Lubec, Maine

Text by Jennifer Multhopp

With images from the collection of Edith Comstock and Margaret Bailey.

In October of 1897, Prescott Ford Jernegan, a Baptist minister, and Charles Fisher, both from Edgartown, Martha’s Vineyard, arrived in Lubec and immediately set an elaborate plan in motion that ultimately resulted in financial ruin for hundreds of defrauded investors throughout New England and dashed the hopes of Lubec townspeople.

The two newcomers leased Hiram Comstock’s tidal grist mill located at Mill Creek in North Lubec. According to Reverend Jernegan in the prospectus he prepared for potential investors, “Millions of dollars in gold were flowing through Lubec Narrows every single day.” He and his boyhood friend, Fisher, founded the Electrolytic Marine Salts Company, an endeavor that promised to extract millions of dollars in gold from the seawater racing through the Mill Creek site. At the time, many wondered why remote North Lubec was chosen for such an undertaking. Jernegan explained that the unusually high tides, swift currents and good boat service between Eastport and Lubec would facilitate successful operation of the plant. He also claimed that the idea came to him “in a vision.” It is more likely that the location was chosen to make the operation less accessible to curious shareholders.

Between October of 1897 and February, 1898 approximately one hundred men were employed in the conversion of the grist mill to a gold extraction factory. A “machine room” and a “laboratory” were constructed. Beneath them, in the water, were placed specially constructed wooden boxes called accumulators, for collecting the gold content of the seawater that flowed through them. More critical to the top-secret operation was the high wood and barbed wire fence with its “No Admittance” signs that surrounded the facility.

The following account appeared in The Lubec Herald in July 1898: “The inlet to Mill Pond accommodated 240 accumulators of which sixty were pulled up each week. Thus each box was under water a month before its turn came to be examined. During that time the water, chemicals, and electricity had time to work their magic.” Apparently, nothing more elaborate than a cast iron pot was at the heart of this fantastic device. It was later learned that Charles Fisher, an accomplished diver and the brains behind the operation, had in fact planted the so-called “magic”- the small quantities of gold extracted by the accumulators – in them. At regular intervals, just prior to the accumulators being raised from the water, he would, under cover of darkness, salt each box with the gold. This gold was sent to New York and proved to be enough to convince investors that a fortune was to be had.

Thousands of shares were sold, primarily to investors in Massachusetts, New York and Connecticut. Jernegan and Fisher designed and published an elaborate prospectus to attract and convince potential shareholders. Among the incredible claims made in this document was the following: “One is at a loss to comprehend the enormous wealth floating in solution in the ocean. At the lowest estimate, a cubit mile of seawater contains gold to the value of $65,000,000. It is probably nearer the mark to place it at $100,000,000.”

Why were so many people willing to invest their life savings and even mortgage homes to become participants in this scheme? The Lubec Herald followed the progress of Passamaquoddy’s El Dorado very carefully throughout 1898 and, initially, very favorable articles appeared lauding the good character of Jernegan and Fisher – “The presence of these people is not only desirable for the amount of money they will bring into the town, but we should welcome them for their social qualities. The officers of the company are earnest, Christian gentlemen, and many of their employees are Christians. We wish them all success in their undertaking and hope that they will take millions of dollars from old Passamaquoddy Bay – and we believe they will! With quantities of gold in the salt water there is little need of a trip to Alaska!” (The Alaskan Gold Rush was in full swing at this time, the major difference being that actual gold was being found there.)

So successful was the first plant at Mill Creek that construction began on a second, much larger facility at the nearby canal in North Lubec that would contain 5000 accumulators and employ hundreds of men. So many came in search of work at the new plant that it was difficult to find boarding space in town. Over 700 laborers were involved in the construction. Many were Italian immigrants lured from working on the railroad in Machias by the promise of higher wages. They lived in two large camps near the site.
The waterfront was very busy with vessels carrying construction materials arriving daily. As a result of the expansion a telephone line, bridge over the canal and a steam launch, named The Gold Bug, were constructed.

Alas, late in July of 1898 rumors began to circulate that all was not well at Klondike and work was suspended on July 29. Both Jernegan and Fisher had unexpectedly vanished with no credible explanation as to their whereabouts. When it became known that both men were missing plant workers and townspeople congregated at North Lubec demanding information from the unfortunate administrators who were left holding the bag, apparently unaware of the swindle. In fact, Reverend Jernegan was at that time sailing, under an assumed name, to France with his family and proceeds from his gold extraction scheme. Fisher’s whereabouts remained unknown, although rumors of his fate circulated for years afterward.

Newspapers throughout New England had a field day exposing the fraud. The August 1, 1898 edition of The Boston Herald reported, “Never did a fisherman bait his traps with more alluring or attractive morsels that did Reverend P. F. Jernegan tickle the fancy and stimulate the greed of victims with his brilliant and enticing prospectus of the Electrolytic Marine Salts Company, now a practically defunct organization, with the reverend promoter flown to foreign parts, an alleged swindle of the first magnitude.”

The Herald went on to report, “Everything is quiet here in Lubec tonight as could be expected with 700 men suddenly thrown out of employment, and the fond hopes of the last eight months for the building up of a prosperous city around the fabled gold producing plant, dashed.”

Even though many investors, very few from the Lubec area, lost everything in the swindle there were no prosecutions.

While living in Brussels, Belgium Jernegan returned $75,000 to his investors. This coupled with the sale of the company’s assets enabled stockholders to recover 36 cents on each dollar invested. He went on to become a respected school teacher in the Philippines where he authored a history of the Islands.

Sources
Bangs, Carrie, “Klondike: The Gold from Sea Water Story Promoted by the Electrolytic Marine Salts Company at North Lubec, Maine”, Lubec Herald, December, 1948 – March 1950.
The Boston Herald, August 1, 1898
Edith Comstock interviews held during November, 2008.
Jernegan, Prescott Ford, A Sketch of the Discovery of a Commercially Profitable Process for the Extraction of Gold and Silver from Sea Water, Robinson Press, Boston, 1898.
Johnson, Ryerson & Lois, 200 Years of Lubec History 1776 – 1976, 1976.