Folio — From the April 2016 issue

Emerald Sea

The making and unmaking of a half-billion-dollar treasure hunt

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ii. emerald reef

Jay Miscovich’s relationship with his younger brother, Scott, had been strained for much of their adult lives, but in March 2010, two months after his discovery, Jay called to relay the news. Like his brother, Scott held a medical degree from the American University of the Caribbean. Unlike Jay, Scott also held an undergraduate diploma from Cornell, and had gone on to do a residency at Yale. A member of the ethics committee of his local hospital, he had worked as a family-practice physician in Kailua, Hawaii, for more than two decades. Scott told me recently that Jay was “totally obsessed and passionate” about finding a shipwreck. Whenever the brothers spoke on the phone, he said, Jay would “talk about his houses, then he’d flip it to treasure.”

According to Scott, Jay worked hard at everything he did. But he also had an impulsive streak. “He would be one of those guys that would go in and just buy a house on the spot from the bank. That was just the way he operated.” Though Jay’s real-estate dealings had made him a paper millionaire for a time, wealthy enough to own a 5,200-square-foot hilltop mansion, Scott worried that his brother did not have the business savvy to manage a serious find. Indeed, it was possible to see Jay’s enthusiasm for treasure hunting, his taste for the long shot, as proof that he was not ideally equipped to handle an honest-to-God treasure hoard. By the time he called Scott, Jay had already raised around $80,000 from the CEO of ORRV — Elchlepp’s previous employer — and one of the company’s principal investors. Jay had also commissioned a friend, a Pennsylvania jeweler named Michael Vesely, to set some of the emeralds in gold. But after Jay said that he wanted to sell the emeralds while touring the country in a rented motor home, Scott warned him, “You’re going to end up dead in a ditch if you think you’re going to tote around fifty to sixty pounds of emeralds. You don’t just get in a Winnebago and start driving around.”

Jay’s plans worried Scott enough that he called Dean Barr, a hedge-fund manager who had been his fraternity brother at Cornell in the early 1980s. He told Barr about the discovery, and said that Jay needed help: help setting up a business to support the salvage operation, help marketing the emeralds, and help recruiting investors he could trust. “I was reaching out for guidance,” Scott explained to the court at the 2012 bench trial, “because, being from a small town in Pennsylvania, he didn’t have that type of skill.” Barr, who held an M.B.A. from NYU, was another story: in 2005, at forty-five, he had been hired to run Citigroup’s $40 billion alternative-investment unit. After he was replaced by Vikram Pandit, Citigroup’s future CEO, Barr started his own billion-dollar private-equity firm in Greenwich, Connecticut.

In court testimony, Barr described himself as initially skeptical of Jay’s tale. Nevertheless, after Scott sent along photographs of the emeralds, Barr invited Jay to meet him in New York. In early April 2010, at the Manhattan office of Proskauer Rose, the law firm that represented Barr, Jay unzipped a green duffel bag and covered the glossy surface of a conference table with gallon-size ziplocks full of emeralds, amethysts, and quartz crystals. There were several hundred stones, Barr would recall later. Most of the emeralds were small, but some of the specimens composed of emerald and quartz were as big as a fist and weighed nearly half a pound. As curious lawyers eyed the gems, Jay told Barr about the map, though he did not mention Cunningham by name.

HA043__03H90-3The two men returned to Proskauer a week later to meet the head gemologist of Christie’s, who confirmed that the stones were real emeralds. Many were not gem quality, she told them, but she also said that proof the emeralds had come from a shipwreck could multiply their value as much as eight times. Barr decided to invest. On April 19, he paid Proskauer a $50,000 retainer to create Emerald Reef LLC, a company whose purpose was to organize the recovery of more emeralds and to locate the shipwreck from which they came.

