The Ozark Diamond Mines Corporation, 1909-1914
Woodford’s report lent momentum to the ongoing effort to reorganize the Ozark Company through a partnership with not only Horace Bemis, but his brother William N. Bemis as well. Horace Bemis and wife, Ethel, deeded the 160-acre Riley place to the Ozark Company, which assumed responsibility for payments still due. Bemis received “one dollar and other valuable considerations,” meaning shares of stock.[1] William Bemis, as president of the Ozan Lumber Company, sold the Ozark an option on 60,000 acres of land in Pike and Hempstead Counties. According to the option deed, the Ozan Company received $7,500 of Ozark capital stock in exchange for fifteen years of diamond exploration and the opportunity to buy any of the land for $50 an acre.[2]
A few days later, the Ozark contracted with the Caddo River Lumber Co. of Missouri, represented by James W. Bemis of St. Louis. According to the deed, that company allowed the Ozark an option on all its land in Pike County, 20,000 acres, in return for $2,500 of capital stock. The terms were identical to the Ozan Company’s.[3]
The Bemis brothers were senior members of a family of business magnates from Prescott, about thirty miles southeast of Murfreesboro. The family owned the dominant lumber operations in the area, and also had a railway system that extended well into Pike County. Controlling vast tracts of land, the men knew the countryside and had the resources to assure a test of the main diamond properties if other support failed to materialize.[4]
At the end of October 1908, as a firm deadline for the Mauney purchase neared, the group increased capital stock to $200,000.[5] Less than a month later they had sold enough to pay Mauney the full $20,000, cash in hand. The actual price of the stock was never clarified.[6]
As the reorganization proceeded, the United Press Association distributed an article datelined Murfreesboro, Arkansas, Dec. 19, 1908, announcing that “the largest diamond mine in the world exists in Arkansas.” President R. D. Duncan of the Ozark Company was in active charge of the prospecting. “From the drilling so far done,” the article said, “it appears that both the Mauney and Riley tracts form one immense pipe covering 130 acres.”[7]
Finally, on January 16, 1909, Duncan, McKee, Russell, H. E. Bemis, W. N. Bemis, and James W. Bemis met in Little Rock to increase the Ozark Company’s capitalization from $200,000 to $1,500,000 and rename it the Ozark Diamond Mines Corporation, with both changes effective March 1, 1909. As that date approached, officers of the new venture were elected. Duncan remained president; Charles McKee and Horace Bemis shared the vice presidency, and D. B. Russell still served as secretary. The four served as the board of directors. W. N. Bemis and James W. Bemis signed the Certificate of Incorporation, but were not designated as board members. While greatly increasing capitalization, the group retained the previous par value of stock, $25 per share.[8]
According to information given the Nashville News, stockholders of the Corporation would be essentially the same as those of the displaced Company. Moreover, “The old company announced that all the trustee’s stock has been sold and no more will be offered.” The Corporation would begin with “a paid-up capital” of $1,000,000.[9]
About four months later, the Corporation’s first annual report lent more perspective. “Amount of capital paid in,” $1,000,000; number of shares subscribed, 40,000, with 164 stockholders listed. The nine principal stockholders—the Bemis interests, E. G. Woodford, Duncan, McKee, and Russell—held a total of 30,226 shares.[10] Taken literally, the statement implied that almost $250,000 from general subscriptions remained for exploring and testing the properties. But that clearly was not the case because stock sales never met the Corporation’s financial needs after 1908.[11] As used here, “capital paid in” represented the par value of all shares taken, instead of the real aggregate value derived from issuing shares in return for cash or other considerations (now known as “share capital”). The actual pricing of stock subscriptions remained a mystery.
Considering that officials of the Corporation received no salaries or other monetary compensation, their holdings in the highly speculative venture were not necessarily excessive, whatever the actual value of their stock. R. D. Duncan’s 7,200 shares, for instance, reflected his role as chief organizer and manager of day-to-day operations. He handled almost all the Corporation’s business by himself, occasionally consulting with Horace Bemis about the most important matters. Living in Little Rock, along with McKee and Russell, he was also Vice President and manager-cashier of the small State National Bank, a convenient financial resource when needed. On the other hand, Charles McKee (varying around 3,200 shares) and D. B. Russell (a steady 405) put very little time into the operation. Even the bookkeeping and other paperwork were left to Robert D. Duncan.[12]
[1] P, 439, Special Warranty Deed, Horace E. and Ethel Bemis to Ozark, October 24, 1908; Pike, Articles of Incorporation 1, 177-78, Annual Report, Ozark Diamond Corporation, July 1, 1909, with initial listing of stockholders and shares (including Horace Bemis, 4,950; William N. Bemis, 4,500; James W. Bemis, 4,500; Ozan Lumber Co. [a Bemis operation; W. N. Bemis, President], 1,350). The Ozark assumed the debts to both the Rileys and Walter Mauney, who held a small interest in the 160 acres.
