THE ADC AND THE ARKANSAS DIAMOND CORPORATION, 1919-32
The big canary diamond found in 1917 no doubt helped stir this renewed interest, but it was the end of the World War that suddenly gave Reyburn’s ADC the opportunity sought for a decade. Massive war industry had consumed diamonds and driven up prices, and now peace was freeing material, manpower, and money for all sorts of domestic ventures. It was the onset of an era of speculation and risky investment. Now, that $75,100 of bond money seemed like pocket change: the ADC had financial sources ready to provide everything it needed for the full-scale test Fuller had proposed a decade earlier. In July 1919, those involved organized the Arkansas Diamond Corporation and chartered it in Virginia with authorized capital of 1,000,000 shares at $10 par value.
One of Reyburn’s financial associates in New York, Thomas Cochran, is sometimes recognized as the principal organizer of the Corporation. Yet, Sam Reyburn, himself a respected executive in banking and finance, remained central to the effort, and as a result the Arkansas Diamond Company retained ownership of its property and control of the operation in Pike County. As company officials and the State of Arkansas agreed in a later court case, the Virginia Corporation owned no property in the State of Arkansas and had “not done business therein.” Assuring things remained in the hands of the Little Rock group, Reyburn soon headed the Corporation as well as the Company. Formally, he conducted business as president of the Corporation, working from his office in New York City.
In effect, the Corporation became a full financial partner of the Arkansas Diamond Company—not merely lending money for expenses, but also handling investments for both entities. Integrating all stock, the Corporation exchanged 176,320 of its own shares, $10 par value, for virtually all of the Company’s 8,848 shares. Suddenly, on paper at least, Lee J. Wagner and a few others could feel like wealthy men. The market value, however, was reflected in the Corporation’s sale of 332,533 shares at $1 each, which brought in enough money to assure a full-scale test while leaving 491,147 shares in reserve.
The Company had only its land and diamond collection to use as collateral for the Corporation’s loans, and Reyburn and a few close associates already had gotten a first mortgage on the land in June 1916 when they purchased $75,100 worth of five-year bonds to fund the ADC. So the bond lien served as basic collateral. Because the bonds would mature in less than two years, Reyburn and associates cleared the way for a collateral agreement by signing an early five-year extension of the lien. The new maturity date, 1 June 1926, allowed ample time for the planned test.
As preparations for the big test began, in August 1919, expectation revived around Pike County. “The diamonds are here,” the Pike County Courier declared, “and we hope the mining industry will be carried on to the extent that all Arkansas will profit thereby.” In early September, news of the ADC’s “reorganization” and $10,000,000 of capital stock “caused considerable excitement,” as the Nashville News put it. And this time there was no doubt a big project was underway. Heavy machinery had been ordered; crews were working to hard-surface the road from Murfreesboro’s railway depot to the mine. In the office of the Courier, a writer envisioned an explosion of jobs and economic growth like that in South Africa, where thousands were put to work. “If the Murfreesboro mine is ever worked to that extent, and we can see no reason why it should not, we will yet get a place on the map,” he told readers.
In mid October the first two carloads of equipment rolled in. Then others, bringing all sorts of machinery—machinery for a saw mill to produce timbers and lumber for construction, a massive 100-horsepower engine, a huge dryer for the plant . . . “Specially constructed trucks” had to be made to transport such items. By mid December the Pike County Courier radiated confidence:
Work is being carried on at the mines regardless of weather conditions, and the ‘prophets’ who once thought the mines would never be worked are seeing what their predictions were worth. Other big interests are making plans to come here, and there is some talk of a $100,000 local corporation being formed to launch a big business enterprise. Real estate transfers are becoming common occurrences now, from the realization of the stability of the town and its assured growth. Again we say, if you are looking for investment don’t fail to visit Murfreesboro . . .
Indeed, as a later and even more effusive article in the Arkansas Gazette said, Pike County seemed “Destined to Become a Great Golconda,” a leading center of diamond production. Also delighting the Courier’s editor, the Kansas City Star repeated the Golconda imagery and suggested the foreign interests controlling the diamond industry were concerned they might be “seriously challenged by a handful of rugged, low-lying hills in Pike County, Arkansas.” Reyburn’s original consultant, the eminent George F. Kunz, also seemed to feel vindicated, declaring that “mining for diamonds in the United States has actually begun.”
