liar, racist and self-publicist Asbury Harpending. But this is only partly his story. Real life is not like the movies. The cast of characters in life is longer and the plot so much less simple. And in reality's final reel the baddies are not always caught and the white hats do not always ride off into the sunset.

A note of caution about history. Some of the facts in this book certainly aren't true. Do not despair of me so early on in our relationship, I beg you. I guarantee that you have yet to read a history book which, no matter how well-researched and double-checked, does not contain error. That is the very nature of the sources of history and biography. The protagonists themselves get simple things like dates wrong, even when they record such details at the time. Reminiscence messes further with the mind.

Test yourself on what you did on this day last year, or ten years ago last month. Compounded with fading recollection, mere mortal journalists and typesetters make mistakes aplenty in the course of their work – on names of strangers, or dates that are of little interest to them. It is sad but true that journalists occasionally throw in rumour as fact to fill space or sensationalise what they see as a dull yarn. They did it then and they do it now. Moreover, journalists copy from one another. By doing so often enough they crystallise a rumour into a fact so that it becomes the source material for history, simply by its mere repetition.

I hope to have dissected out the wilder excesses of error. I have chosen to include some single source information, simply because the particular source appears to have that essence of part of the story as told by someone who was there; someone who really knew, rather than someone who is guessing, supposing, or surmising.

The writ

Early in the Spring of 1874, in London, or to be more precise in the office of a small firm of solicitors, West & King, of 66 Cannon Street in the City, a caller is eyed searchingly by his opposite numbers as he awaits an answer. The visitor is an attorney’s junior clerk. He is under strict instruction not to leave West & King without signed acceptance of service of the thin folded writ he has just delivered. On the face of the writ Rubery v Grant was the name of by far West & King’s biggest client.

When that client – a man named Baron Albert Grant – was informed in due course that he had been named in yet another lawsuit, the news did not unduly concern Grant. This time, just for novelty, the case was a libel claim, not the usual high finance breach of contract or misrepresentation suit.

It was not totally unexpected. For a start, the plaintiff, a man called Mr Alfred Rubery was a little strange. He had already transgressed the etiquette of business and had turned up unannounced at Grant's office, demanding to see him. Rubery had threatened that unless he got money he would 'expose' Grant. Grant, a man not to anger, told Rubery to his face to do what he so grandiosely threatened, for he would get nothing.

Even this wasn't the first brush with the weak chinned Rubery. Baron Albert Grant had bested the whiningly persistent and thin-skinned Rubery in court once before, so Grant expected that English justice would soon see fit to dismiss this trumped up case. Grant was a strong believer in every virtue that could be ascribed as English. He went out of his way to practise them himself. In fighting this Rubery in court Grant would be taking what he saw as the proper stance of an English gentleman of his position. In Grant’s mind, just as it was the rightful stance of a country squire to see off poachers, so it was the role of Britain’s most renowned financier to call the bluff of a potential extortionist.

This trial was never going to be uppermost in Baron Grant’s mind. In his business he regularly received writs. He was in and out of courts often; it was part of his business. To his mind at least, he drove very hard bargains and often his partners tried to wriggle out of what they’d previously agreed to by resorting to the law. Of course the other side always saw it differently.

Baron Grant had a business day which routinely stretched 14 or more hours. Invariably he would be simultaneously launching a half dozen international company public flotations on the London Stock Exchange. Grant was a one-man merchant bank. The Victorians had a name for those who managed public offerings. They were called ‘company promoters’. His prodigious output of IPOs made money for the investors; they made more money for the owners of the property that was being floated – and they made most money of all for Albert Grant.

He was constantly consulting with his lawyers, juggling timetables for protracted, complicated commercial lawsuits that inevitably spilled out from previous deals and ran on sporadically through the tortuous English legal system for years.

Baron Grant could not have fully reckoned with the circumstances of this seemingly minor libel suit. He had not even written the libellous words – though ominously it was his name which appeared first on the writ. Grant may have thought little of the outcome either way, but this trial would reach a sensational and damning conclusion. In the aftermath of two massive scandals that threatened the world's financial system, a climate of corruption would be exposed across the entire British business landscape. The perpetrators of the two scandals fled the jurisdiction, so someone had to pay. It would be Grant.

Grant could not see it then, but in the next 12 months his nearly two decade-long run of almost preternatural financial luck would desert him. He did not yet realise how life changing this tiny libel claim would become. Though he did but know it, he was already experiencing the first trickles of a future deluge that would cheat him of his fortune, his tenuous foothold in the Establishment and in the end would ruin him.