[2] P, 472, Option Deed, Ozan Lumber Company to Ozark, October 24, 1908. The number of shares, 1,350, is noted supra.
After the Ozark reorganized as a Corporation, with Horace Bemis a vice president, the Ozan reissued the option (Q, 472, Quit Claim, Ozark to Ozan, May 19, 1909; Q, 508, Option, Ozan to Ozark, May 19, 1909).
[3] P, 474, Option Contract, Caddo River Lumber Co. to Ozark, October 28, 1908, signed by M. R. Smith, President, and W. E. Cooper, Secretary.
The Ozark’s annual report in 1909 (supra) omitted Caddo River from the list of shareholders. It appeared initially in the 1910 report, with 450 shares (Pike, Articles of Incorporation 1, 197, July 14, 1910).
[4] The holdings of the Bemis family’s Ozan Lumber Company included several tracts close to the diamond pipe (for a full listing of properties, see Q, 472, Option, Ozan to Ozark, May 19, 1909). To facilitate their operations, the family had acquired the Prescott and Northwestern Railroad in 1890 and extended track into virgin lumbering territory. Horace Bemis and the family clan were also part of the financial structure in Prescott, and had legal talent available through Horace’s father-in-law, Thomas C., a lawyer, banker, and former Congressman. Horace Erastus Bemis’s prominence is reflected in an excellent biographical sketch in David Y. Thomas, ed., Arkansas and Its People, 3 (New York: American Historical Society, 1930), 49-50, including a sharp photograph. Brief historical sketches are now available on the web: search “H.E. Bemis” and “W.N. Bemis,” for sites, including “De Ann Cemetery (Prescott, Ar.) Biographies.”
There may be credibility in an early account of John Huddleston’s discovery, which said Horace Bemis was the first person to whom Huddleston showed his unusual crystals. Bemis, “suspecting they were diamonds, took one to the Mermond, Jaccard and King Jewelry Co., of St. Louis for identification” (Miser and Ross, “Diamond-Bearing Peridotite in Pike County, Arkansas,” USGS Bulletin 735-I, 285). The reference to Bemis was cut from subsequent editions of Miser and Ross’s report, but was quoted fully in Thomas, Arkansas and Its People, Vol. 2, 386. After World War II, Howard Millar revived and embellished the story, most notably in his imaginative Finders Keepers, 25 (referring to “Morace Bemis”).
[5] Articles of Incorporation 1, 62, October 31, 1908; “Certificate” increasing stock, November 7, 1908, Arkansas Secretary of State, Corporate Records, File 0-1, Record 2-14-109; Nashville News, “The Diamond Fields,” November 14, 1908, p. 4.
Duncan later secured options from other property owners near the pipe (Deed Book Q, 300, from Walter Mauney, March 27, 1909; S, 387, from W. M. Kizzia, January 28, 1910). Other options and purchases are discussed later.
[6] P, 547, Warranty Deed, M. M. and Bettie L. Mauney to Ozark, November 23, 1908. Later, during bankruptcy, Duncan and Russell were questioned about the stock sales. Twice, Russell said the Company’s sales totaled $40,000; Duncan also was sure of that amount, and referred to “the sale of the Forty Thousand Dollars Treasury stock of the original Ozark Diamond Mining Company.” Asked how that money applied to the Mauney purchase, Russell changed the sales to $20,000 total, all spent on the tract. Duncan was vague about where the payment came from: “I would say, in a sense, from the Forty Thousand Dollars . . ..” (Russell, Deposition, pp. 8, 10-11; Duncan, Deposition, 5).
