Prescott Ford Jernegan was born on December 17, 1866 in Edgartown on Martha’s Vineyard.

The Jernegans were whalers, and Precott’s father Captain Jared Jernagan frequently took his daughters and infant son to sea aboard his vessel, the Roman.

It could be an exciting life. In the Marquesas, Prescott personally witnessed his father put down a mutiny with sheer gumption and two loaded revolvers — though given that Prescott was only two years old at the time his memories of the incident were probably a bit hazy. He had a far clearer recollection of the great calamity of 1883, when Capt. Jernegan’s fleet was lost in the Arctic and the family fortunes were nearly wiped out.

Still, those early sea voyages had a profound impact on the young Prescott Ford Jernegan. In his unpublished biography, he recalled…

I used to think those early days on the Roman were mere childish memories, of no great significance for my character. I was wrong. Ninety percent of what I was to become and do settled there. My father was an aristocrat of the sea. From him I learned, wisely or not, to regard myself as the equal in personal worth of any man. Roving too was bred into me; no place has ever seemed thoroughly home to me. The Planet itself merely a port of call. Life has been harder on account of this twist of character, but much more exciting.

As a boy, Prescott was both studious and mischievous. When he wasn’t burying his nose in a textbook, he was trying to find a way to bilk his classmates out of their lunch money by rigging games of chance. In the summers he got up to mischief with his pals and developed a system that would allow him to break the bank in Monte Carlo (not that he ever got the chance to put that system to the test).

In 1881, Prescott found religion at a Baptist revival. and emerged from the waters a new man. He threw himself into his studies, graduated Phi Beta Kappa from Brown in 1889, and spent a few years teaching at the Phillips Academy in Andover while simultaneously taking classes at the Newton Theological Seminary.

When he graduated from Newton in 1892 he celebrated by marrying his childhood sweetheart, Miss Betsey Evelyn Phinney, who had earlier broken off their engagement only to come crawling back to Prescott when things didn’t work out with her second beau.

The newly anointed and married Reverend Jernegan assumed the pulpit of the First Baptist Church of Middletown, Connecticut. He was a thoroughly modern Christian, whose preaching took cues not only from the Bible but from the writings of Henry George and Edward Bellamy. He was particularly infatuated with Bellamy, whose novel Looking Backward depicted the United States of the Year 2000 as a post-capitalist utopia.

In Middletown, the Reverend Jernegan embarked on several schemes to put Bellamy’s ideas into practice. The most notable of these was the Industrial Woodpile, a woodyard he opened with the help of several parishioners with the goal of providing employment for the homeless and poor. Local NIMBYs were not happy with the Woodpile or the sort of person it tended to attract, and dismissively called it “the Tramp House.” The tramps were none to keen on working, either, especially since the only reward for their hard labor was a seven cent meal ticket. The Reverend Jernegan stuck to his guns even though no one seemed to appreciate his charity. When one of the tramps stole the silverware the Jerngans had received as a wedding gift he pulled a Bishop Myriel and not only refused to prosecute the tramp but let him keep the stolen cutlery.

The straw that broke the camel’s back was when the Reverend Jernegan announced the church would stop charging rental fees for pews. (As a lapsed Catholic, the idea of having a seat license for churches seems ridiculous but you do you, Protestants.) The parishioners of the First Baptist Church were none too happy about this. They felt their young pastor was more interested in social justice than salvation. (This sort of criticism is often thrown at religious leaders by those who go to church to feel superior rather than out of any desire to do or be good.)

Whatever the reason, the church’s board of directors decided to reduce the minister’s salary so that he would have fewer resources to throw at his utopian socialist ideals.

The Reverend Jernegan responded by resigning his pastorship, effective New Year’s Day 1895. This seems to have been a negotiating tactic — he expected First Baptist to panic, cave, and restore his full salary. If so, it was a bad negotiating strategy right from the Richie Phillips playbook, because the Baptists accepted Jernegan’s resignation and he found himself unemployed.

Now, as a boyish and charismatic young fellow the reverend had no problem finding another job. The problem was it was with the DeLand Baptist Church just outside of Daytona, Florida. He left Betsey and the kids on Martha’s Vineyard with his parents, then took the long train ride down to Florida to preach.

The parishioners of First Baptist had been well-to-do, but the parishioners of Deland were straight up wealthy. Indeed, the majority of the church’s budget came from the tithes of a single individual: John Batterson Stetson, of cowboy hat fame. The Reverend Jernegan correctly intuited that these richie riches might be even less receptive to social justice initiatives than his old flock and decided to keep his head down. He made no attempts to help the poor and needy and made sure his homilies were bland and uncontroversial.