Not long after, Barr’s personal accountant, Neil Ash, also agreed to invest in Emerald Reef. (Both declined to comment for this story.) Barr and Ash, who became known as the New York investors, brought in a handful of others to back Emerald Reef, but the two men would end up contributing the lion’s share of its working capital. They quickly took charge of setting the company on a proper footing. They drew up capitalization tables for a series of limited-liability corporations and financed the purchase of a $700,000 115-foot dinner-cruise boat called the Spirit of La Salle. Scott spoke to experts in marine archaeology, and Elchlepp, the most experienced treasure hunter in the group, was tasked with hiring divers, transforming the Spirit of La Salle into a proper salvage ship, and arranging expeditions to the site, which was yielding, by Jay’s estimate, some 10 to 20 million dollars’ worth of emeralds per trip.

By the end of that summer, the emerald stash, which Elchlepp was storing in Key West, in a gun safe at his house, weighed more than eighty pounds. At Jay’s urging, the group commissioned an Oxford-trained marine archaeologist to produce a report about the find to circulate to potential investors. Jay was understandably eager to keep the coordinates of the emerald site a secret, and he was careful to tell the archaeologist a story that was somewhat different from the one he’d told his partners — it placed the find in early 2009, for instance, and made no mention of a treasure map. The archaeologist’s report noted that the emeralds were associated with no known shipwreck, and it concluded with a forgivable bit of hyperbole: “Dr. Jay was in a unique position; he had discovered treasure before the treasure hunt had even begun!”

Though Emerald Reef had attracted more than $6 million in investment commitments, for much of that summer Jay remained, in what would become a favorite phrase, “emerald rich and cash poor.” Barr and Ash had agreed to send him $10,000 each week, money that was meant to fund the company’s salvage operations and to pay down his personal debts, which, they feared, could cause P.R. problems when the find became public. But not even the weekly stipend kept Jay more than half a step ahead of his creditors. He told Ash that he was nearly homeless — “my 14 yr old car burns 2 qts of oil a week,” he wrote in an email — and that his debit card had been rejected when he tried to buy lunch for his dive crew in Key West. “I understand I and the housing crash created all my problems, and you and Dean are trying to help,” he wrote. Still, he complained, bringing the emeralds to market was “taking so long.”

Jay blamed much of the delay on the lawyers, but as the attorneys at Proskauer were learning, claiming ownership of sunken treasure was in some ways more difficult than finding it. U.S. admiralty law stipulates that the rights to sunken cargo can persist many centuries after a wreck, and the Spanish government in particular has been ruthless in pursuing treasure lost during the peak years of its transatlantic empire. For this reason, Emerald Reef’s lawyers had begun to consider a strategy to make an admiralty claim in a foreign country — the Cayman Islands, say — whose laws would make it more difficult for Spain to secure ownership. Proskauer advised Jay and his partners not to sell any of the emeralds until their legal rights were ensured.

The value of the emeralds presented another complication. At times, Jay suggested that the stash could be worth as much as half a billion dollars, but the shares he sold Barr and Ash implied a more modest valuation of $10 million. To help resolve the uncertainty, Jay, Barr, Vesely, and others traveled to Washington, D.C., in August to meet Jeffrey Post, the head curator of the Smithsonian’s gem collection. According to Post, who is by many accounts the nation’s top gemologist, Jay brought his duffel bag into a conference room in the National Museum of Natural History and “started pulling plastic bags full of emerald crystals out.” Post told me recently that there were so many emeralds on the table that he called a colleague in to help examine them. “There were thousands,” he said. “Never in my lifetime have I had that many emeralds piled up on a table in front of me.”

Like the gemologist from Christie’s, Post said that the emeralds were not well suited for jewelry. Still, the visible presence of pyrite — fool’s gold — in the stone matrices, along with the emeralds’ shape, color, and quantity, strongly suggested that they were from Colombia. “There aren’t a lot of places that, historically or even now, could produce that number of emerald crystals in one place,” he explained to me. According to Vesely, Post said that some of the stones looked like they were from Muzo, a region north of Bogotá from which the world’s most valuable emeralds originate. The group was thrilled: there was talk of permanent donations and joint exhibitions with the Hope diamond. Before Jay left the office, he promised to send Post a handful of emeralds directly from the dive site to examine under a scanning electron microscope. That afternoon, Dean Barr emailed a potential investor: “It was a home run! Jeff Post?said, and I quote, ‘This has been a once in a lifetime experience for me.’ This guy has seen everything.”

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