Gold Rush in the Sea – Do you believe everything you read in the newspaper?

Gold Rush in the Sea – Do you believe everything you read in the newspaper?

by Esther Gritsch, Custom House Maritime Museum Intern

The year was 1897, when a young Reverend founded the Electrolytic Marine Salts Company,  an auspicious name, one that drew the attention of many newspapers and journals. These articles on what would be later known as the “Gold Hoax of Lubec” are worth a closer look. Comparing the publications before and after the scam was revealed gives us the opportunity to reflect on how newspapers portray events and how those portrayals influence their readers.

Rev. Prescott F. Jernegan founded the company with his childhood friend Charles E. Fisher. The two business partners started working on a method and machinery that could extract gold from sea water. Jernegan first had this idea in 1896 and after many years of experimenting, him and Fisher introduced the so-called “Gold Accumulator” box and presented it to future investors in 1898. 

These investors were Arthur B. Ryan, a jeweler who became president of the company, and Andrew N. Pierson, a florist who became superintendent of construction. Shortly after these demonstrations the Electrolytic Marine Salts Company purchased land in North Lubec, Maine in order to build their plants. They claimed this was because Passamaquoddy Bay and its extreme tides made the gold extraction more efficient, but in reality  the remote area made it easier to keep the process a secret. 

In the first few months, the company was successful, employed hundreds of people and sold many stock certificates. Then in July 1898, both Jernegan and Fisher disappeared with over $200,000, worth c. 6.2 million dollars today. Their disappearances prompted an investigation which revealed that the apparatuses did not accumulate gold. Instead Fisher, a professional diver, had injected it into the boxes. Meetings were later held to try and  refund some money to the tricked stockholders. The leaders of the scheme fled the country and were never convicted. [1]

When the company was first established and the plant in North Lubec was built, people were skeptical because a preacher, a floorwalker, a jeweler and a florist did not seem qualified for this type of work. The local newspaper (Lubec Herald, March 1, 1898) judged its readers for their prejudice, saying that they condemn these magnificent doings, and instead they should be grateful for the opportunities presented by the company and support its undertakings. [2] The leaders of the company were considered honorable gentlemen. The Lubec Herald (n.d.) wrote that their presence in town was desirable as they were Christians with extraordinary social and business competences and because of that, they will bring prosperity and wealth to the remote town. [3] The quiet town did indeed profit from this company as it built a new iron bridge, and brought the first telephone line to Lubec. The Lubec Herald (April 19, 1898) rejoiced, “It will be a great convenience not only to North Lubec but to us in the village as well, and is another sign of progress. Electric lights and waterworks next.” [4]  

In order to advertise and support the new company, sensational headlines, mind-boggling calculations and predictions were published, saying that an estimated 70,000,000,000 tons of gold is in the ocean, which would be worth $48,000,000,000,000. [5] Newspapers like the Lubec Herald, The Middletown Press and The Hartford Courant, were very excited about Plant No. 2 being built at the canal which connected Johnson Bay and South Bay in North Lubec where supposedly, 10,000 machines making $10,000 every day were to be installed, employing 500 men. [6] Another publication affirmed that nine shipments had been made with an average of $1,000 each. Statements like these were press releases initiated by Jernegan and Fisher themselves. [7]

This good press from local newspapers and magazines stopped though when the scam was revealed. Some newspapers tried to dissociate from the company, while others criticized everyone involved. “The ‘United States Investor’ HAS NEVER BELIEVED in the Electrolytic Marine Salts Co. – apart from any question if the feasibility of the project. It has been entirely too secretive from the start, either for the good of the stockholders or of the company itself.” [8]