His new parishioners were not upset, but neither were they impressed. When the Reverend’s contract expired in 1896, they declined to renew it.

Jernegan returned to Martha’s Vineyard, where he immediately contracted typhoid fever. If he expected Betsey to take care of him, he was sorely mistaken. Instead, she declared she wanted a divorce, then decamped to Philadelphia to see the osculust — excuse me, oculist — she had been having an affair with. His mother and sisters stepped up to take care of him.

Several weeks of bed rest gave Prescott Ford Jernegan plenty of time to think about his life. He did not like where it was going. He had dreamed of making the world a better place, and had instead been “…patronized by illiterate snobs. I had been underpaid, my mind had become embittered by a thousand acts of injustice…” Jernegan eventually rose from his sickbed full of righteous anger.

He was going to get what the world owed him, one way or another.

Partners in Crime

Reverend Jernegan soon reconnected with a boyhood friend, Charles Elmer Fisher.

Fisher was also the son of a sea captain, albeit a less wealthy one. He had left the island to become a doctor but had flunked out of medical school. After that he spent a few years as a ne’er do well with no steady employment. He had been a mill clerk in New Bedford, a soldier in the British army, and a submarine diver in Florida. Most recently he had been in Brooklyn, where he had been working as a floor walker for the department store of A.I. Namm & Son. Fisher had decided to quit his job and start sponging off his parents shortly after his employer discovered he had a bad case of sticky fingers but before they could sic the cops on him.

The reunion with Fisher seemed to bring out the worst in Jernegan. The idealistic minister vanished, replaced by the puckish schoolboy who bilked his friends out of their lunch money by rigging a game of “guess how many marbles I have in my pocket.”

It would have been charming if the duo had merely reverted to childish tomfoolery. The problem was that as adults they had graduated from juvenile delinquents to full-blown con artists.

They began selling shares in a company that bought run-down farm machinery, refurbished it, and re-sold it in the South. After several months the company shareholders realized they were not receiving financial statements, much less the promised dividends, and that Jernegan and Fisher had been making themselves scarce. Eventually the two were cornered and forced to admit that the company had gone under due to an unexpected failure of the tobacco crop. Except one of those shareholders did a little digging and found out the company had never been properly incorporated under state law, and there was no indication it had ever purchased anything.

It was only the good name of Captain Jared Jernegan that kept his son out of jail. (It helped that he and Fisher hadn’t spent the money yet, so they could repay their marks in full.)

Then Prescott Ford Jernegan had a flash of inspiration.

During his convalescence, his younger brother Marcus read magazines to him every day. An article in one of those magazines casually mentioned that particles of gold and silver had been discovered in the world’s oceans.

That triggered a memory of Jernegan’s college days at Brown, specifically, a visit to Block Island where several of his professors had set up the Sea Water Steel Company. The company used enormous magnets to comb the floor of the bay and recover particles of scrap iron dumped into the ocean by nearby factories and mills. The process worked, but the company failed because the recovered iron was of inferior quality and commercially worthless.

Jernegan’s inspiration was to combine these two factoids into the ultimate con. What if there was a secret process that could be used to extract precious metals from seawater? Obviously not magnets, of course, gold and silver aren’t magnetic, but maybe something chemical? Maybe electrical? Electricity was basically magic, right? That could work.

As he noted in that unpublished biography…

It instantly occurred to me that since gold was already contained in sea water it would be an easy matter to conceal more gold there, then to sell the ‘secret’ for a large sum of money and disappear into parts unknown.

The duo had burned their bridges on Martha’s Vineyard, but Jernegan knew where they could find more marks: at the First Baptist Church in Middletown, Connecticut. His former parishioners may have disliked his idealism, but they still believed he was a holy man, an honest man, a utopian dreamer. If he was lucky, they they would still think of him as a minister, and naively give him the trust and respect that the role demanded.

The Reverend Jernegan took his pitch to two businessmen from his former flock: Arthur B. Ryan, a jeweler who taught Sunday School, and Andrew N. Pierson, a florist who was also a deacon.

He told the two men a fantastic tale. On a train ride back from Florida, almighty God had parted the clouds and bestowed upon him a secret process to extract precious metals from seawater. He had spent a year making that vision a reality, and only recently had he perfected “the gold accumulator.”

The gold accumulator was just a small wooden box with slits in the side that allowed water to pass through, like a lobster trap. Inside the box was a lead pan filled with mercury and acids, connected to an electrical power source through platinum wires described either as “as thick as a pencil,” or “as thick as your pinky,” so the width of a dainty finger or maybe an oversized novelty pencil.