In January 1920, the venture began constructing a large processing plant at the base of the southeast slope. The company planned to test approximately 100,000 loads of peridotite “rock” from the matrix and 50,000 loads of the tough surface clay. The plant was designed to handle both types of material separately, as Reyburn and his new general manager, Stanley H. Zimmerman, pointed out in an article in the Engineering and Mining Journal in April 1920. Their flow chart showed a dual system, with the humus-enriched surface gumbo passing through a heated chamber (“dryer”) before dropping into a standard fourteen-foot African-type washing pan. Experiments had shown that thorough drying seemed to disintegrate humus fibers; sudden saturation with water then loosened the clay particles more easily, letting the material break down into a thin mud when stirred in the pan. If the material dissolved properly, diamonds and other heavy solids sank to the bottom of the pan, ready for screening and sizing. The new plant handled the jigging and sizing separately from the treatment of matrix material.
In the article, Rayburn and Zimmerman wrote candidly about one central point. What really counted was not the yield of diamonds from the thin surface layer: “. . . the real test will be made upon the rock, and the future of the mine will depend upon the yield of diamonds from this source.” Previously, a joint statement indicated it would take eighteen months of “hard and accurate work” before Arkansans learned if they had a viable mine or only a diamond pipe that was “just an interesting occurrence in geology.”
The five-story plant was essentially completed in July-August 1920, at a cost of about $125,000. During limited trial washing, there was news of unspecified problems with some equipment; and yet at one point the crew still managed to recover twenty-four diamonds, totaling fourteen carats, from a one-hour run. That yield, along with the reported problems, suggested that from the start the ADC had trouble with the surface gumbo.
Nevertheless, local expectations kept soaring. If the test proved successful, said the Courier in September, “many more mines would install machinery and begin operations. Citizens owning farms in that section would become rich overnight.” Murfreesboro—“staid old Murfreesboro”—would become “the metropolis of Arkansas.” In December, the editor was already projecting the ADC’s development of a larger, permanent facility “giving employment to thousands of men.”
 “Up to May, 1919, the United States was buying more precious stones than all the rest of the world put together. The demand for all grades of diamonds from ‘chips’ to stones of the finest quality, continues in excess of offerings. The shortage of diamonds . . . is most marked in small stones” (B. H. Stoddard, “Gems and Precious Stones,” in Mineral Resources of the United States, 1919, Part 2 [Washington: GPO, 1922], 171). The article cited The American Jeweler’s report that “the price of diamonds has increased almost 100 per cent in the last year” (ibid.).
 “Certificate of Incorporation of Arkansas Diamond Corporation,” July 30, 1919, Virginia State Corporation Commission Charter Book, Vol. 102, RG #112, Barcode 1087200, p. 501 (also Vol. 169, RG #112, Barcode 1087292, p. 420). On May 12, 1933, the Articles and some of the related filings were also registered in Arkansas (Arkansas, Secretary of State, Corporate Records, EL Box 81, File No. 328). The original organizers set maximum capitalization at $10,000,000 and par value of shares at $10. Richmond, Virginia, was designated the principal corporate headquarters. B. A. LaBarge, New York City, was initially president, with J. A. Mowen of Brooklyn vice-president and H. H. Chalkley of Richmond Secretary-Treasurer; directors included Mowen, LaBarge, and Thomas W. Yeakle of New York City. As usual, this was an initiating group: Reyburn and close associates quickly assumed control (infra).
 Cochran’s role in the Arkansas venture is mentioned periodically in the literature after the mid-1920s. The “Historical Summary of Arkansas Diamond Corp. of Virginia,” in “Reports and Information,” 2, was among the first to comment (not altogether correctly). The writer, or his source of information, said the ADC was “reorganized” under the laws of Virginia in 1919. “This [new] company was controlled by Mr. Cochran and his associates. A Mr. S. H. Zimmerman was employed by them to take charge of operations.” Cochran, “later a partner in J. P. Morgan and Co.,” advanced money to the venture in return for a “mortgage,” and in 1927 foreclosed. The writer said Cochran, in 1911, had “purchased a minority interest” in the Arkansas Diamond Company; but there is no available evidence of that.