The Engineering and Mining Journal emphasized that an expert in the field should have been consulted. [9] Referring to chemists who did research on this matter, the journal declared it impossible for someone like Jernegan, a man without any “scientific knowledge or training,” to make this kind of discovery. It also stated that it had warned investors in their 26 March 1898 issue, calling it a “fake company”. [10] Some articles even postulated that you had to be a fool to trust the company’s claim. One article could only explain the incidents assuming that the “fools far outnumber the wise in this world”. The author was not only very disappointed in mankind for their beliefs and stupidity, but also even more shocked by the fact that professional business men fell for the scheme. “You have a right to expect that [they] will not try to extract sunshine from cucumbers, or gold from sea water.” But the author also complimented Jernegan for his awareness of how to trick the masses, saying he seemed to have known “his fellow-creatures” very well. The article ended with tips on how to stay away from scams like these, noting to never trust a clergyman with business affairs and that Jernegan cannot be blamed for human idiocy. [11]

The Boston Sunday Herald (n.d.) published this sketch of the so-called “Gold-Accumulator”. The apparatus and process was described in the Engineering and Mining Journal. It was a combination of chemical and electrical components inside a box with a cylinder, where sea water would flow through the machinery, extracting the gold. [12] But this good-looking invention was never proven and only used for show. Therefore, the question arises of where the shipped bullions came from. It was later revealed that it was bought in Philadelphia and put into boxes  “carefully sealed and marked ‘platinum wire’.”[13]

So how did this purchased gold get into the accumulators? This is where Fisher and his diving skills came into play. A series by the Newburyport Daily News suggested that William Phelan – a possible accomplice, early employee and New York detective – supposedly held the life line while Fisher put the gold into the accumulators. Phelan left the company and allegedly blackmailed Jernegan and Fisher.  He wrote, “If this thing is not settled by Wednesday, I shall print” suggesting he knew about the procedure and fraud. [14] While further investigating in North Lubec, Phelan almost got arrested but escaped. [15] If the accusations had not been insane enough, the Newburyport Daily News raised the question whether Phelan and Fisher were the same person. When asked the Pinkerton Detective Agency was only familiar with the name Fisher, but not Phelan. Fisher however had never visited New York under his real name. This lack of information about Phelan led to some officials to believe the men were one in the same. [16]

When the plant opened in Lubec, the accumulation of gold seemed to have happened in a laboratory. The Boston Herald (August 3, 1898) described this laboratory as where Fisher worked on assaying the gold. And while, this did not seem to be out of the ordinary. The space, however, contained a gloomy flight of stairs that led to a locked door. Upon opening it, it revealed a dark and mysterious room. Along the walls were flumes which were filled with water coming in from automatic gates on the outside. Originating from this main channel, many smaller flumes eventually led to the accumulators. These were kettle-shaped machines holding mercury, quicksilver and acids, placed in a wooden box. Water was pumped through the flumes and into the accumulators. Everything in this obscure room was covered with slime. Spookiness and anxiety increases when thinking about Fisher working there at night-time. [17] A mischievous journalist noted very suitingly that the salt of the ocean was not the only salt which entered into the accumulators. [18] 

The Jewelers’ Circular and Horological Review featured an article previously published in the Milwaukee Herold (August 6, 1898) offering an explanation to the process where the purchased pure gold was dissolved with the help of acid. This dissolved gold (chloral gold) was then diluted with water. Large quantities of sea water were pumped into tanks and the water with the dissolved gold was added. This mix was then brought to a boil. In doing this the gold would reappear and the lumps could be formed into bullions again. [19] 

The disappearance of Jernegan and Fisher, which initiated the investigation and revelation of the scam, was also heavily discussed by newspapers and journals. According to a press representative in France, Fisher travelled to Europe a few days before Jernegan. Jernegan argued that he was trying to chase Fisher in order to retrieve the secret formula, which he claimed was in jeopardy. [20] The reverend was in New York City a week before he left, claiming the trip was to purchase “electrical machinery for the extension of his plant.” In retrospect, his dealings were probably not with electricians, but with bankers. After making his younger brother, Marcus W. Jernegan, his private secretary, Jernegan bought government bonds which amounted to $150,000. [21] These bonds where purchased under the assumed names of Frank W. Thompson and A.C. Spencer, after which P. F. Jernegan changed his name to Louis Sinclair and then boarded a ship to France. [22] This meant the police would have to obtain a warrant for his extradition back to the United States. The Newburyport Daily News however was sure that it was only a matter of time until it was obtained, and Jernegan could easily be imprisoned and brought to face justice. [23] The newspaper also printed comments about Fisher’s wife saying “Would Fisher desert his wife? In a minute.” There was no doubt in their minds, as he even sold stock to his mother-in-law. These accusations only worsened, especially when Jernegan and Phelan were accused of murdering Fisher. [24]