When the accumulator was lowered into the ocean, the tides would cycle through the device where the process of electrolysis would draw precious metals out of the seawater and bind them to the mercury.

The device cost under a dollar to build, mere pennies to operate, and the return on investment would be virtually infinite.

This feels like a classic “something for nothing” con and you would expect Ryan and Pierson to be suspicious. And they were! They asked Jernegan to give them a live demonstration.

Jernegan did them one better. To show them that he was on the level he handed over the blueprints for the gold accumulator and insisted that the marks build their own. All he would provide was a location for the test, and the electricity to power the device.

One cold night in February 1897 Jernegan, Ryan, and Pierson met in a dockside shack few miles south of Providence, Rhode Island. Jernegan took Ryan and Pierson’s accumulator, hooked it up to his power cables, and slowly lowered it into the dark waters of Narragansett Bay. They sat around making idle chitchat for twelve hours, through a complete cycle of the tides. Then they raised the accumulator out of the water and opened it.

Jernegan peered inside, then nearly fainted and fell off the wharf. The lead pan had leaked and some of the mercury had been washed away, along with any precious metals that might have bonded to it. The reverend recovered, took what little mercury was left, and gave it to his potential investors. They in turn took it to a local chemist who did a quick assay and recovered five grains of gold and ten grains of silver, worth about $4.50.

The two capitalists did quick back-of-the-envelope math using figures Jernegan had provided them earlier. A single accumulator produced $6.50 in gold over the course of sixty hours. Operating costs were about 10¢ for every $1 of precious metal you recovered. An accumulator that ran continuously for a year would produce $949 of revenue, or $854.10 of profit.

(In modern money, that’s $32,216 per accumulator per year if you just plop that final figure into an inflation calculator. Of course, the price of gold has risen faster than inflation and the price of laboratory chemicals and electricity have gone way down. If you account for that, you’re looking at more like $188,256 per accumulator per year.)

Jernegan smiled and asked them: were they in?

They were all in.

A Quick Reality Check

So, let’s take a moment to do a quick reality check.

Is there actually gold in the ocean?

There absolutely is. In 1866 Henry Wurz suggested to the American Association for the Advancement of Science that the oceans might contain particles of gold, silver, and other precious metals in solution. In 1872 British chemist Edward Sondtstadt conducted some experiments which suggested that there was approximately one grain (or 64 milligrams) of gold in every ton of seawater, and those results were confirmed a few years later by Australian chemist Archibald Liversidge.

Can you use electricity to separate gold from seawater?

You absolutely can! That’s basically what electroplating is: using an electrically charged but chemically inert anode to separate metallic ions from a salt-based solution and deposit them onto a negatively charged but chemically receptive cathode. Seawater is by definition a salt-based solution, and it contains gold, so yes, you can use electricity to get it out of there.

So, was Jernegan’s gold accumulator actually viable?

Ha ha! No.

Electrolysis of this sort only really works if there’s a lot of metallic ions in the solution.

A cubic mile of seawater weighs about 5 billion tons. Most of that is liquid water, of course, but about 3.5% of that consists of various solids in suspension. That’s 175 million tons of solute, of which 85% is good old fashioned sodium chloride, and another 14% common elements like magnesium and bromine. The remaining 1%, or 1.6 million tons, is everything else, and some of that is gold.

Now, while that is a trace amount of gold at best, trace amounts can add up when you’re talking about something as large and voluminous as the ocean. Even conservative estimates suggest that the ocean contains hundreds of millions of tons of gold, representing about $800,000,000,000 at the current market value.

That’s about $1,000 for every man, woman, and child alive.

Mind you, that motherlode is still spread out across the entire ocean. Which is, y’know, huge.

It would be commercially viable to mine gold from the ocean if there were at least ½ grain (or 32 milligrams) in every metric ton of seawater. In other words, gold needs to be a mere .00000003% of the ocean, which is not a lot. Sondtstadt and Liversidge’s experiments suggested that the amount of gold in seawater was twice the break-even point.

However, more accurate modern testing has revealed that the actual concentration of gold in the ocean is only .0000 00001%, a whole order of magnitude lower than the break-even point. And that break-even point assumes you have access to modern, ion exchange membrane technology and not the crude chemical batteries of 1897. And for the gold to be evenly distributed throughout the ocean. Which it is not.

Which means, as John L. Mero noted in 1968…

If the total investment thus far expended in man’s attempt to extract gold from seawater had to be covered by a specific process which eventually might be developed, it is doubtful if gold from seawater ever would be a paying proposition. The mistake most people make in attempting to extract elements from seawater… is in assuming that there is enough of the element in seawater to pay the extraction costs. …[T]here is hardly enough of these elements present in seawater to pay the investment costs on the extraction facility, let alone pumping or reagent costs.

