Maureen Milford

The News Journal

When Bruce Silverstein first heard the story in 2011, he was skeptical: a novice treasure hunter discovered thousands of emeralds on the murky Gulf of Mexico floor with a map he bought in a Key West, Fla., bar.

The discovery, perhaps pirate booty from a 16th- or 17th-century ship, could be among the biggest and most valuable treasures found in those waters if certified as ancient spoils. Experts who inspected some of the emeralds said they were potentially valuable.

It didn't take long for Silverstein, a Wilmington lawyer who once sought a position on Delaware's prestigious Court of Chancery, to be convinced this was an "amazing discovery."

He was not alone. More than a few people who saw the bags of green jewels believed treasure hunter Jay Miscovich's story that he picked up emeralds in the Gulf like "cherries on a cherry tree." Some, including Silverstein and a former deputy campaign manager for President Bill Clinton, put money into Miscovich's treasure salvage enterprise, according to court documents.

Then the story began to unravel. A prominent treasure hunting company raised doubts about the discovery in October 2011. Months later, labs found some emeralds were coated with a 20th-century jewelers polish, suggesting they were a modern find that would not dramatically increase in value. Last October, Miscovich put a 12-gauge shotgun to his head, pulled the trigger and killed himself.

The final, devastating blow to the treasure tale came in January. A jewelry store owner testified during a south Florida federal case that he sold Miscovich 80 pounds of the rough Colombian emeralds. Federal criminal investigators already had begun looking into the case, according to John Siracusa, a West Palm Beach lawyer who represented Miscovich's company.

Growing fallout

Now, the fallout from the alleged fraud has descended on Silverstein and his Wilmington law firm, Young, Conaway, Stargatt & Taylor.

Silverstein, who is a Delaware lawyer for Miscovich's JTR Enterprises Inc., is accused by another company in federal court of being so enamored by the prospect of bounty from a valuable shipwreck that he helped conceal that some emeralds were coated with a modern epoxy meant to enhance the stones.

He also faces accusations that he threatened witnesses and worked to prolong litigation in hopes of frustrating other parties.

One of the biggest names in the treasure business – Motivation Inc. – and owner of two famous Spanish galleon shipwrecks worth hundreds of millions of dollars, accused Silverstein and others in court documents of engaging in a "brazen fraud" on the court to promote the treasure as the product of a pirate shipwreck, while hiding "rock solid" test results that the emeralds were mined in modern times.

The value of items recovered from ancient shipwrecks soars, while modern finds are worth only a fraction, according to court testimony.

"Silverstein even bragged to another partner in a Delaware firm that his firm would receive a fee exceeding $100 million in this matter," according to a February motion Motivation filed in its case against the lawyer and others.

Young Conaway had a right to a percentage of the emeralds and anything recovered by Miscovich, according to an affidavit filed by Silverstein.

In its February motion, Motivation asked that Silverstein, Young Conaway and Paul Sullivan, the former Clinton campaign official, show why they should not be sanctioned by the court.

Motivation wants the three to pay legal expenses. It also wants the court to bar Silverstein and Young Conaway from practicing law in the federal Southern District of Florida.

"It is impossible to believe that a sophisticated corporate lawyer and a national-caliber political adviser/real estate developer and savvy law firm did not know the obvious: JTR was a criminal enterprise," Motivation's motion states.

Silverstein did not return repeated calls or emails seeking comment, nor did Young Conaway. They have not filed responses with the court to Motivation's claims filed in February.

"I think the whole case is unfortunately a tragedy," said Siracusa, a JTR lawyer in Florida who said his firm settled with Motivation. "I'm out over $650,000 over this. It was a wild story. But I dove the site and found emeralds, and I did believe it."

In lengthy affidavits, Silverstein said Motivation was on a "witch hunt."

"I believe that I have an impeccable reputation, and I am deeply offended by the claims of fraud that have been asserted against me," he wrote in a 2012 affidavit.

"The assertions are baseless, reckless and defamatory, and I am in the process of investigating my avenues for judicial redress."

Silverstein denied deceiving the court or running up legal costs. He and the firm argued they are not parties to the Florida case and the federal court lacks jurisdiction over them.

"If anyone has engaged in bad faith litigation, it is Motivation and its counsel," Silverstein and his firm argue in court filings. "Motivation and its counsel are going after [the firm], and Mr. Silverstein simply because they believe [they] are deep pockets."

Treasure map

Miscovich knew his tale of lost treasure was "romantic," according to testimony during a federal trial last year to determine whether he should be granted exclusive rights to the discovery.