In 1920, Reyburn and Stanley Zimmerman offered a simple statement covering the event: “In the summer of 1919 the owners [of the ADC] succeeded in interesting a number of their friends, chiefly in New York, who have put up about $250,000” (“Diamonds in Arkansas,” EMJ, 984; also, “Prepare for Test in Diamond Field,” Arkansas Gazette, November 14, 1919, p. 5: “This spring proved to be a better time to obtain money than we have had heretofore, and many of our friends knowing fully of our proposition, have put up a large sum of money to enable us to go forward with the testing”). John Fuller also explained it briefly in his public speech in Little Rock in 1928: “Finally Mr. Reyburn in New York succeeded in interesting capitalists who he could trust and who did not seek to control the property” (“Public Statement,” in “Reports and Information,” 33 [which erroneously dated the speech as April 7, 1929]).
No doubt Cochran was the major investor in the Corporation—he certainly had the resources (see the later summary of his personal wealth, “G. G. Bernard Left Estate—Morgan Partner [Cochran] Left $7,323,203,” New York Times, July 12, 1940, p. 13). For general information: “Thomas Cochran, Financier, is Dead,” New York Times, October 30, 1936, p. 23; “Thomas Cochran,” National Cyclopedia of American Biography, 27, pp. 368-369. An associate of Sam Reyburn in New York, and about the same age (born March 20, 1871), Tom Cochran was known as an easy-going and affable member of the financial community—much as Reyburn, himself.
In 1917 Cochran became a partner in the powerful banking firm of J. P. Morgan & Co., which was involved with a wide array of national and international interests, including some majors in the diamond industry. After 1919, the link with Morgan & Co. inevitably generated more suspicion among critics of Reyburn’s venture in Pike County: again, it seemed the international diamond syndicate was in control; the eventual failure of the new test seemed to confirm a conspiracy to keep Arkansas diamonds out of the market (Gross, “Incredible Mystery,” 99-100, was an outstanding example of the theory; also infra, “Frustration, Suspicion, and Taxes”). Cf. Millar, Finders Keepers, 60ff.
 Property deeds remained with the ADC. No lien on the ADC’s property appears in Pike County records except the original bondholders first mortgage (supra, “Financial Doldrums”).
The Company was never simply absorbed into the Corporation or “reorganized” as the Corporation. It retained the deeds to properties until it finally went out of business in July 1930, liquidating its assets (infra, “Inactivity and a Change of Leadership”).
 Pike County Chancery Court, “State of Arkansas vs. Arkansas Diamond Corporation,” case no. 1444, 30 December 1926, file drawer 35 (storage room, third floor of the County Court House). Initially, the State filed a minor claim against the Corporation, reflecting the general perception that it had displaced the Company, but amended the petition upon determining the Company’s status (the initial pleading is not in the file; the corrected decree repeated the award to the State, $2,500).
 Reyburn’s position as president of the Corporation was soon publicized, as in the editor’s introduction to Reyburn and Zimmerman, “Diamonds in Arkansas,” Engineering and Mining Journal, 109, No. 17 (April 24, 1920), 983. For other instances, see Reyburn, letter to stockholders, March 20, 1924, “Misc.” box, Crater archive; Schenck & Van Haelen, New York, letter to S. W. Reyburn, President, Arkansas Diamond Corporation, New York City, Dec. 8, 1926, copy in “Reports and Information,” p. 37.
 Sam W. Reyburn, President, Arkansas Diamond Corporation, letter to stockholders, May 29, 1928, I.N., Crater; Wagner’s Stock Certificates, II.A, Crater. Lee Wagner received certificate No. A309 for 1,000 shares on December 23, 1919, and No. A3086 for 200 on November 14, 1921. No. A4640 for 1,200 shares has an illegible date (June 26, 19?). In the letter above and in a few other documents, Reyburn simplified the Company’s relationship with the Corporation by simply calling it a subsidiary.
