According to the Reverend Prescott Jernegan, it all began with a divine vision he experienced while sitting in a train car while on his way to Florida in 1896.
At least, that was the story he told soon after to a Connecticut jeweller named Arthur Ryan (who also happened to be a deacon in Jernegan's church). In describing his vision, Jernegan said that God had appeared to him and told him how to build a device that could extract gold from seawater. Though it was common knowledge that ordinary seawater contained a virtually unlimited supply metal salts that, in theory, could be harvested in enough quantities to supply all of mankind's metal needs, nobody had ever found a way to do it profitably. After showing that a crude model he built by hand worked as his vision described, Jernegan was quick to exploit his discovery with the help of men like Arthur Ryan. Exactly how this device could be built, not to mention the mysterious process that it used to separate gold from seawater, were secrets that Jernegan refused to share with anyone. Still, the series of demonstrations Jernegan staged, along with a man named Charles Fisher, was enough to persuade Ryan that they were on to something.
By 1897, Jernegan, Fisher,and Ryan had launched the Electrolytic Marine Salts Company and set up operations at a seaside facility they built at Passamaquoddy Bay on the border between Maine and New Brunswick. Much like the nearby Bay of Fundy, the tides in Passamaquoddy Bay rose and fell on a regular schedule and the special tidal water mills set up by the company were able to process tons of seawater every few hours. Given that they were already boasting of collecting about $100 a day in gold alone in their accumulators, it didn't take long for enthusiastic investors to start pouring in with their money. To safeguard their operations, and the secret of their seawater process, the three entrepreneurs constructed a ten-foot fence around their property. Newspapers were enthusiastic in describing what was happening with headlines such as "Gold From The Sea." In one story which ran on November 17, 1897, Ryan himself was quoted as saying that the mills they had established already accumulated one half to one grain of gold and one to two grains of silver per ton of seawater. Given the prices for gold and silver back then, that meant that a cubic mile of seawater could contain more precious metals that had been mined during the entire course of human history.
Though it seemed incredible, what mainly helped sell the idea to investors were the hard won reputations of Arthur Ryan and Prescott Jernegan. Ryan was already a well-known businessman in that part of the country while Jernegan had a good reputation as an evangelist and preacher. When Ryan promised that the extra accumulators they were building would soon bring in $1000 a day for the company, people believed him. The stock they sold in their company skyrocketed in value in just a few months and the founders suddenly found themselves almost embarrassingly wealthy.
In June 1898, just months after newspapers spread the word about Prescott Jernegan's miracle process, new stories began coming out which told a rather different story. With headlines such as "Jernegan Under Suspicion", the Electrolytic Marine Salts Company announced that it was suspending the sale of stock in their company. As for Prescott Jernegan, he had absconded to Europe and rumours were flying that he had managed to embezzle more than $300,000 in company funds. At around the same time, Charles Fisher had disappeared as well though nobody had any idea where he had gone. Perhaps not coincidentally, the tidal accumulators were no longer producing gold. This belatedly allowed authorities to finally work out the "secret" behind Jernegan's process: each night, he had Charles Fisher (who happened to be a deep-sea diver) salt the accumulators with gold dust to be "extracted" the next day. Police learned this when another deep sea diver, who had apparently been used before Fisher signed on, began complaining that he hadn't been paid for his early service to the company.
But there was still the matter of what to do about Prescott Jernegan. While police had all the warrants they needed for his arrest, extraditing him back to the United States was a legal headache. Even after he agreed to return home to stand trial, he still managed to elude them somehow. All that they could learn after his return was that he was "staying with friends" at an unknown location. Though Jernegan refunded $75,000, which was quickly divided among his creditors, that only amounted to twenty percent of the total money owing them. Arthur Ryan, who appeared to have been an innocent dupe, managed to stay out of prison though his reputation as a businessman had been completely trashed. When not dealing with lawsuits over the company's collapse, he largely faded from public view.
By the time all of the lawsuits were settled, investors received only thirty-six cents on the dollar, largely because the company had legitimate assets that could be sold at a loss. As for what became of the hundreds of thousands of dollars that had gone missing, financial investigators could find no trace. An independent report by a prominent scientist verified that gold could be extracted from seawater but there was no practical way of accomplishing it, not that this deterred other companies from trying the same thing. One company in London had reportedly started up soon after the first glowing announcements by the Electrolytic Marine Salts Company and, sure enough, their stock boomed as well. What became of them and their investors, I haven't been able to learn.
As for Prescott Jernegan, he managed to avoid arrest and ended up in the Philippines, of all places. In 1903, an enterprising reporter wrote that Jernegan had been spotted in Manila where he was employed as a teacher of English at a boy's school. Not only did Jernegan make no attempt at concealing his identity, he was open in describing his life as a fugitive:
"When I found myself in Europe with a large amount of money to my credit, I said to myself: "Now, I will live." I did not fear criminal proceedings because the best legal authorities informed me that the money was technically mine. All my life I had lived on husks, I had been patronized by illiterate snobs. I had been underpaid and my mind had been embittered by a thousand injustices. " Still, a belated attack of conscience led him to invest much of his money in the hope of reimbursing his creditors. Ironically, he decided to invest in that London-based copycat company that had been trying to repeat his success at extracting gold from seawater. Thinking that they succeed where he failed, he was reportedly mortified to find that he had been swindled. "Every cent I had put in was swept away. I still had $10,000 left and my desire to recoup had become a mania but I had made other unlucky investments so that early in 1901, I found myself with barely enough money to get my wife and myself back to the United States. She went to live near Boston where she now is while I went west."
As for his life in Manila, all that he would say was that he simply wanted to be permitted to "work out the problems in my life as best I can." His wife, Betsy, divorced him in 1906 citing desertion and nothing more was heard about Prescott Jernegan for a few years until he turned up in the United States again. Capitalizing on his years in the Philippines, he wrote a number of books and became a lecturer before taking over as principal at a high school school in Hawaii. He lost this position in 1924 when the story about his long-ago swindle leaked out though he continued teaching at the same school until his retirement. He died in 1942.
Whether or not he really lost his money the way he claimed, there is no doubting that Prescott Jernegan was one of the most successful swindlers in American history. Even after the Electrolytic Marine Salts Company collapsed, some true believers continued to insist that Jernegan had been unfairly treated though most of his investors were just grateful to get some of their money back. That he managed to reinvent himself as a distinguished educator with little fallout from his long-ago fraud, seems hard to believe in this Internet era but investors showed little interest in rehashing their own gullibility by pursuing him in court.
Still, much like the South Sea Bubble and assorted other cons, Jernegan's seawater swindle is yet another reminder of that old adage: if something seems too good to be true, it probably is.