Given that we’ve just established that this is all theoretically possible but not practical, how had the gold accumulator managed to extract $4.50 of gold from the waters of Narragansett Bay?

Easy. It hadn’t. The con men had “salted” the accumulator, pre-loading it with gold for Ryan and Pierson to find later.

The exact method they used is somewhat unclear. They couldn’t have tampered with the device directly, since it had been supplied by Ryan and Pierson. There were plenty of other ways they could have done it, though.

Contemporary newspaper reports claimed that Fisher, drawing on his submarine diving experience, had slipped beneath the wharf under cover of darkness, used the electrical cable as a guide, and tipped gold dust into the submerged accumulator.

In his biography Jernegan denied that version of events, explaining that Fisher had nearly drowned on a test dive and then refused to make any further attempts. Instead he claimed that he had created a distraction by “fainting” when the accumulator was first opened, then had used that opening to sprinkle in a few gold flakes he had been hiding in plain sight on an ornamental stickpin.

There’s some problems with that version of events, too.

The exact method doesn’t matter all that much. All the con men had to do was swap out the mercury from the accumulator with a pre-prepared sample at any point before Ryan and Pierson could get it assayed. There were numerous opportunities for such shenanigans.

And oh boy, were there going to be a lot of shenaningans.

The Electrolytic Marine Salts Company

Jernegan spent the next several months finding investors among his former parishioners and seminary classmates.

On November 5, 1897 those investors incorporated the Electrolytic Marine Salts Company in Portland, Maine. (Though for some reason the company headquarters were actually in Boston, in the old Exchange Building on State Street.)

Ryan was President. Jernegan was Vice President. Both president and vice president received a small salary, and Jernegan and Fisher also received a 45% royalty on every share sold, plus cash bonuses and stock grants when the company reached certain financial milestones.
 The only compensation the other four officers received was a single share of company stock, and a 25% commission on any other stock they managed to sell.

The Electrolytic Marine Salts Company issued 10,000,000 shares of stock, each valued at $1. Within days they had already sold some 250,000 shares.

That cash was used to buy an old tide-powered grist mill in Lubec, Maine — the northeasternmost point of the United States, on the shores of Passamamassy… Quoddamapoddy… Passamaquoddy! Passamaquoddy Bay off the Bay of Fundy — on the theory that the region’s extreme tides would cycle more water and therefore more gold through the accumulators.

Pierson hired work crews and surrounded the old mill with a high board fence topped with barbed wire to keep looky-loos out. Then he spent several months refurbishing the property to meet the Electrolytic Marine Salts Company’s needs. It re-opened in January 1898 as Plant No. 1, the first of the company’s so-called “tide mines.”

Numerous gangplanks had been added to the lower level of the plant, right at the tideline and dotted with small bays where the gold accumulators were lowered into the waters of the bay.

The accumulators had undergone a slight redesign. The wooden boxes had been replaced by metal kettles, which were significantly larger — 3’ in diameter and 2′ tall. The lead pans were replaced with copper pans, which held up better to the acid. A line of cables ran from the accumulators into an ominous black chest (nicknamed the “coffin”) in an upstairs office, and from there to a dynamo the company had shipped in from Boston at great expense.

Each accumulator spent thirty days underwater, and then was hauled up to be cleaned out and refurbished for its next go-around. The mercury was taken upstairs to a laboratory, where an on-site chemist separated out the gold and formed it into cones and bars for sale.

Jernegan and Fisher were the plant’s General Manager and Assistant Manager. The company had only three other full-time employees;

• Robert Pedden, Jernegan’s old partner in the Industrial Woodpile and one of the ESMC’s earliest investors, was brought in to maintain the dynamo.
• Chemist William Arrington was hired to separate precious metals from the mercury.
• John Ives, an old army buddy of Fisher’s, was the security guard since he could be trusted not to ask too many questions.

Those were the only employees the plant would need on a permanent basis. While there were other tasks that would need doing, they could be handled by temporary workers, day laborers, and outside contractors.

The Electrolytic Marine Salts Company many not have been creating a lot of jobs, but the huge sums of money they were throwing around were great for the local economy. Lubec was so small that it did not yet have paved roads or electric lights or a waterworks but now it had a new bridge (which had been needed to get the dynamo down to the mill), electric power and telephone lines, and plans to build a spur line from the nearest railroad.

