Inactivity and a Change of Leadership, 1926-1932
In June 1926, bonds matured again, and again there were no funds to pay off the lien holders. Sam Reyburn, immersed in his job in New York, seemed willing to go along with any of several solutions: simply finding more money for renewed testing, selling the company to a suitable new group, or, if necessary, foreclosing on the bonds. In July he proposed the ADC raise $100,000 to pay off bonds and cover routine expenses while trying to find money for further testing. Stockholders were reluctant to continue the status quo.
The ADC had only one asset left, its remaining rough diamonds, and it pledged those as collateral for loans to pay current expenses. The lenders were the same group holding the bond lien. For the diamond notes, they were due a total of $21,000 in July 1927. When that date passed, they demanded payment. According to Reyburn’s later explanation to stockholders, “The Company, without credit, could not borrow elsewhere or find a market for the diamonds. They were sold under the power of the pledge for $21,000.”
Howard Millar’s later memoir, Finders Keepers, offered an expanded interpretation of these events. In his version, Tom Cochran held the bond mortgage and was determined to foreclose and grab the ADC’s property. “I do not believe he had any intentions of doing anything in the diamond field except to make sure it wasn’t developed to compete with the world syndicate,” Millar wrote. As for the pledged gems, Cochran secretly “had stood on the steps of the Garland County Courthouse, in Hot Springs, Arkansas, earlier and auctioned off the diamonds for $19,000. He was both auctioneer and only bidder.” Schenck and Van Haelen, New York diamond specialists, later bought the collection, including the Uncle Sam, from Cochran’s estate.
The venture continued in limbo for almost two more years before the bondholders sued for foreclosure in order to spur shareholders into action. At the time, the ADC was broke; the custodian and the watchman at the property, Lee Wagner and Charles M. Carter, had gone several months without pay; the property manager, John Peay, was using his own money for basic expenses. Therefore, in January 1928 the trustee for the bond mortgage was switched from the Union Trust of Little Rock to George Jordan of New York County, New York. In February Jordan filed suit against the ADC in federal district court, Texarkana, Arkansas, seeking $75,100 principal and $10,965 interest accrued since July 1, 1925. The original mortgage agreement had empowered the Trustee to defend the interests of the bondholders. Jordan primarily represented the New York group.
After lawyers representing the ADC filed a standard denial of all charges, J. C. Pinnix and other “minority stockholders” petitioned, in March, to intervene in the suit. They needed time to “investigate the affairs of the Company,” in order to decide whether to intervene and “offer to lend the Company” any funds needed to discharge the mortgage. Negotiations were already in progress, they said. Nevertheless, after a transfer of the case to the Fort Smith Division of the Western District, the court appointed a receiver to arrange a public sale of the ADC’s property.
As negotiations continued out of court, Thomas Cochran, the New York banker representing the bondholders, advised that they would be receptive to any plan of reorganization resulting in the retirement of corporate debts. A group of interested stockholders, led by J. C. Pinnex and John T. Fuller, along with Roy L. Thompson and Fred Heiskell, prominent Little Rock businessmen, convened in the Chamber of Commerce auditorium, Little Rock, on April 7, 1928. After due discussion, they proposed to buy the Corporation’s remaining 491,147 shares of stock for 25¢ each, stipulating that the $122,786.75 be used to pay debts and, if possible, to recover the defaulted diamonds. If successful they would own both the ADC and the Corporation, and then would lease the ADC’s property to a new operating company headed by John T. Fuller. By implication, this meant the stalwart ADC, Sam Reyburn’s old Arkansas Diamond Company, would become superfluous.
The Corporation’s board of directors approved the offer, but with the proviso that all shareholders be afforded the opportunity to buy, at 25¢, shares virtually equaling the number each already held. All participating shareholders were to send a certified check to Sam Reyburn, President of the Corporation, by a fixed deadline: June 25, 1928. If sales fell short of the stated goal, checks would be returned; otherwise, Reyburn and other officers of the venture would apply the funds and then resign in favor of new management.
At the meeting of April 7, John Fuller spoke optimistically about the group’s chances at the diamond field if adequate funds for testing could be raised. “It is possible,” he said, “that diamonds may occur only in certain spots [in the matrix] and it will be necessary to excavate the whole area to determine if it will pay.” Then he added: “We always expect and always find the surface material of a diamond pipe more productive. It might pay handsomely to wash up the surface and I believe it would in this case. In fact, surface washings to date have been successful.”
Reporting this event, the Pike County Courier expressed guarded optimism. Several men already were out on the big southeast slope, preparing it “for the probable re-opening of this only industry on the North American Continent.” The new venture, “if carried through,” would undoubtedly succeed. “The diamonds are there. U. S. Geological reports show them to excel in hardness and brilliance . . . and if the diamond plant can be rebuilt to properly mine the precious stones . . ..”