Miscovich himself was a "a fairly colorful fellow," Silverstein wrote in an April 2012 email to Vice Chancellor J. Travis Laster of the Delaware Chancery Court about an upcoming "60 Minutes" segment on the emerald discovery.

Silverstein wrote, in the email obtained by The News Journal, that there could be a "reality show on a cable outlet."

Brought up in Latrobe, Pa., a small town southeast of Pittsburgh, Miscovich said he received a doctorate of medicine from the American University of the Caribbean School of Medicine in 1984 and then worked in medical administration, according to court testimony.

He said he opened homes for the elderly, while also serving as a volunteer firefighter and taking up scuba diving.

"I started getting interested in treasure salvage," Miscovich testified. "I actually started to seek out different treasure salvage companies looking for investors."

One company he invested in, he said, was Motivation Inc., which owns the salvage rights to the Atocha and Santa Margarita, Spanish ships that sank off Key West during a hurricane in September 1622.

"I started realizing that most of these treasure hunting companies, the real treasure was making money by taking it from their investors, and they weren't really looking for treasure," Miscovich testified.

After the real estate market crashed in 2008, Miscovich said he went to Key West to search for treasure. In September 2009, he teamed up with Steve Elchlepp, a local diver.

"I thought, because of my scientific background, I could do it in a more scientific and professional manner," he said.

The pair dove dozens of wrecks. Then, in January 2010, Miscovich said he got a call from a handyman-diver he'd known in Pennsylvania who wanted to meet at the Bull and Whistle Bar on Duval Street in Key West. At the bar, the handyman unfolded a copy of a nautical map and produced a piece of sea-crusted pottery, Miscovich said.

"I immediately was excited because I knew from the pinkish glaze that it was definitely Spanish Colonial-era pottery from the 1500, 1600 era," Miscovich testified.

Miscovich said he quickly paid $500 for the map and pottery shard.

Almost immediately, he and Elchlepp began diving at the site in the Gulf of Mexico.

On the third day, in a depth of about 65 feet, Miscovich said he saw what he thought was broken glass that was "kind of glistening on the bottom."

"I thought it would be just shards of glass, but it was round. It wasn't flat," Miscovich testified. "I was rolling it around in my hands, and I'm looking and looking at it and examining it, and I'm thinking, 'No, it couldn't be.' Then I picked up about four more pieces. They were all round. They weren't flat glass. It struck me because I had seen emeralds before."

The two divers returned to the boat, grabbed plastic sandwich bags and went back underwater.

"We went straight over to where all the emeralds were on the bottom, and we immediately started picking them up and putting them in sandwich bags as fast as you can pick them up," Miscovich said.

"There was so many of them it was like picking cherries on a cherry tree," he said.

Miscovich found amethyst and quartz crystals, along with bags and bags of emeralds.

Miscovich, through his brother Scott, a physician in Hawaii, persuaded New York City investors to support a salvage operation to hunt for more. The group included Dean Barr, the former head of Citigroup's hedge fund division, and Neil Ash, a certified public accountant. A business was formed in April 2010 for the recovery and "monetizing precious stones and other items."

Barr testified that he invested $420,000, not including more than $400,000 for a salvage boat.

Court fight

The investors soon fell out with Miscovich over control of the emeralds, and they began to suspect that he was "not dealing honestly with them," according to court documents.

They filed a Delaware Chancery Court lawsuit in January 2011 that described Miscovich as having a "mountain of personal debts."

Barr, Ash and others were upset because Miscovich and Elchlepp had "hidden" two large collections of precious stones in Florida.

Silverstein, who got involved when Young Conaway agreed to represent Miscovich and Elchlepp on a contingent-fee basis, said he saw a significant dispute over a potentially valuable discovery, court papers say.

"Values for the 'discovery' [once fully developed and properly marketed] were bandied about in the hundreds of millions of dollars, and possibly exceeding a half a billion dollars or more. Inasmuch as the plaintiffs were wealthy, sophisticated business persons, represented by high-priced New York counsel, it appeared that there may well be something worth fighting over" Silverstein wrote in a 2012 affidavit.

Silverstein, in his affidavit, described himself as a corporate lawyer who "litigated numerous claims involving transactions involving many billions of dollars."

"I have rarely lost a litigation matter in which I was lead counsel," he wrote.

Young Conaway is a Wilmington law firm that Silverstein said employs more than 100 attorneys.

The Delaware case quickly reached a settlement in March 2011.