By February 1898 Plant No. 1 was “fully operational” with a hundred accumulators working around the clock, each purportedly producing $240 in pure profit per day, with plans to scale up to a full suite of 240 accumulators (which was all the plant could support). A few weeks later Arrington had enough gold on hand that the company began sending cones down to Boston, and within weeks there was a steady stream of them.

So, if the accumulator didn’t work, where was all this gold coming from?

Jernegan and Fisher were buying it from jewelers in Portland, Boston, New York, and points beyond. The gold would be shipped to Lubec, ground into dust, and surreptitiously sprinkled into the accumulators during Fisher’s nightly rounds when no one else was around except for Ives.

If your goal is to make money selling gold, that is a terrible strategy.

Thing is, Jernegan and Fisher were not making money selling gold. They were making money selling stock. As long as they were spending less on gold than they were making from stock sales, everything was hunky-dory.

Of course, the instant stock sales began to falter they would be in serious trouble.

The con artists didn’t anticipate this happening any time soon. Once their first fraudulent cones of gold and silver began reaching Boston, the company had to beat off potential investors with a stick.

No one was more delighted by these developments than the Electrolytic Marine Salts Company’s board of directors. The “success” of Plant No. 1 and the resulting influx of ready cash emboldened them to release a prospectus in an attempt to drum even up more investors.

Gold From Seawater at a Profit: The Facts is a masterwork… a masterwork of incredible hyperbole, delusion, and outright lies.

In addition to overstating the amount of gold in seawater, beyond even Jernegan’s inflated estimates, it also claimed the accumulators had been tested hundreds of times, all around New England and even overseas off the coast of Whitable-by-the-Sea and the Island of Wight (which was not true at all). And that was before it got outright biblical.

There is enough gold in the waters of Long Island Sound to pay off the national debt and leave a larger gold reserve in the treasury than the government has yet possessed. The waters that sweep in and out of New York Bay daily contain enough gold to buy all the ships and merchandise borne on their surface. Massachusetts Bay holds enough of the precious metal to buy all the real and personal property in the entire state… If this thing continues, we shall presently be paving earth’s streets with gold long before we reach the New Jerusalem.

By the beginning of summer the Electrolytic Marine Salts Company had “mined” nearly 2,877 ounces of gold, valued at $20,000. Over 900,000 shares of stock had been sold and the share price had risen from 33¢ to $1.40 giving the company a valuation of $14,000,000. The company declared a 3% dividend for all shareholders, and then turned over the remaining unsold shares to Jernegan as previously agreed. (Jernegan then turned around and made the other officers his sales agents in exchange for a small cut of the sale price.)

The company even employed 700 construction workers to clear land on the other side of the bay to build a second tide mine that would double their capacity and revenues.

Something Has Gone Wrong

By now the company’s rapid rise and subsequent press coverage had made Prescott Ford Jernegan, “the Reverend Electrolycist,” so famous that people began recognizing him on the street.

Which is a problem when you’re trying to clandestinely purchase gold to grind down for your big fancy scam. He had to start going farther afield to acquire the precious metals he needed to keep the ball rolling, and one week he couldn’t acquire any at all, so the plant’s “output” dropped to almost nothing. The board of directors began asking Fisher awkward questions, which he deflected until an eavesdropping local suggested that heavy rains had diluted the waters of the bay, lowering the concentration of gold. Fisher immediately seized on the comment as his out.

The con men realized that if they were having trouble procuring enough gold to keep up the ruse at Plant No. 1, they were going to be in serious trouble when Plant No. 2 became “operational” in a few months.

On top of that, stock sales were also beginning to slow down, meaning the directors were making less money on commission. Other capitalists had begun offering to buy gold accumulators from the company for outrageous sums. It wouldn’t be long before the directors succumbed to temptation and agreed, which would allow outsiders to scrutinize the device and expose the entire con.

Jernegan and Fisher knew what that meant. It was time to cut and run.

On July 20, 1898 Charles Fisher did not show up for his shift at Plant No. 1, and could not be found anywhere in Lubec. The locals were not particularly worried; Fisher had always been a bit of a loner. He would turn up eventually.

Then, on July 23, Prescott Ford Jernegan and his family, boarded the SS Navarre and set sail for France. To keep his departure quiet, Jernegan purchased the ticket under the fake name of “Louis Sinclair,” who also lived at a non-existent street address in Chicago.

No one had any idea something was wrong until July 25, when the weekly shipment of gold arrived in Boston, accompanied by personal checks to each director for $9,500, and a worrying letter from Jernegan to Ryan.