Later, the Courier repeated the prevailing belief that Reyburn’s operation had failed because “for some reason the machinery never did the work expected of it.” This time, however, the earlier comment was further qualified: “There is no question about the presence of diamonds there; the only question is, can they be mined at a profit? The new company propose [sic] to answer this question, and as a starter will employ sluice washing until the installation of new machinery is made.”
Although the Corporation’s terms were not met fully, the amount of stock sales and the reputation of the new group evidently impressed the bondholders. The lawsuit was terminated in June 1928 and the reorganization was allowed to proceed. Roy L. Thompson, vice president of the Democrat Printing & Lithographic Company, replaced Reyburn as president of both the Corporation and the ADC. John Fuller, J. C. Pinnix, and John Peay served on the governing board; Peay, the veteran field supervisor for the ADC and the Corporation, remained as general manager. The faithful Lee J. Wagner stayed on as property custodian and general handyman.
Facing the same problems as their predecessors, John Fuller and associates continued sluicing the rich surface layer, and found it still yielded about enough diamonds to compensate for operating expenses. They still lacked funds, however, for any significant testing of the matrix. By late 1929, as turmoil in the stock market set in, the operation’s long-term viability seemed highly questionable.
In early 1930, those leading the venture began preparing for the demise of the Arkansas Diamond Company. In April a new Diamond Mining and Engineering Company of Arkansas (DMEC) was given a ninety-nine year mineral lease on all the ADC’s properties, including the existing plant. In return, the DMEC had to pay 5% of the gross from diamonds recovered in the future, plus 5% of any profit. Stripping the ADC of valuable assets, the lease stipulated the ADC “shall sell and deliver to the lessee all diamonds recovered by it [the ADC] during the past year from said property”; the stated price was $5,000, “the estimated cost of producing said diamonds.”
Only the continuing involvement of John Fuller and John Peay lent credibility to this otherwise shaky venture. Although the DMEC’s authorized capital was 10,000 shares of common stock, the certificates were assigned no par value. The beginning capital was $300, the legal minimum. The president, W. C. Ribenack, subscribed to fifty-four shares of the sixty bought by incorporators.
Those listed as officials of the DMEC, all Little Rock businessmen, hardly represented a significant break with the past. Two of the seven, including the secretary, Aristo Brizzolara, Jr., used the Union Trust Company as an address; Ribenack and two others listed the Bankers Trust Company; and one, H. G. Mitchell, listed Roy Thompson’s Democrat Printing & Lithographic Company as an address.
In July 1930 the ADC completed this final reorganization by transferring all its properties in Pike County, including remaining buildings and machinery, to the Arkansas Diamond Corporation. The warranty deed preserved DMEC’s long-term lease. Then, on July 12, 1930, Sam Reyburn’s Arkansas Diamond Company officially dissolved.
 ADC financial report, July 30, 1926, cited in Reyburn to Stockholders of the Arkansas Diamond Corporation, May 29, 1928, I.N, Crater. Cf. this account with Howard Millar’s interpretation of events in 1926-1928, Finders Keepers, 64-66.
In November 1927, the press carried a statement about the ADC’s “willingness to sell its holdings for $100,000”; but that probably referred to the proposal of July 1926 (“Fraud Order Hits Arkansas Concern,” Gazette, November 24, 1927, p. 1; the same press release appeared as “Fraud Order Hits Arkansas Diamond Co., Nashville News, November 26, 1927, p. 2.
 Reyburn to Stockholders, May 29, 1928.
 Finders Keepers, 65-66. Rather than trying to control the diamond field, Cochran was amenable to the group of Arkansans who wanted to pay off the bonds and continue the ADC’s operation (infra). While he represented the group holding the bond lien and the diamond pledge, there is no evidence he acted slyly or unfairly.
 Pike, Mortgage Record 17, 610, Acceptance of Trust, George Jordan, January 30, 1928; “Complaint,” George Jordan as Trustee vs. Arkansas Diamond Company, February 3, 1928, United States Western District of Arkansas, Texarkana Division, Equity Case No. 170; switched to the Fort Smith Division of the Western Division, Equity No. 474, in Federal Records Center, Ft. Worth, Texas (NARA, Southwest Region), Accession No. 7NC-21-85-0004, Box No. 2 of 96, Location No. A34-006-21.
Later, Jordan corrected the amount of interest, leaving a total of $88,968.40 due (Petition for Correction, ibid., Fort Smith Division).
 Petition for Leave to Intervene, J. C. Pinnix, et al., March 12, 1928; Stipulation for Transfer to Fort Smith Division, April 5, 1928; Oath of Receiver, May 2, 1928. The case was transferred to Fort Smith by agreement of the parties.
 Reyburn to Stockholders, May 29, 1928; “Mining Company–Will Hold Meeting,” Courier, April 6, 1928, p. 1; “New Corporation to Acquire Mine,” Arkansas Gazette, April 8, 1928, reprinted with same title, Courier, April 13, 1928, p. 1. Roy L. Thompson was vice president of the Democrat Printing & Lithographic Company; Fred Heiskell ran the Arkansas Gazette. The group’s steering committee consisted of Thompson, Heiskell, Pinnix, Fuller, R. H. Kaufman (Little Rock), J. Gilbert Leigh (Little Rock), James T. Hammond (Pittsburgh, Pa.), and several others.
