The Foreign Service Journal - November 2014 - page 68

68
NOVEMBER 2014
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THE FOREIGN SERVICE JOURNAL
stipend of $2,500, along with a sweetheart deal: a no-interest
loan to purchase £10,000 of Emma Mine stock, which would
not need to be repaid until he sold the shares. In this way
Schenck not only lent the prestige of his diplomatic position to
the enterprise, but made it appear that he was making a sub-
stantial personal investment in it.
To his credit, it seems that Schenck had some reservations
about accepting the proposed arrangement. Rather than con-
sulting the State Department, however, he informally queried
two colleagues at the embassy (both also former Civil War offi-
cers). Neither raised any objections, so Schenck took the deal.
The prospectus was issued on Nov. 9, 1871, and proved
very popular, especially among “widows, clergymen, half-pay
military officers and others dependent on annuities.” (Three
members of parliament also accepted seats on the Emma Silver
Mine’s board.)
Shortly thereafter, Schenck again began to have qualms
about his relationship with Emma Mine, and finally sent the
following telegram to Secretary of State Hamilton Fish asking
for guidance: “Am surprised and pained by telegrams from
United States, published here, regarding my connection with
Emma Mine. Have no pecuniary interest except some shares,
for which, after investigating fully, I paid dollar for dollar. Hav-
ing thus decided and raised means to invest, was solicited by
respectable Americans to act with gentlemen of known high
character as director, to protect their interests and my own in
what I believe very valuable property. Perhaps made mistake.
Want only honorably and usefully to serve my government
and countrymen, but have not deemed it wrong to try to make
something honestly for myself and family. Will withdraw from
board or do whatever you advise. Will not embarrass adminis-
tration.”
Fish quickly cabled back: “The advertisement of the name of
a diplomatic representative of the government, as director of a
company seeking to dispose of its shares in the country to which
he is accredited, is ill-advised and unfortunate, and is calculated
to subject him to criticism. … You are earnestly advised to with-
draw your name from the management of the company.”
Schenck duly submitted his resignation from the Emma
Mine board on Dec. 6, 1871—but did not sever his ties with the
firm until Jan. 12, 1872. The delay afforded him additional time
to unload his shares.
In the end, though, he proved better at playing draw poker
than playing the market, losing, he said, about $40,000 on
the deal. Ironically, one of the reasons Schenck cited for
participating in the venture was that he had “found it impos-
sible to maintain suitable living standards for himself and his
family on his meager salary.” (This is a sentiment expressed
by countless Foreign Service officers serving in London since
then.)
Many other investors lost money, as well. By the end of
1872, shares in the mine fell from a high of £32 to just a little
over £1. Investors naturally became irate over what was
increasingly seen as a fraud. To his further discredit, Schenck
successfully invoked the cloak of diplomatic immunity to
escape British lawsuits over the scandal and his role in it as a
director of the Emma Mine.
Yet despite his loss of credibility, Schenck chose to stay on
in London as minister for another four years, finally returning
to the United States in early March 1876. Though animosity was
directed at Schenck personally, the episode does not appear to
have affected bilateral relations in any significant way.
Congress Investigates
Schenck’s belated resignation may well have been driven by
the worsening political climate in Washington, where Democrats
began to push investigations into various scandals implicating
the Grant administration with an eye toward the 1876 elections.
In February 1876, the House of Representatives passed a resolu-
tion directing the Committee on Foreign Affairs to investigate
the Emma Silver Mine affair and Schenck’s role in it.
Representative Abram S. Hewitt (D-N.Y.), a member of the
committee, presented its 876-page report to the full House on
May 25, 1876. After summarizing the facts, he commented:
“Of all the positions in public life, the ambassador occupies
the most delicate, the most responsible, the most honorable.
To his further discredit, Schenck successfully invoked
the cloak of diplomatic immunity to escape British lawsuits
over the scandal.
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