Although the Corporation’s articles (supra) included no specific reference to the Arkansas Diamond Company, the long document provided sweeping powers to pursue diamond exploration, mining, and marketing. Its “further and additional powers” allowed wide latitude in financial arrangements with other corporations, including authority to “purchase, hold, sell, assign, transfer, mortgage, pledge or otherwise dispose of the shares of the capital stock or any bonds, securities, or evidences of indebtedness of any corporation . . ..” (4). Moreover, it could “make, accept, endorse, execute and issue promissory notes, bills of exchange, bonds, debentures and other obligations, . . . for any purpose in or about the business of the Company,” and also “aid by loan, subsidy, guaranty, or in any other manner whatsoever, any corporation whose stock, bonds, securities or other obligations are in any manner owned, possessed, held or guaranteed by this corporation” (4-5). The Corporation further authorized itself to “acquire from time to time, in exchange for the shares of the capital stock, or the bonds or debentures of the company . . . such property or shares of the capital stock of any other corporation or corporations . . . at such valuation as in the judgment of said board shall be fair and just” (4).
 Reyburn to stockholders, May 29, 1928, I.N, Crater.
 Pike, Mortgage Book 10, 396, original Mortgage Deed, June 1, 1916 (supra, Financial Doldrums); Book 13, 357, Extension of Maturity, September 30, 1919. The extension was drawn up in New York City and signed by Reyburn and Adolph G. Wrigren, two of the seven original bondholders, on October 22. Charles S. Stifft, Albert D. Cohn, and Moorehead Wright signed in Little Rock October 28; John C. Fuller, in Little Rock November 13; John C. Peay, in Murfreesboro November 17. The instrument assigned J. C. Pinnix, Murfreesboro, as an agent to assure it was then filed at the Pike County Courthouse.
Although Cochran, and undoubtedly other New York investors, clearly gained an interest in the bond lien (infra, “Inactivity and Change of Leadership”), available documents include no contract or other collateral agreement. Neither the original mortgage nor the extension indicated a transfer of lien or a second lien. According to Pike County records, Reyburn’s group of seven still owned the bonds; the Union Trust of Little Rock remained trustee until 1928, when the bonds finally were acted upon in New York. For key evidence of the New York investors’ interest in the bonds, notice that the administration of the bonds was switched, in January 1928, from Union Trust of Little Rock to a new Trustee in New York when legal action was taken there to enforce the bond lien (infra, “Inactivity and Change,”). Also notice that although the mortgage bonds reportedly were paid off in 1928, the marginal notation on the mortgage deed was not entered until June 21, 1937, indicating the New York Trustee still held some related obligations (marginal notation, top or original Mortgage Deed). Consistent with that delayed filing, the ADC’s property deed to the Corporation in 1930 was held back until June 21, 1937 (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.
The ADC’s diamond collection clearly was committed to the financial maneuvering. On September 6, 1919, the Arkansas Diamond Company, Murfreesboro, sent eighty diamonds to Sam Reyburn in New York, including the 17.83-carat canary yellow Lee Wagner found in 1917 (“80 Pike Diamonds,” Nashville News, September 10, 1919, p. 2). The canary and other choice stones eventually ended up in a private collection donated to the Smithsonian. After the big test ended in late 1922, the Company pledged its current diamond collection as collateral for loans “to meet pressing debts and current expenses” (Reyburn to Stockholders, May 29, 1928; infra, “Inactivity and Change”). Nevertheless, the combined collateral value of the bond lien ($75,100) and the diamonds ($21,000) was less than half the amount finally spent on the big test—which ran at least $276, 470 (Reyburn to Stockholders of the Arkansas Diamond Corporation, March 20, 1924, in “Misc.” box, Crater archive). Basically, the financing of the venture rested upon the credibility of Reyburn’s original group and the wealth and risk-taking that characterized the postwar economy.
Later, Reyburn provided a long, detailed summary of events in July 1919-May 1928. When mentioning the use of diamonds as collateral for loans, he referred to “the holders of the notes, who also owned the bonds of the Company,” but gave no further clarification (Reyburn to Stockholders, May 29, 1928). Cochran clearly was involved with the diamond notes as well as the bonds.
 “Diamond Mines May Open Soon,” Courier, August 8, 1919, p. 1; “80 Pike Diamonds,” News, September 10, 1919, p. 2. Engineers “from the diamond fields of South Africa” had inspected the field and left the previous week (Courier).
 “Diamond Mines May Open Soon,” Courier, September 5, 1919, p. 1. Ibid. and News, September 10, for comment on machinery and roads.
