No Sanctions for Lawyer in Bogus Treasure Case

     KEY WEST, Fla. (CN) – A federal judge refused to sanction an attorney connected to treasure hunters who planted fake emeralds in the Gulf of Mexico and then tried to sell the purported treasure to investors.
     As recounted in court documents, divers Jay Miscovich and Steve Elschlepp claimed to have discovered a lost treasure from an 18th century Spanish galleon off the Florida coast, and sought the exclusive rights to survey the site of the purported treasure in Federal Court.
     Miscovich testified that, while diving in 2010 with Elschlepp in the Gulf of Mexico, 30 miles north of Key West, he noticed some “shiny objects” at the bottom of the ocean. Miscovich first mistook them for broken glass, but soon realized that the objects were green gems, most likely emeralds, according to his testimony in court. The divers said they had paid $500 for a treasure map and a shard of pottery that had led them to the site.
     Miscovich claimed that he and his dive partner filled their empty lunch bags with emeralds and took them to Elschlepp’s home to be cleaned and stored. The divers went back over the following months and retrieved more of what they believed to be lost Colombian emeralds, according to Miscovich, who said picking the emeralds felt “like picking cherries on a cherry tree.”
     However, Elschlepp’s testimony and a report an archeologist drafted about the discovery differed from Miscovich’s account, the court noted.
     The court later discovered that the treasure hunters’ claims were false and that they had planted thousands of junk emeralds on the ocean floor. By getting title to the emeralds as well as a court order preserving future rights to the imaginary treasure site, Miscovich and Elschlepp hoped to persuade prospective investors and buyers that the discovery was genuine, according to U.S. District Judge James Lawrence King’s most recent ruling in the case.
     The treasure hunters took the purported gems to New York and Washington, D.C. to attract investors and asked experts in France, Switzerland and Colombia to evaluate them. Some of the stones were used to make jewelry and others were planted back into the ocean to be used in a promotional video, according to the ruling.
     “Although the future victims of the conspirators would have been the purchasers of the fake gems and the investors who were expected to invest in the continued salvage operations of the fake discovery, the immediate victim was the United States District Court and the American system of justice,” King wrote in the March 16 opinion. “The entry of a final decree as sought by plaintiff would have lended credence to the conspirators’ outrageously false claims of a new discovery.”
     Miscovich and Elschlepp managed to get support from various investors, business associates and law firms. Additionally, national media outlets, the Smithsonian Institute and Colombian government officials unwittingly helped the divers sell the story, according to the court’s 58-page opinion.
     Miscovich told a crew from the CBS “60 Minutes” program that the emeralds were worth millions of dollars, according to the ruling. An emerald expert later testified in court that the combined value of the stones could not exceed $50,000 and that maybe one or two percent of them had commercial value. Experts also testified that at least some of the stones were coated with epoxy, a modern material that did not exist before the 19th century.
     “The involvement of all of these individuals and corporate entities produced, in some instances, astounding results,” King wrote. “The record indicates that a more than three million dollar investment was made in furtherance of the criminal enterprise. The record further indicates that various 1aw firms have invested legal services (some paid, some unpaid) of several million dollars in attorneys’ fees and costs of litigation. The case has additionally spawned hundreds of hours of judicial labor in the three trials that have thus far been conducted.” (Parentheses in ruling).
     The treasure hunters filed their claim to the stones in September 2011, in Key West, Fla. Motivation Inc., a prominent treasure hunting company, opposed the claim, arguing that the gems could have come from one of two Spanish ships that sank in the 17th century, to which it had title.
     The company, in which Miscovich had previously invested, claimed the stones could have floated 40 miles from the site of the shipwrecks to the site of Miscovich and Elschlepp’s alleged discovery. The divers opposed the theory, and Motivation withdrew its claim after an expert inspected the emeralds and concluded that they did not come from the 17th century shipwrecks.