But, based on court documents, Silverstein was thinking beyond that case. The plan was to wait for Chancery Court to approve the settlement, then file an admiralty action in federal court in Florida to give Miscovich and his company ownership of any treasure found where he said the emeralds were discovered, according to Silverstein's affidavit.

'Not real'

In August 2011, JTR Enterprises LLC was formed to hold the title and interest in the emeralds and the exact location of the discovery site, according to court documents.

Young Conaway was to serve as general outside counsel to JTR and Silverstein as lead counsel, according to another affidavit he filed last year.

JTR hired noted Florida admiralty lawyer David Paul Horan in September 2011 to handle the case seeking title to the treasure and site in the U.S. District Court for the Southern District of Florida.

Silverstein said he became an owner of JTR indirectly when he and Sullivan contributed money to allow "Jay and Steve to pay rent and put food on their table," according to court documents. Silverstein described his investment as "less than $150,000," according to a trial transcript from his testimony in the admiralty case.

Word of the remarkable emerald discovery prompted interest from the Fisher family in Key West, the legendary treasure hunting family behind Motivation that found the Atocha and Santa Margarita in the early 1970s.

Motivation, headed by Kim Fisher, wanted to inspect the emeralds to see if they came from the treasure deeded to the family after they discovered the sunken Atocha and Santa Margarita. The company filed a claim in October 2011.

"The whole story seemed not real because, you know, I've been diving my whole life for treasure," Fisher testified in a January hearing in federal court. "And when you find emeralds, when we find emeralds, we go out with heavy equipment and we move tons and tons of mud and sand just to find four or five emeralds. Jay claimed to have been swimming along and saw the emeralds laying on top of the sand. It just doesn't happen that way.

"The emeralds settle down into the sand. It doesn't take long at all for them to settle down. We go out and dig holes, and get chased off by the weather and there will be a hole full of artifacts and we come [back] a few days later and everything is already buried again. It doesn't just sit on top of the sand," he said.

A new mystery

With Motivation's claim, things began to fall apart for Miscovich and others tied to his treasure.

His company agreed to have the emeralds tested, and stones were sent to various labs.

Then, in December 2011, the company was told that lab tests showed some of his emeralds were coated with modern epoxy, according to court documents.

"And this was obviously surprising to us and shocking," Sullivan testified in the January federal court hearing. But Sullivan said other labs had not completed their reviews when they received the first results.

Silverstein said he began taking steps to get to the bottom of the "new mystery."

The lab reports led to a disagreement between Silverstein and Horan on what to tell the court, according to emails obtained by The News Journal. In a March 2012 email to Silverstein, Horan said "we now know that all the labs have confirmed there is modern enhancement on the vast majority of the stones that have been tested." Horan told Silverstein he had a "moral and ethical obligation" to be candid with the court.

"As you are fully aware, we have had 'credibility problems' with our clients," Horan wrote. "Our duty to disclose the fact of the enhancement to the court is clear."

Still believable

Silverstein responded that under the rules of professional responsibility, he did not believe Horan had the right or duty "to violate your clients' confidences and/or make statements that may harm their interests based on current circumstances [if ever].

"As in the past, I encourage you to temper your actions and to be patient while things play out."

The federal court was notified of the reports in April 2012, days before the "60 Minutes" segment aired, according to court documents.

JTR said four laboratories disclosed they had found substances on the emeralds. JTR then told the court that a number of modern shipwrecks were in the area of the treasure site.

"Because of the information provided by all of the laboratories, it now appears that the source of the emeralds, amethysts and quartz crystals could be one of these 'modern' shipwrecks," the status report reads.

Horan withdrew as counsel in October 2012.

Even after the lab findings, Silverstein, in his October 2012 affidavit, said he believed Miscovich's treasure tale.

"Since January of 2011, more than ten attorneys at my firm and at two other firms [in Hawaii and Massachusetts] have reviewed thousands of pages of source documents, conducted numerous interviews, and performed substantial research, and we have been unable to uncover any evidence that caused us to believe that Jay has fabricated the story of his discovery of the emeralds," Silverstein wrote.

He also said "60 Minutes" apparently believed the story.

"I have no doubt that '60 Minutes' would have prepared a far different segment than the one that was broadcast if CBS News believed Jay had fabricated the story of his discovery. Indeed, I was told as much by the CBS News personnel working on the story," Silverstein wrote.

In December, Silverstein said: "Until now, all I have seen is contradictory evidence that suggests that some of the emeralds may have modern epoxy on portions of their surface."