At first, the directors of the company tried to conceal the suspicious activities, but after the publications and articles about the scam went public, they quickly changed their position. [25] Most of them publicly admitted the process was a fraud. They held a meeting at Salisbury Beach and afterward published a statement to the stockholders. In that statement, they discussed that Jernegan and Fisher defrauded the stockholders and then disabled the apparatuses in Lubec before fleeing the country. As a result, the officials of the company would engage in damage limitation. [26] Pierson, superintendent of construction, stated that after an examination of six accumulators no gold was found. The only discovery was “Auri chloridum”, a liquid solution of gold in chlorine gas which was found in Fisher’s office. [27] On August 19th a stockholder meeting was held in Portland, Maine where they decided to test the process once more, as President A.B. Ryan still believed that it worked. The test of course failed, further proving the deception. [28] 

After paying the workers and making sure all other expenses were covered, the directors were left with a balance, which allowed them to pay the stockholders 30% of their investments. Unfortunately, this percentage might be lower, depending on the litigation and court hearings they had ahead. [29] The litigation, as noted in the Newburyport Daily News, only allowed dividends of 20 cents in the end. [30] This marked the end of the Electrolytic Marine Salts Company.

These articles show that newspapers sometimes write whatever people want to hear, from exuberant positivity on a matter to unrealistic assumptions and harsh criticism on persons included. On the other hand, people believe what newspapers and journals are writing about. After discussing several pieces of advice given by authors and journalists, I want to end this blog on a similar note: It is always important to ask yourself the question who is writing the article and who they are writing for.

[1] Bangs, Carrie (Pesha, Ronald Ed.). 2013. The Great Gold Swindle of Lubec, Maine. Lubec Historical Society. Published by The History Press, Charleston SC.

[2] Bangs, Carrie (Pesha, Ronald Ed.). 2013. The Great Gold Swindle of Lubec, Maine. Lubec Historical Society. Published by The History Press, Charleston SC. page 19.

[3] Bangs, Carrie (Pesha, Ronald Ed.). 2013. The Great Gold Swindle of Lubec, Maine. Lubec Historical Society. Published by The History Press, Charleston SC. page 51.

[4] Bangs, Carrie (Pesha, Ronald Ed.). 2013. The Great Gold Swindle of Lubec, Maine. Lubec Historical Society. Published by The History Press, Charleston SC. page 50.

[5] McCain, Diana Ross. 11/18/1998. FORTUNE SUCKED FROM THE SEA WAS A GOLDEN SCAM in “The Hartford Courant”:https://www.courant.com/news/connecticut/hc-xpm-1998-11-18-9811150027-story.html, 07/02/2019.

[6] Bangs, Carrie (Pesha, Ronald Ed.). 2013. The Great Gold Swindle of Lubec, Maine. Lubec Historical Society. Published by The History Press, Charleston SC. page 64.

[7] https://lfb.org/the-great-gold-swindle/, 07/12/2019

[8] United States Investor and Promoter of American Enterprises. Volume 9. Part 2. Issues 27-52. 1898. Investor Publishing Company. [Digitized: https://books.google.com/books?id=Wj5OAAAAYAAJ&lpg=PA1112&dq=electrolytic%20marine%20salts%20company%20agent&pg=PA1112#v=onepage&q=electrolytic%20marine%20salts%20company%20agent&f=false, 04/30/2010] 08/09/2019, page 1098.

[9] Engineering and Mining Journal. Volume 66. 1898. McGraw Hill Publishing Company. [Digitized: https://books.google.com/books?id=bsk2AQAAMAAJ&lpg=PA257&dq=arthur%20W%20johnson%20electrolytic%20marine%20salts%20company&pg=PA581#v=onepage&q&f=false 12/10/2012] 08/09/2019, page 151.