My Dear R:

I feel something has gone wrong with [Fisher]. He has disappeared from N.Y. after telling me that the apparatus was ruined, and has carried away the formula relating to the making of the machine in combination, which was his own invention, made since the initial contract, and which I have been pressing him to make clear to me and deposit a record of. His action in this regard leads me to fear that he may have deceived me, even in the experimental stage. Since I now look back, I see he was situated where he could do so in every experiment that has been successful.

That the main machine takes gold out of sea water is a certainty. I shall devote myself for a few weeks in trying to find him and whether I succeed or fail, I give you my word of honor that I will meet you for a conference in the near future. I advise that the directors develop a rigid scientific test, one in which our own apparatus is shown to be practical.

Ever yours, J.

Ryan was understandably confused. Jernegan now seemed to be saying that it was Fisher who had invented the gold accumulator, and that he had fled without divulging the secrets of its operation. Then Jernegan implied that the gold accumulator may have never worked in the first place. And then immediately walked that back. And then walked back the walking back.

What the heck was going on?

Ryan set out for Lubec try and figure things out. To calm the market’s fears, he announced that Fisher had gone on a belated honeymoon, and that Jernegan was traveling to Europe to acquire the chemicals and machinery needed for Plant No. 2.

It was 100% a lie, and he knew it. And within a day, so did everyone else.

On July 28 several newspapers began running an expose of the Electrolytic Marine Salts Company by one William Phelan. According to the stories Phelan, a private detective, had been one of the first potential investors the con men had approached, and had even been in the room for Ryan and Pierson’s test of the gold accumulator.

Phelan chose not to invest, because he smelled something fishy. He began investigating Jernegan and Fisher, and eventually discovered the true nature of their scam: that during the so-called “test” Fisher had dived beneath the wharf and surreptitiously tipped gold dust into the submerged accumulator.

He also named four other individuals who had to be on it: Ryan, the company president, who was named in the prospectus as one of the people who knew how the accumulator worked; Arrington, the chemist, who was responsible for assaying the gold and knew it wasn’t coming from the accumulator; Shanahan, the contractor responsible for building Plant No. 2; and Atwater, the part-time bookkeeper, who had to be keeping Jernegan’s surreptitious gold purchases off the books.

There was an enormous public outcry. Ryan had to act quickly and decisively to restore public trust in the company.

First he halted trading of the stock, ruining the plans of several traders who were trying to snap up more of it.

Then he shut down operations at Plant No. 1 and paused the construction of Plant No. 2. He also sent a telegraph across the ocean asking European authorities to keep an eye out for Prescott Ford Jernegan and Charles Elmer Fisher.

Jernegan and his family arrived at Le Havre on August 1. He was briefly questioned by the French police, but could not be detained because he had yet to be charged with a crime. The Sûreté promised to keep an eye on him, though… and then immediately lost track of him somewhere along the road to Paris.

Ryan and Atwater quickly discovered that Jernegan and Fisher had taken with them some $250,000 in cash (Jernegan $150,000; and Fisher $100,000). Despite this the board still maintained there was nothing untoward going on. Instead, they insisted this was money that the inventors were entitled to, their royalties from the sale of stock. As far they were concerned, everything was still on the up-and-up, even if the two most important people in the operation had fled the country and disappeared without a trace.

There was a brief rally on the stock after Ryan announced this, but most of the market did not share his Pollyanna-ish enthusiasm. When trading resumed the company’s share price plummeted from $1.40 to 30¢.

Back in Lubec, the cops dragged Arrington down to police headquarters for questioning, then charged him with conspiracy to defraud and set his bail at $25,000.

Ryan tried to quell the panic by pushing the idea that Jernegan and Fisher were actually the victims here. His story was that the two men had been “hounded and blackmaiiled for several months” by a gang of “sharpers.” Amazingly, this turned out to be true. Jernegan and Fisher had been being blackmailed… but not by a gang.

They had been being backmailed by William Phelan.

Phelan had a long and colorful history. During the Civil War he had been drafted into the army, but after his discharge he drifted from job to job. He did a stint in the British army, where had learned the art of submarine diving and befriended another soldier by the name of Charles Fisher.

He drifted down to Philadelphia, where he collected down payments for a photo album commemorating the 1876 Centennial Exposition which never quite made it to the printer. He became a counterfeiter, and after getting caught switched sides and became an agent for “Heath’s Counterfeit Detector.” After that he became a rootless private investigator… and not the good-hearted rogue with a code of honor kind. The skeezy, problematic fixer kind.

Jernegan and Fisher had approached Phelan in 1896, but not to ask him to invest in their new venture. They had asked him to be their accomplice, to operate the air pumps during Fisher’s dives. When that part of the plan was scrapped, the duo kicked him to the curb.

