BOSTON (CN) - As a grand jury investigates the claims made to finance an underwater-treasure hunt, the First Circuit has endorsed the government's subpoenas.
Though the 26-page decision obscures the names of parties at issue in the grand-jury proceedings, the details of the case narrow the focus to Greg Brooks and his salvage company, Sea Hunters.
Prosecutors say Brooks collected $8 million in capital by using doctored records to make investors think that a jackpot of gold and platinum sank with the British SS Port Nicholson in 1942 when German U-Boats attacked it off the coast of Massachusetts.
The government notes that Brooks gave potential investors a confidential report in April 2008 that claimed the wreckage contained 71 tons of platinum and "a very real possibility of ten tons of gold bullion," as well as 1.5 tons of industrial diamonds.
When Sea Hunters contended in a federal admirality action that month that the operation had retrieved six metal pieces from the wreckage, the court granted it salvor-in-possession status for the ship that August.
The British government soon threw its hat in the ring, however, to seek possession of the ship's supposed load of precious metals.
In 2013, the United Kingdom began to question the authenticity of the documents Sea Hunters was filing, and agents with the National Archives and Records Administration soon conducted an interview of Edward Michaud, the salvage researcher Brooks had hired.
Prosecutors say Michaud ultimately admitted to altering historical documents to indicate that the ship contained 1.7 million troy ounces of platinum when it sank, after Brooks allegedly told him that they "needed to show more to get investors on board."
Specifically, Michaud copped to altering an entry in Lloyd's War Losses, saying Brooks instructed him to purchase a copy of the compendium in 2006 while researching the SS Port Nicholson.
Brooks claims that Michaud committed the fraud on his own, but Michaud, who is now working with the government in the case against Brooks, claims that he was pressured to doctor the reports.
The government executed a search warrant at Brooks' home in December 2014, soon after Michaud spoke with NARA, seizing six metal pieces in addition to numerous computers and electronic media storage devices.
Two months later, three of Brooks' admiralty lawyers and their law firms met with subpoenas for all materials concerning Sea Hunters in the last nine years. The government said that the materials seized from Brooks' home fell under the crime-fraud exemption to otherwise-privileged material.
Though the lawyers claimed that attorney-client privilege and work-product protection protected their records, a federal judge sided with the government.
Around that same time, the admirality case was dismissed with prejudice, and Brooks lost the rights to salvage the SS Port Nicholson.
A three-judge panel with the First Circuit affirmed the government's subpoena wins on Friday.
"There was ample evidence for the district court to conclude under the applicable evidence standard that appellant was involved in a scheme to defraud investors as to the value of the cargo of the P.N.," Judge Timothy Dyk wrote for the court. "This included evidence that E.M. stated that the documents were falsified at appellant's direction, that the falsified documents were transmitted to potential investors and the admiralty court, that appellant's claim that the six metal pieces came from the P.N. was contradicted by the captain of the S.W. vessel that supposedly recovered them, and various other evidence from the ... affidavit" of FBI Special Agent Mark Miller.
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