[10] Engineering and Mining Journal. Volume 66. 1898. McGraw Hill Publishing Company. [Digitized: https://books.google.com/books?id=bsk2AQAAMAAJ&lpg=PA257&dq=arthur%20W%20johnson%20electrolytic%20marine%20salts%20company&pg=PA581#v=onepage&q&f=false 12/10/2012] 08/09/2019, page 122

[11] United States Investor and Promoter of American Enterprises, Volume 9, Part 2, Issues 27-52. 1898. Investor Publishing Company. [Digitized: https://books.google.com/books?id=Wj5OAAAAYAAJ&lpg=PA1112&dq=electrolytic%20marine%20salts%20company%20agent&pg=PA1112#v=onepage&q=electrolytic%20marine%20salts%20company%20agent&f=false, 04/30/2010] 08/09/2019, page 1112.

[12] Engineering and Mining Journal. Volume 66. 1898. McGraw Hill Publishing Company. [Digitized: https://books.google.com/books?id=bsk2AQAAMAAJ&lpg=PA257&dq=arthur%20W%20johnson%20electrolytic%20marine%20salts%20company&pg=PA581#v=onepage&q&f=false 12/10/2012] 08/09/2019, page 581.

[13] Engineering and Mining Journal. Volume 66. 1898. McGraw Hill Publishing Company. [Digitized: https://books.google.com/books?id=bsk2AQAAMAAJ&lpg=PA257&dq=arthur%20W%20johnson%20electrolytic%20marine%20salts%20company&pg=PA581#v=onepage&q&f=false 12/10/2012] 08/09/2019, page 154.

[14] Newburyport Daily News. 08/01/1898. http://newburyport.advantage-preservation.com/viewer/?k=electrolytic%20marine%20salts%20company&i=f&d=01011890-12311900&m=between&ord=k1&fn=newburyport_daily_news_usa_massachusetts_newburyport_18980801_english_1&df=31&dt=40&cid=2710, 07/24/2019, pages 1,4.

[15] Newburyport Daily News. 08/06/1898. http://newburyport.advantage-preservation.com/viewer/?k=electrolytic%20marine%20salts%20company&i=f&d=01011890-12311900&m=between&ord=k1&fn=newburyport_daily_news_usa_massachusetts_newburyport_18980806_english_1&df=11&dt=20&cid=2710, 07/23/2019, page 1.

[16] Newburyport Daily News. 08/09/1898. http://newburyport.advantage-preservation.com/viewer/?k=prescott%20jernegan&i=f&d=01011890-12311900&m=between&ord=k1&fn=newburyport_daily_news_usa_massachusetts_newburyport_18980809_english_8&df=1&dt=10&cid=2710, 07/23/2019, page 8.

[17] Bangs, Carrie (Pesha, Ronald Ed.). 2013. The Great Gold Swindle of Lubec, Maine. Lubec Historical Society. Published by The History Press, Charleston SC. pages 148,149.

[18] United States Investor and Promoter of American Enterprises. Volume 9. Part 2. Issues 27-52. 1898. Investor Publishing Company. [Digitized: https://books.google.com/books?id=Wj5OAAAAYAAJ&lpg=PA1112&dq=electrolytic%20marine%20salts%20company%20agent&pg=PA1112#v=onepage&q=electrolytic%20marine%20salts%20company%20agent&f=false, 04/30/2010] 08/09/2019, page 1185.

[19] The Jewelers’ Circular and Horological Review. Volume 37. 08/10/1898. Jewelers’ Circular Publishing Company. [Digitized: https://books.google.com/books?id=4HMoAAAAYAAJ&lpg=PA24&dq=electrolytic%20marine%20salts%20company%20newburyport&pg=PA24#v=onepage&q=electrolytic%20marine%20salts%20company%20newburyport&f=false, 06/18/2008] 08/12/2019, page 16.

[20] The Jewelers’ Circular and Horological Review. Volume 37. 08/10/1898. Jewelers’ Circular Publishing Company. [Digitized: https://books.google.com/books?id=4HMoAAAAYAAJ&lpg=PA24&dq=electrolytic%20marine%20salts%20company%20newburyport&pg=PA24#v=onepage&q=electrolytic%20marine%20salts%20company%20newburyport&f=false, 06/18/2008] 08/12/2019, page 16.