When Phelan saw the Electrolytic Marine Salts Company in the papers, he put two and two together and sent a letter to Jernegan and Fisher implying in so many words that if they did not pay up he would expose them. The letter included a $500 invoice for “services rendered.”

Jernegan responded by sending a check for $200.

Phelan responded by sending a second invoice for $2000.

At that point, Jernegan and Fisher decided to leave while the going was good, and fled the country.

This new information confused just about everyone. It was welcomed by William Arrington, though, who was promptly released from jail with many profuse apologies. He swore out a criminal complaint against Phelan, who fled across the border into New Brunswick to avoid prosecution.

Now, at this point, many managers would have stopped digging and blamed everything on Phelan. To Ryan’s credit, he kept on digging. Even though his investigations kept turning up more and more disturbing facts about his business partners.

He learned about Jernegan’s boyhood pranks. He found out about Fisher’s sticky fingers and the farm machinery scam the duo had run on Martha’s Vineyard. He realized that their flight was not spontaneous but deliberately planned, with tickets purchased weeks earlier under assumed names. He discovered that Jernegan had opened numerous bank accounts in New York and had been cycling his income through it to launder its origin. He even heard that Jernegan had bumped into friends in the days before his departure, and made a feeble attempt to gaslight them into thinking he was someone else.

These did not seem like the actions of a man with nothing to hide. It also did not help that Jernegan kept sending the board of directors a steady stream of letters from his hidey-hole in Brussels, most of them protesting his innocence and trying to shift the blame for everything to Fisher, who had seemingly vanished from the face of the Earth.

Disgruntled investors began demanding that something be done… but nothing could be done, according to the regular rules of order. Remember that over the summer the grateful directors had spontaneously gifted Jernegan and Fisher the remainder of the unsold stock, some 9,000,000 shares, giving them a 90% controlling interest in the company. No quorum could be met without them, and they could control the outcome of any vote.

Even worse, with Jernegan and Fisher gone no one at the Electrolytic Marine Salts Company could figure out how to get the gold accumulators working again. The directors seemed reluctant to admit that the accumulators had never worked, and spent several months throwing the top scientific minds in the country at the problem. They all said the same thing: that while the principles behind the accumulators were sound, the devices themselves were utterly impractical.

The top scientific minds were also forced to point out there was a more practical reason the accumulators would not work. Though there were wires running from the dynamo into the coffin in Jernegan’s office, and wires that came out of the coffin that went to the gold accumulators, when the coffin itself was opened it was discovered the two sets of wires were not connected.

Yikes.

Stick to the Truth at All Times

As the story continued to break, a small army of reporters descended on Martha’s Vineyard to ask the reverend’s friends and family what they thought about the islands wayward son. They gave some choice quotes, with the most savage ones coming from a very disappointed Captain Jared Jernegan:

They said here the news would give me a shock. Shock! It would take more than that to give me a shock…

He never mentioned gold to me. He knew better. I had sailed over too many miles of salt water to be taken in. He never confided his plans to me. If he had I would have told him to stick to the truth at all times… My boy Prescott has gone wrong. He did not follow the teachings I tried to give him. Now he must take the consequences. I shall not worry about him…

When my boy Marcus came down here with that valise full of money his brother Prescott had given to him I said to him, ‘Don’t keep a cent of it.’

Wait, what’s that a briefcase full of money?

What you need to know is that Marcus Jernegan, who may have accidentally kicked the entire plot off by reading magazines to his brother during his convalescence, had been brought in to the Electrolytic Marine Salts Company as a gofer. He had spent most of the last month running around doing his brother’s banking, converting his stock into more fungible assets. When the news broke that his brother had fled the country, Marcus was in possession of a briefcase full of some $40,000 in cash and bonds. Which he’d promptly turned over to the police.

That was the only good news for a long while. It was clear now to Ryan, the directors, and shareholders that the company had been a house of cards built on fraud, but there seemed to be very little they could actually do about it.

Then, in December 1898 there was a sudden and very unexpected development.

Jernegan had been hopping around Europe, from France to England to Monte Carlo to Belgium to Germany, and along the way he’d figured he’d try out some of his youthful schemes to beat casinos at their own game. It turns out they weren’t very good schemes, and in short order he lost almost half of his ill-gotten gains.

Perhaps the financial reversal was a sign to the Reverend Electrolycist from God Almighty. Perhaps the long months of social isolation had forced him to reflect on the error of his ways. Or perhaps he was growing increasingly worried that he, his business partner, and his brother were going to be indicted for fraud.

