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How might posterity regard the recent swindles in the nation's financial markets? Corporate officers overstate revenue and potential earnings, so as to drive up the stock price. Then they sell at inflated prices before the truth emerges about the company. Investors end up with next to nothing, while the speculators enjoy a pile of cash.
If those speculators happen to have operated in Colorado about 125 years ago, then they are esteemed by posterity -- to the extent that we even name things after them.
The tale can start with a familiar figure from Colorado lore: Horace Austin Warren Tabor. In 1877 he and his wife, Augusta, were keeping the general store and post office at the placer camp of Oro City, which stretched along California Gulch at the headwaters of the Arkansas River.
Rich silver deposits had just been discovered nearby, and a new settlement, which would soon become Leadville, sprang up closer to the mines. The Tabors opened a branch there, and Horace was a soft touch for prospectors in need of a grubstake.
Grubstakes worked like this. The storekeeper advanced supplies like food, whiskey, picks and shovels to the prospectors. If they found something, then the storekeeper got an interest in the mine.
On April 15, 1878, Tabor grubstaked August Rische and George Hook for $17 of supplies. They took their gear and headed up Fryer Hill and began digging. They needed two more grubstakes before they had a mine. They wanted to name it the Pittsburgh to honor Hook's home town, but another mine had a similar name, so they christened it the Little Pittsburg.
Just a month after the first grubstake, Hook and Rische were 27 feet down and hit rich silver ore. Under the grubstake agreement, Tabor owned a third of it. Each partner made $10,000 that summer. Hook, who wasn't fond of Leadville's gelid climate, sold out to Tabor and Rische for $90,000 and left town.
Shortly thereafter, Tabor and David H. Moffat bought
Rische out for $265,000. Moffat had arrived in Denver in
1859 from Omaha, opened a store, and invested in mines,
banks and railroads. He was first of all a
financier,
according to one railroad history.
Now enters another financier, Jerome B. Chaffee; some
folks said the B stood for Boss
because he pretty
much ran the Republican Party in Colorado. He was one of
Colorado's first U.S. senators after statehood in 1876, and
he and Moffat often worked together.
The details of various Little Pittsburg transactions are somewhat sketchy after all these years, and the accounts at hand vary to some degree.
But I'll go with the most recent research from a historian I respect: Duane Smith of Durango. He has just issued a fine biography of Colorado's other first senator, Henry M. Teller, who as an attorney represented the Little Pittsburg in claim-boundary litigation in 1879. That's when Chaffee, Moffat and Tabor held most of the stock in the Little Pittsburg, stock that was traded in New York.
Smith writes that With 1879 monthly dividends rolling
in, Little Pittsburg stock rising in price, and predictions
of a $50 value [shares had started at $20] before 1880 was
out, stockholders relished what the new year would
bring.
That sounds familiar, and so does this: But then
suddenly the Little Pittsburg stock price slipped and by
... the end of the month [February] the stock had plummeted
to $13 a share.
Ore value had dropped from more than
$100 to less than $20 a ton. Dividends stopped in early
March.
Chaffee and Moffat had been unloading their own stock in
early 1880, although no one now knows precisely how much.
Smith observes that Chaffee and Moffat and others had
used inside information to dump their stock on an
unsuspecting public.... Crucial information had been
withheld from the public to benefit insiders. Mining
engineers' reports that were not highly laudatory did not
find their way into the press or to stockholders.
Chaffee made a feeble defense, that he had withheld damaging information about the mine so as to keep the stock price up and protect investors -- a tale that sounded fishy even then.
Smith concludes that Moffat and Chaffee had taken
advantage of both the Caribou [a silver mine west of
Nederland] and Little Pittsburg opportunities for their
benefit and to the disadvantage of others. In each case
inside information had aided them, as had the gullibility
of eastern investors.
In both cases their men directed mining operations,
giving them up-to-date information not provided to other
investors. Having fled the scene before the collapse, they
hurried on to other matters.
So they pulled off a classic insider deal, touting their company even as they were dumping its stock. Today Colorado boasts a Moffat County, as well as a Moffat Tunnel and a town of Moffat in the San Luis Valley. Also there's a Chaffee County, where I live.
And that's how posterity regards the deliberate defrauding of investors, at least if you live in Colorado.
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