[21] Engineering and Mining Journal. Volume 66. 1898. McGraw Hill Publishing Company. [Digitized: https://books.google.com/books?id=bsk2AQAAMAAJ&lpg=PA257&dq=arthur%20W%20johnson%20electrolytic%20marine%20salts%20company&pg=PA581#v=onepage&q&f=false 12/10/2012] 08/09/2019, page 124.

[22] Newburyport Daily News. 07/29/1898. http://newburyport.advantage-preservation.com/viewer/?k=electrolytic%20marine%20salts%20company&i=f&d=01011890-12311900&m=between&ord=k1&fn=newburyport_daily_news_usa_massachusetts_newburyport_18980729_english_8&df=31&dt=40&cid=2710, 07/24/2019, pages 1,8.

[23] Newburyport Daily News. 04/22/1899. http://newburyport.advantage-preservation.com/viewer/?k=electrolytic%20marine%20salts%20company&i=f&d=01011890-12311900&m=between&ord=k1&fn=newburyport_daily_news_usa_massachusetts_newburyport_18990422_english_1&df=21&dt=30&cid=2710, 07/24/2019, page 1.

[24] Newburyport Daily News. 08/18/1898. http://newburyport.advantage-preservation.com/viewer/?k=electrolytic%20marine%20salts%20company&i=f&d=01011890-12311900&m=between&ord=k1&fn=newburyport_daily_news_usa_massachusetts_newburyport_18980818_english_1&df=21&dt=30&cid=2710, 07/24/2019, page 1.

[25] Engineering and Mining Journal. Volume 66. 1898. McGraw Hill Publishing Company. [Digitized: https://books.google.com/books?id=bsk2AQAAMAAJ&lpg=PA257&dq=arthur%20W%20johnson%20electrolytic%20marine%20salts%20company&pg=PA581#v=onepage&q&f=false 12/10/2012] 08/09/2019, page 154.

[26] The Jewelers’ Circular and Horological Review. 08/03/1898. Volume 37. Jewelers’ Circular Publishing Company. [Digitized: https://books.google.com/books?id=4HMoAAAAYAAJ&lpg=PA24&dq=electrolytic%20marine%20salts%20company%20newburyport&pg=PA24#v=onepage&q=electrolytic%20marine%20salts%20company%20newburyport&f=false, 06/18/2008] 08/12/2019, page 24.

[27] Newburyport Daily News. 04/22/1899. http://newburyport.advantage-preservation.com/viewer/?k=electrolytic%20marine%20salts%20company&i=f&d=01011890-12311900&m=between&ord=k1&fn=newburyport_daily_news_usa_massachusetts_newburyport_18990422_english_1&df=21&dt=30&cid=2710, 07/24/2019, page 1.

[28] Engineering and Mining Journal. Volume 66. 1898. McGraw Hill Publishing Company. [Digitized: https://books.google.com/books?id=bsk2AQAAMAAJ&lpg=PA257&dq=arthur%20W%20johnson%20electrolytic%20marine%20salts%20company&pg=PA581#v=onepage&q&f=false 12/10/2012] 08/09/2019, page 257.

[29] Engineering and Mining Journal. Volume 66. 1898. McGraw Hill Publishing Company. [Digitized: https://books.google.com/books?id=bsk2AQAAMAAJ&lpg=PA257&dq=arthur%20W%20johnson%20electrolytic%20marine%20salts%20company&pg=PA581#v=onepage&q&f=false 12/10/2012] 08/09/2019, page 197.

[30] Newburyport Daily News. 04/22/1899. http://newburyport.advantage-preservation.com/viewer/?k=electrolytic%20marine%20salts%20company&i=f&d=01011890-12311900&m=between&ord=k1&fn=newburyport_daily_news_usa_massachusetts_newburyport_18990422_english_1&df=21&dt=30&cid=2710, 07/24/2019, page 1.