[7] “The Pipe Diamonds–Remain no Longer a Subject of Doubt,” Nashville News, December 23, 1908, p. 4. Test pits reportedly showed “one tract 2,000 feet wide and much longer, containing diamond bearing rock.” A railroad from Nashville was “rapidly being constructed to the field” and “active mining” would begin “early next year” (ibid.).
[8] Pike County, Articles of Incorporation 1, 170, “Certificate,” February 27, 1909 (no file in State Corporate Records: designated a local corporation); Nashville News, “A New Mining Company,” February 24, 1909, p. 5. For continuing details see the “Annual Reports”: Articles of Incorporation 1, 177, July 1, 1909; ibid., 196, July 1, 1910; Misc. Record 2 (succeeded Articles of Incorporation, continuing the series), p. 11, August 15, 1911; no report in 1912; ibid., 82, February 15, 1913 (final report, filed before the commencement of testing). Each annual report included assets, debts, and capital “actually paid in,” and listed shareholders and quantity of stock held,
Duncan’s later testified in the bankruptcy that the three Bemises and J. F. Rutherford of Pine Bluff, Arkansas, were on the board; but he made it clear that he and Horace Bemis made decisions, sometimes after consulting with others (Duncan, Deposition, 1).
[9] News, ibid. This article also said John F. Rutherford, president of the Citizens’ Lighting and Water Company of Pine Bluff, Arkansas, had been made a director of the Ozark Company recently and would be “identified” with the new venture. The Corporation’s annual reports (supra) listed him as a major stockholder in 1909-1911, with 1,800 shares, and then indicated only one share in 1913. He was never an active member of the board.
[10] Pike, Articles of Incorporation 1, 177 (entry begins opposite page 177), Annual Report, Ozark Diamond Mines Corporation, July 1, 1909, signed by Duncan and Russell. The cash value of real estate was $20,000 (the Mauney tract); debts stood at $2,183.67.
The report named all shareholders and the number of stock each held. Shares of the Bemis family and the Ozan and Caddo River Lumber Companies were listed supra. E. G. Woodford held 1,600 shares as an individual and 2,400 in trust. He evidently received some stock in lieu of salary. R. D. Duncan held 7,200 shares; Charles McKee, 3,303; D. B. Russell, 405. Among many local small investors, M. M. Mauney had eight shares and Walter, ten (in 1910, this increased to twelve each, with three shares also entered for Henry Mauney; between 1911 and February 1913, M. M. increased to 20 and Walter and Henry sold all shares). John C. Peay, Reyburn’s associate, had 160 shares in 1910 and still held that number in 1913.
The Mauney records, held by the Terrell family of Murfreesboro, has an original issue of corporate stock, 148 shares to J. M. Moulton at $25 par value; the Ozark Corporation’s annual report of July 1, 1909, and following years, included Moulton at 148 shares.
[11] Bankruptcy proceedings in 1914 (infra) disclosed the basic financial problems, but failed to clarify stock sales and annual reports after 1908.
Compare the Corporation’s statements with those of the Ozark Company, supra. In 1908, Duncan’s financial statement for the new Ozark Diamond Mining Company gave the amount of capital stock—$25 par value— “actually paid in by the subscribers”: $5,000 of the authorized $100,000. He then listed the total shares owned: 4,000. The subscription price was hardly the same as par value. The statement for the Ozark’s predecessor, the Pike County Diamond Mining Company, made the same distinction between market value and par value.
The Ozark Corporation’s contracts with the Ozan and Caddo River Companies might lend some insight into the actual price of stock. The two deeds called for proportional prices for the options on 60,000 acres (Ozan) and 20,000 acres (Caddo River)—$7,500 and $2,500, both paid in shares of stock. The Corporation’s annual reports listed the Ozan at 1,350 shares and the Caddo River at a proportional 450 shares. If the deeds and reports reflected the contracts of October 1908 precisely, the shares would have been valued at about $5.50 instead of the $25 par value indicated in the annual reports. If general sales—cash sales— were also discounted at that price, the Ozark’s income and expenditures would begin making sense. The lists of shareholders would be credible.
[12] Bankruptcy proceedings, infra (see Depositions of McKee, Russell, and Duncan; and Referee’s “Order Allowing Claim of W. E. Bemis, H. E. Bemis Estate and R. D. Duncan for $43,360”). It is not clear how many of Duncan, McKee, and Russell’s shares in the Corporation were carried over from their stake in the preceding Ozark Company (supra).