     The court then denied Miscovich and Elschlepp exclusive title to the stones, finding that the law of salvage could not apply in the absence of a shipwreck and without proven ownership of the rescued materials. What’s more, the court found, the divers had forfeited any right to the stones by using them for personal benefit when they had some of them cut and used in jewelry pieces.
     The treasure hunters also could not keep the stones under the law of finds because they could not prove they had continuous possession of the gems after scattering them throughout the world to various experts, relatives and prospective investors, the court ruled.
     In a December 2012 order, the court said it was simply returning the stones to the parties who had physically brought them into court, without making any findings as to their origin or value.
     Two actions for sanctions followed, one of which led to the discovery of the divers’ fraud. Motivation filed a first motion for sanctions in August 2012, alleging that Miscovich and Elschlepp had increased its legal costs by delaying inspection of the emeralds and by taking months to recover the stones from other parties and turn them over to the court.
     During the three-day trial on the issue of sanctions, a witness revealed that Miscovich had in fact bought 80 pounds of raw emeralds from a store in Jupiter, Fla. The owner of the store testified that Miscovich had spent about $80,000 on the emeralds he had bought over the course of four months in 2010. The court then concluded that Miscovich had planned the purported discovery by planting the emeralds and then “finding” them to increase their value as purported “sunken treasure.”
     Miscovich committed suicide in October 2013. According to John Siracusa, a West Palm Beach lawyer who represented Miscovich’s company, federal criminal investigators had begun looking into the case before Miscovich’s death.
     The court imposed sanctions against Miscovich’s estate for the fees Motivation incurred from the moment it filed its claim until Miscovich’s death. His treasure salvage company was also sanctioned for withholding from the court the results of expert tests that detected the presence of epoxy coating, which suggested the emeralds were mined in modern times.
     Motivation also asked the court to sanction Miscovich’s attorney Bruce Silverstein and his Delaware-based firm Young Conaway Stargatt & Taylor, among others, for allegedly enabling Miscovich’s fraud by withholding the lab test results for several months. Motivation claimed that Silverstein, who initially represented Miscovich in a Delaware lawsuit filed by investors in the emeralds, had a personal interest in the outcome of the Florida lawsuit and unnecessarily prolonged litigation.
     Paul Sullivan, a political organizer who worked on the campaigns of Presidents Carter and Clinton, was also accused of misconduct in connection with the divers’ fraud.
     Sullivan advised Miscovich and took several trips to Colombia to negotiate the country’s possible interest in the stones with the Colombian president on behalf of Miscovich. Silverstein and Sullivan were among those who put money in Miscovich’s treasure salvage enterprise, according to King’s ruling.
     In opposing the sanctions, Silverstein claimed that, while the emerald test results from the French and Swiss labs were still inconclusive, he viewed any disclosure of those results as a breach of the attorney-client privilege. He said he had no reason to suspect Miscovich and Elschlepp of fraud since the Smithsonian and a gem expert in New York had previously found no traces of epoxy or other modern enhancers on the stones.
     Silverstein testified he did not suspect Miscovich was lying, despite red flags raised by other attorneys representing the treasure hunters, who withdrew or tried to withdraw when the story did not add up. Silverstein also said he had no reason to doubt Miscovich’s story that he had paid $50,000 to the seller of the treasure map in exchange for release of all claims to the treasure, which later proved to be pure fiction.
     King ruled last week that the Florida court had the power to sanction Silverstein’s alleged bad-faith litigation conduct even though the attorney was not subject to the court’s orders and did not formally appear in the Florida action.
     However, Motivation failed to prove that the attorney acted in bad faith, the judge concluded.
     King agreed that Silverstein had an interest in the outcome of the Florida litigation, given his investment and equity in Miscovich’s enterprise, but said there was no proof that Silverstein was willfully blind to the treasure hunters’ fraud. Silverstein and others connected to Miscovich and Elschlepp’s case may still be held accountable in other civil or criminal proceedings if there is clear proof that they participated in or enabled the fraud, according to the ruling.
     Attorney Bruce Silverstein did not respond to a request for comment.

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