And the possibility the emeralds came from a pirate ship "remains a possibility to this day, as far as I know," Silverstein said in his affidavit.

'Suspicious' treasure

After a lengthy trial in December 2012, a federal judge in the admiralty case ruled against Miscovich, declining to award salvage rights for the emeralds.

Calling it a "three-year opera with a stunning libretto," U.S. District Judge James Lawrence King said he found the story of the "purported treasure map suspicious to say the least."

"In other words, the court must address the elephant in the room: how did these stones come to be sitting on the ocean floor," King asked in his opinion.

"There is just as much support for the theory that Jay and Steve planted the stones as there is for the assertion that they found them," the judge said, referring to Miscovich and his partner. "The Court cannot simply accept the un-contradicted testimony of Jay and Steve that they followed a treasure map to the site, dove to the floor, and found the emeralds."

By this time, Motivation was seeking sanctions against Silverstein, his law firm and others, accusing them of dragging out the litigation and running up legal costs.

"Silverstein actually triggered substantial motions practice in an effort to get Motivation's claims dismissed before its expert could examine the emeralds and see that they were treated with modern epoxy and Krazy Glued," reads a motion filed by Motivation in February.

After more than two years of litigation, the so-called "mystery" was solved in January, when a jewelry store owner from Jupiter, Fla., testified that Miscovich bought 80 pounds of rough emeralds from him in 2010.

Jorge Rodriguez, owner of JR Colombian Emeralds, said Miscovich approached him after the "60 Minutes" story aired, telling him "don't talk with anybody.

"'You don't have to talk with anybody about this case,'" Rodriguez testified. "And that's the last time that he went to the store."

Elchlepp has since been notified by federal prosecutors that he is being investigated, according to a target letter from the U.S. Attorney's Office in the Southern District of Florida that says it is investigating "possible violations of federal criminal law arising out of activities related to wire fraud, aiding and abetting false statements, obstruction of justice and/or perjury in violation of federal law."

Elchlepp could not be reached for comment.

Sanctions sought

The sanctions case filed by Motivation against Silverstein, Young Conaway and Sullivan is now in the hands of U.S. District Judge K. Michael Moore.

Moore, during proceedings in the sanctions case, said it was clear the judge in the admiralty case "smelled a rat." Siracusa, JTR's lawyer, agreed there was a fraud.

"It was an uncomfortable moment," said Siracusa.

Moore asked Siracusa if he thought that evidence at the trial suggesting Silverstein intimidated witnesses "might fall under the obstruction of justice provisions." He questioned whether Silverstein "crossed the line of professional attorney representation of his client."

"Well, based on what I heard, I think he was zealously representing. I don't know that I heard anything that suggested that he knew it was fraud," responded Siracusa.

Silverstein's absence from the sanctions hearing before Moore did not go unnoticed by the judge.

"So in terms of his zealous representation of his client [JTR], why isn't he here today zealously representing them?" Moore asked Siracusa. "You can understand how somebody who had listened to the evidence over the past three days and did not have the benefit of Mr. Silverstein's testimony or defense of his own conduct ... could draw an adverse inference."

Now, Silverstein and his firm wait for Moore's decision.

Contact Maureen Milford at (302) 324-2881 or milford@delawareonline.com.

January 2010

Jay Miscovich, a former Pennsylvania real estate investor, says he found more than 100 pounds of emeralds scattered on the ocean floor after he obtains a treasure map from a handyman in the Bull and Whistle bar in Key West, Fla.

January 2011

Bruce Silverstein, of Young, Conaway, Stargatt & Taylor in Wilmington, represents Miscovich and partner Steve Elchlepp in a Delaware lawsuit over control of the emeralds.

September 2011

An admiralty action seeking title to the emerald treasure find is filed in U.S. District Court for the Southern District of Florida.

October 2011

Motivation Inc., the company that owns the Spanish shipwrecks Atocha and Santa Margarita, files a claim against the emeralds and wants to see the stones.

December 2011

A lab report says that many emeralds were coated with modern epoxy or oil, raising doubts that they are ancient shipwreck treasure.

August 2012

Motivation asks for sanctions against Silverstein, Miscovich and others for engaging in bad faith litigation.

January 2013

Federal judge refuses to award Miscovich and his company exclusive title to discovery site.

October 2013

Miscovich commits suicide.

January 2014

Three-day federal hearing includes testimony from the owner of JR Colombian Emeralds store in Jupiter, Fla., saying that Miscovich bought 80 pounds of emeralds from him in 2010.