 Reyburn to Stockholders; “Diamond Stock Has Been Sold,” Courier, May 11, 1928, p. 1, partially reprinted from the Gazette.
 “Public Statement of John T. Fuller on April 7, 1928 [not 1929, as indicated],” in “Reports and Information,” 34. “New Corporation to Acquire Mine,” infra, only mentioned Fuller briefly.
 “Diamond Stock Has Been Sold.”
 “Diamond Mines Are to Reopen Soon,” August 24, 1928, p. 1.
 Although the bonds were declared paid in 1928, the discharge document was held back until June 21, 1937, when it was filed in Pike County. The required marginal notation on the original mortgage deed was not entered until that date, indicating the New York Trustee still held some related obligations (Pike, Mortgage Record 25, 549, Discharge of Lien, George Jordan, Trustee, July 11, 1928; marginal notation, top of original Mortgage Deed, Record 10, 396). Corresponding with that delayed filing, the ADC’s property deed was also held back when the property was turned over to the newly reorganized Corporation in 1930 (Pike, Deed Book 56, 169, Warranty Deed, Arkansas Diamond Company to the Arkansas Diamond Corporation, July 9, 1930 [filed June 21, 1937]); Arkansas Secretary of State, “Certificate of Dissolution of the Arkansas Diamond Company, July 12, 1930, Arkansas Secretary of State, Corporate Records, File 478, attached to Record 1-15-540.
 “Receiver’s First and Final Report,” June 28, 1928; “New Corporation to Acquire Mine”; “Diamond Stock Has Been Sold”; “Arkansas Diamond Mine Reopens for Work,” Courier, August 9, 1929; “Form for Use of Foreign Corporations,” Arkansas Diamond Corporation, February 23, 1933, Arkansas Secretary of State, Corporate Records, EL Box 81, File No. 328; Organization Meeting of the Board of the Arkansas Diamond Corporation, February 23, 1933, ibid.
 “Statement of Operations at the Arkansas Diamond Mine for 16 months ending November 30, 1930,“ in “Reports and Information,” 41; infra, “Fuller’s Last Stand” (summarizes the surface work). By early August 1928, John Peay had moved back to Murfreesboro from Little Rock, hired a crew, and started preparing for the sluicing operation. New piping was run from the nearby Little Missouri River to supply adequate water (“Diamond Mine Began Work Monday,” Courier, August 2, 1928, p. 1; “Arkansas Mine Reopens for Work,” ibid., August 9, 1928, p. 1).
 “Certificate of Incorporation of Diamond Mining & Engineering Company of Arkansas, April 30, 1930 (with attached “Certificate of Dissolution of a Corporation,” DMECA, August 22, 1941), Secretary of State, Corporate Records; Pike County, Oil and Gas Leases (covering all minerals), Book 6, 271, Arkansas Diamond Company to Diamond Mining & Engineering Company of Arkansas (DMECA), April 30, 1930.
In addition to this lease, the ADC granted a timber concession netting the company $7,200 (Pike, Deeds, 51, 258, Timber Deed, ADC to A. H. Boswell, April 12, 1929). This was the extent of the ADC’s income.
Fuller’s job at the time evidently allowed adequate time for these activities (compare “Qualifications,” in “Reports and Information,” 10, with “Public Statement,” ibid., 34, which indicated he was still Chief Engineer of the American Bauxite Company as well as General Manager of an ALCOA subsidiary).
 Lease, ibid.
 Certificate of Incorporation.
 Ibid. The company had a president, a secretary, and five directors. S. M. Garwood (“c/o Bankers Trust Co.”), W. R. Snodgrass (Union Trust), C. E. Crossland (Bankers Trust), and H. W. Morrison (“R. I. Ry. Co.”—Rhode Island Railway Company[?]) completed the group. When the Certificate of Dissolution was filed, August 22, 1941, all officers still lived in Little Rock.
 Pike, 56, 169, Warranty Deed, Arkansas Diamond Company to the Arkansas Diamond Corporation, July 9, 1930 (not filed until June 21, 1937); Arkansas Secretary of State, “Certificate of Dissolution of the Arkansas Diamond Company, July 12, 1930, Arkansas Secretary of State, Corporate Records, File 478, attached to Record 1-15-540.
At some point, the Corporation’s buildings, power plant, “washing plant,” transmission equipment, shop equipment, yard equipment, pipe, angle iron, and office furniture were put up for sale by the Industrial Machinery Company of Dermott, Arkansas. The date is unclear (“List of Machinery, Equipment and Supplies of the Arkansas Diamond Corporation,” IV.C, “Brochures, Pamphlets, etc.,” Crater.