 “Machinery for the Diamond Mine,” Courier, October 17, 1919, p. 1 (“two carloads”); “Machinery is Arriving for Diamond Mines,” News, October 18, p. 1 (shipment came from Aldene, New Jersey); “Machinery Arriving,” Courier, November 28, p. 1 (saw mill); “More Diamond Machinery Here,” ibid., December 19, p. 1 (engine and special trucks); “Two Cars Machinery Received,” ibid., January 30, 1920, p. 1. These fail to mention the dryer, but the task of moving that object from the depot to the mine is well documented by photos in the Mauney Records, Murfreesboro. According to John Peay, general overseer of the ADC’s operation, all the machinery was manufactured in the United States without difficulty (Peay, Affidavit for Millar, et al. v. Bettie L. Mauney, et al., June 11, 1920, “Misc.” box, Crater archive).
 “More Diamond Machinery Here.” An expanded pronouncement followed in January 1920: “The magnitude of this gigantic industry is becoming more apparent with each succeeding car load of machinery. The experimental days of the industry have passed . . .. Before you know it Murfreesboro will be a thing of note. All we need to do to accomplish this is to let the outside world know what we have got. It is not all diamonds. We have immense quantities of kaolin (a fine clay), gypsum, asphalt, and other minerals, besides being one of the finest agricultural and fruit raising districts on earth. A delightful and healthy climate, surrounded by all these things and more, among good thrifty people, is enough to create envy . . .” (“Two Cars Machinery Received”).
 Fletcher Chenault, “Pike County Destined to Become a Great Golconda,” Gazette, October 4, 1920, pp. 4, 9; article, no date indicated, Kansas City Star, reprinted as “The Pike County Diamond Mines,” Courier, September 24, 1920, p. 1; Kunz, “Precious Stones,” Engineering and Mining Journal (1921), 160.
 Reyburn and Zimmerman, “Diamonds in Arkansas,” 985. “The charring and burning of the vegetable matter no doubt opens pores through which the water enters, thereby wetting the surfaces of the grains of sand and crystals to such an extent that the bond is broken and the thin mud or paste results. The diamonds and associated minerals readily settle to the bottom of the pan, and the concentrates from this point on are separately treated exactly the same as shown in the rock-treatment flow sheet. The process of drying will be accomplished by a 6 x 50-ft. direct-heat rotary drier, fired either by coal or wood” (ibid.).
The dates plant construction began and ended were clarified in affidavits for a law suit provided by Stanley Zimmerman and John C. Peay, general overseer of the ADC’s operation (Affidavits, June 11, 1920, “Misc.” box, Crater). Ground preparation for the plant began January 1919; construction, the following month; and “active washing of material,” about August.
 Ibid. Apparently drawing from company information as well as this article, the Philadelphia Public Ledger, Sunday edition, covered the test. At one point it said, “There are 2,000,000 to 3,000,000 tons of the decomposed clayey stuff overlying the mouth of the pipe, and this will be washed for diamonds—profitably, it is hoped. But the real test of the future of the mine as a producer of the sparklers will lie in the outcome of the rock-crushing operations” (undated clipping, Box IV.E.5, Crater archive).
 “Prepare for Test in Diamond Field,” Arkansas Gazette, November 14, 1919, p. 5.
 Zimmerman, Affidavit, ibid. (cost); “Stockholders Visit Mines,” Pike County Courier, September 3, 1920 (operation). When the plant was “practically finished,” Zimmerman stated the cost at about $125,000, a figure reflecting the extra expenses incurred because of bad weather and reliance upon unskilled labor. This was consistent with other knowledgeable sources. Published comments about “a half million dollar diamond crushing and washing plant” apparently were based on estimates of maximum spending for the entire testing program (e.g., “Operations to Start Soon in Diamond Fields,” Nashville News, April 7, 1920, p. 1, citing Charles S. Stifft). The plant complex also had an office building, machine shop, and gasoline station (“Stockholders Visit Mines”).
In late October Zimmerman guided some prominent stockholders through the plant, including Charles and P. W. Stifft, J. F. Loughbourough and wife, L. R. Kauffman, E. B. Hamilton, Charles Seymour and J. B. Bateman, all of Little Rock. According to the Courier, the group left feeling assured the mine would “prove to be a paying proposition” (“Stockholders Visit Mines”).
 Ibid.; “May Enlarge the Diamond Plant,” Courier, December 17, 1920, p.