Who were these two very different men, Baron Albert Grant and Mr Alfred Rubery, and how had their paths crossed, eventually bringing them into court at London’s Guildhall on a December morning just before Christmas 1874?

Baron Albert Grant

Albert Grant is nowadays a name unknown. Yet from the mid-sixties to the early eighties of the 19th century he was one of the most famous people in Britain; no, in the empire – no, even across the whole of what Victorians liked to call the 'civilised' world. Though the final 20 years of his life would be spent in diminishing rural obscurity, yet on his death when it came, his passing was recorded in obituaries in hundreds, yes, hundreds, of newspapers worldwide. This sounds like an idle throwaway boast on the author's part, but consider this: From a search of one US digital source alone (Newspapers.com) you will note that even provincial newspaper editors in remote hamlets across America thought the name important enough to cover his death. So Americans and Canadians got to read of Albert Grant's demise in The Brooklyn Daily Eagle, Oshkosh Daily Northwestern, Indianapolis News, Lawrence Daily Journal , Harrisburg Telegraph, Fort Wayne Sentinel, Alton Evening Telegraph, The Philadelphia Times, Logansport Pharos-Tribune, San Francisco Call, Reading Times, The Chicago InterOcean, The Norfolk Nebraska Weekly News, Altoona Tribune, Times-Picayune of New Orleans, Princeton Union, Journal Advance of Gentry Arkansas, Ottawa Journal, as well as the New York Times, San Francisco Chronicle, Chicago Tribune and so on. As you can imagine, every provincial British paper did the same, as did those in the British Empire in South Africa, Australia, New Zealand and so on, plus national papers in all the European capitals, that boast is not so idle.

Back in the 1870s he was considered possibly the richest man in England who was not simply a son of money. Grant was benefactor, influencer, politician, press baron, a charmer and above all, he was very, very rich.

In the month when the case opened in London's Guildhall court, Grant turned 43. For a ten years and longer this small, disarmingly charming and dapper man with piercing eyes and a shock of hair worn in ice cream curls, Disraeli-style, made more money than anyone else in England, simply by launching companies. Grant was now among the super-rich.

His beginnings were anything but privileged. His parents were so poor that, after he was born, neighbours took a collection to provide him the baby clothes his parents could not buy.

Now his family were living in a whole Kensington hotel, which he purchased as a pied à terre while a 90 room mansion was being built for him right opposite Kensington Palace.

Grant was cleverer than the rest of the City. Grant became the doyen on the market for foreign issues – railways in South America, canals in France, sewage works in the Baltic, coaling stations in the Far East. All these projects came to London for finance for there was no other source like the City for funds and there was no better way to ensure success than launching with Grant.

Much earlier in his career Grant identified that there was a whole untapped class of investors in shares. That community was made up largely of the recently financially enfranchised lower middle class – people personified by characters from a Dickens novel, rather than a Trollope. Such families now had a small disposable income, but more importantly they had an appetite for risk. Lower middle class men – and increasingly women of the higher social classes – had never before been tapped for funds to invest as the Industrial Revolution rolled across the world. So Grant used innovative methods to reach them.

If it was risk they wanted, then it was exactly what Grant provided. Along with risk he offered almost unbelievably high rewards. Dividends on Grant shares were overwhelmingly in double digit percentages – at least for a time.

Grant was accused of fast practice – and to an extent the charge was true. By their nature his get rich quick offerings took on a life of their own. People rushed to get in, which drove the price higher, allowing the early investors to remove themselves at a profit. Those who came in late paid too much and those who were left holding their shares when the ardour cooled would lose most if not all their money. But unlike out and out fraudsters from Carlo Ponzi to Sir Allen Stanford, Grant worked within the law – or so he thought. In a world where company legislation was thin, Grant exploited loopholes.

Not only that but he knew well the value of public relations in nurturing a company’s share price. He utilised the feeding frenzy that occurs – has always occurred – when an uninformed general public gets behind an investment. Whether it is tulip bulbs, dotcoms or Bitcoins, loose money always seeks risk.

He worked like this. Before Grant launched a company, he struck a deal with the vendors that would be good for them and even better for him. They would sell their unincorporated assets into a holding company he part-owned and take their first small profit. The first company would sell itself to a second company that would go to the market. The vendors, who had shares in the first company took cash and shares from the subsequent company in payment. Grant too would be paid off in money and in shares of the second company. In the process the asset values would have been pumped up – often greatly overpriced. Thus it was always in Grant’s best interest have that company talked up in the press and see the share price rise to meet the asset valuation, while he drip-fed those shares he still held into the market – often at a huge premium.