Whatever the reason, he wrote a letter to the board of directors offering to relinquish his shares in the company and return all the cash he had left, which was about $75,000. All he asked was for any potential fraud charges to be dropped against himself and his brother.

The board took Jernegan up on his offer.

In January 1899 the Electrolytic Marine Salts Company entered receivership and Ryan spent most of the following year liquidating the company’s assets. Some $35,000 in bullion was found hidden in Plant No. 1. With Marcus Jernegan’s help they were able to recover another $60,000 from various banks in Boston and New York. Additional funds were raised by auctioning off the company’s property and fixtures.

In April the company’s investors were paid off at a rate of 20¢ per share, with a promise of another 10¢ to follow. That arrived in July, with the promise of an additional 5¢ payout. Which arrived in November, and wound up being 6¢.

No one would ever say that 41¢ on the dollar is a great return on investment, but it’s way more than an investor in a bankrupt and fraudulent company could have ever expected. Ryan’s scrupulous honesty and probity convinced everyone that the board, at least, had not been in on the con.

And that was the end of the Electrolytic Marine Salts Company.

But it wasn’t the end of Prescott Ford Jernegan and Charles Elmer Fisher.

We’ll do Fisher first because his life was a lot shorter. He’d moved nearly half a world away, first to New Zealand, then to New South Wales, and died of a sudden illness in Sydney in 1902. (It was later rumored that he had faked his death and was living in the South Pacific, or had been until he was caught in flagrante delecto with a cannibal chief’s wife and beheaded.)

Jernegan spent the next few years bouncing around Europe, and may have made an unsuccessful attempt to revive his scam in London. Betsy left him in 1900 and filed for a divorce, which was finally granted in 1906. He gambled away most of his money, and then returned to North America and took whatever odd job would have him. He worked on a labor gang in Manitoba, went prospecting in Alaska, ran a sawmill in Washington. He spent a few years in the Philippines where he became a teacher, wrote several textbooks, and may have even written the lyrics to the Philippine national anthem.

Eventually he relocated to Hawaii, where he became a high school principal in Hilo. At least for a few years — when his bosses found out who he really was, he was busted back down to teacher. He remarried, retired in 1924 with a full pension, and started writing books about theology. When his story was forgotten he returned to the mainland and lived in obscurity in California. He died in in 1942 while visiting his one of his daughters in Texas.

I have been thinking about this story for more than a year and I’m honestly not sure what sort of moral to take away from it. Except maybe that people are gullible, and would rather continue to delude themselves than face uncomfortable truths.

Modern Gold-From-Seawater Schemes

The idea of gold from seawater, of something for nothing, has remained a tantalizing idea propped up by the high price of gold.

Only a few years after the failure of the Electrolytic Marine Salts Company similar scams were started by Henry James Snell in London and Alfred Argles in New South Wales. Fortunately for the investor class, neither operation seems to have taken off.

In the 1920s chemist Fritz Haber became obsessed with the idea of extracting gold from seawater to help pay down Germany’s war debts and reparations. If anyone could have figured it out it would have been Haber, who had won the Nobel Prize for developing the industrial process we use to extract nitrogen from the atmosphere, which revolutionized modern agriculture. Haber spent years working on an extraction method that involved centrifugal force and electrochemistry before finally realizing the estimates of the amount of gold in the ocean were wildly inaccurate and giving up in frustration. He returned to his day job, synthesizing poison gas for Nazi death camps.

In the 1930s, emboldened by his successful side hustle of extracting bromine from seawater, Willard Dow of Dow Chemicals declared that within a decade his company would be extracting all sorts of precious metals from seawater. Several Dow chemists even received patents for processes that, like Jernegan’s, worked in theory but not in practice. Dow gave up after a decade of wasted effort, having managed to extract about a pinhead’s worth of gold from the ocean.

In the 1950s the development of more accurate techniques for chemical analysis revealed that the concentration of gold in seawater was far lower than had been previously believed. Legitimate scientists largely abandoned the field, turning it over to the con men and cranks.

Our most recent crank would be Mark Sullivan. In 2012 Sullivan developed a giant ocean turbine that used the Coriolis Effect to produce free infinite energy, and which extracted gold from seawater as a byproduct. He pitched his idea on Shark Tank and even the sharks, who are not normally great when it comes to science, would not bite. Sullivan then turned his attention to harnessing gravitons for free infinite energy.

It’s probably a good thing that it’s not possible. The gold bugs do not seem to have learned the lesson the Spanish had to learn the hard way: greatly increasing the supply of something only collapses the market.

Besides, all the cool kids have moved on to crazier scams. Now, who wants to harvest gravitons for free infinite energy?