To sustain that model, Grant built marketing tools at that time un-invented. He used unprecedented direct marketing, along with savvy media buying to reach his target market. While other issuers thought it sufficed to put a few tombstone advertisements in The Times, complacent in the belief that they would reach all the possible buyers they could contemplate, Grant did more. In addition he used provincial media and Sunday papers to an extent that no-one before had done.

His marketing operation was unique and ahead of its time. In a world before typewriters, let alone computers, his clerks had a secret office with cabinets full of handwritten index cards bearing names and addresses of those who had already invested and what shares they had purchased. Grant personally crafted his prospectuses and it was acknowledged by his critics that no-one knew how to write a prospectus as beguilingly as Grant. He had as many as 80,000 copies printed. On the day the prospectus was back from the printers he had them mailed out by first class post literally by the tens of thousand to likely prospects.

Above all it was public relations that secured the issue’s attention with the public. And this media management worked through contacts with the daily financial press and one man in particular, the financial editor of The Times.

Grant had twice been elected an MP – the first time when he was in his mid thirties. He was entitled to call himself a Baron, as he held a title bestowed on him by the King of Italy for funding the construction of that magnificent shopping arcade opposite the Duomo in Milan. He was a Deputy Lord Lieutenant of London, a Freemason and a member of a City livery company. He was a family man who drank little. He was an intellectual, a member of various scientific societies. He gave to charities, both publicly and privately.

If he had a weakness it was that his money overwhelmed him. He rushed to spend it on houses that were unliveable architectural follies – each one more grandiose. He bought art in prodigious, wholesale amounts to fill his own private art gallery. His sense of noblesse oblige and jingoism was so strong that when he saw that Leicester Square the heart of empire was turning into a local rubbish dump, he spent time and a great deal of his money to buy up the square in small parcels of land from its grasping owners – and then to donate it to the nation in perpetuity.

So that was Grant. The man who was suing Albert Grant was everything that Grant was not. Alfred Rubery had been born into minor privilege; though his life’s trajectory was in a downwards direction; dishonesty, crime, a conviction that could easily have meant the death penalty, followed by alcohol abuse and domestic violence.

Alfred Rubery

Alfred Rubery was the second son of an umbrella factory owner from Birmingham. With his share of his father’s inheritance he embarked on a life of indolence. At 21 years old he went to New York on a dubious errand from his older brother. He was sent to hide some of the firm’s assets from the receiver who was chasing the now failing umbrella firm. In America at the start of the Civil War he got caught up in the fervour that many Britons felt. His loyalties were drawn to supporting the slave-owning, cotton-producing South. Travelling across the continent, Rubery fell in with an American in San Francisco who planned to rob the Union of gold and send some of the proceeds to the Confederates, though keeping most for himself.

Their lame plan to become pirates of the Pacific and steal Californian gold being shipped to the East was easily discovered. Rubery was lucky to escape being shot or hanged, but was sentenced to ten years jail – before a British politician friend of Abraham Lincoln appealed for his release.

Even from that time drink was Alfred Rubery’s addiction. It made him almost clinically paranoiac, undoubtedly hypersensitive to imagined insults and so violent that he was manacled by the ship’s captain for his journey back to England after release.

Those were two of the names on the court papers for the upcoming libel trial of Rubery v Grant, but there was a third. The second defendant named was the highly-respected doyen of financial journalism and long-time financial editor of The Times, a journalist with an imposing reputation and an even more imposing name, Marmaduke Blake Sampson. It was Sampson who was actually accused of writing the words libelling Alfred Rubery; the lawsuit roped in Grant by alleging that it was Grant who put Sampson up to writing what The Times published.

This is a story of revenge of Jacobean proportion set in train by a fourth figure whose name was not included in the court papers. That American who tried to steal government gold in the Civil War was using his accomplice Rubery to punish both Grant and Sampson – Sampson for exposing him as a fraudster selling to the English market worked-out and useless American mines, and for ruining more than one of his schemes to dupe English investors – and Grant for distrusting him sufficiently to withdraw his powerful marketing support from this man in order to back a rival.

That eminence grise behind Rubery was born in Kentucky, but spent much of his early life in the Californian gold fields. It was he who planned the pirate expedition with Rubery to steal the Union’s gold shipments. His name? Asbury Harpending.

Entwined around this trial are the two most massive and audacious frauds ever perpetrated on the investing public – certainly the most notorious confidence tricks in the world across the whole of the 19th century. Harpending and Rubery were connected to both.

By the time the libel trial came to court, everyone in Britain and America had heard of the two scandals, unfolding as they did within months of one