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Times Publishing Company

St. Petersburg Times

September 7, 1987, Monday, City Edition


LENGTH: 1298 words

HEADLINE: 'The treasure hunt is today's siren song'


When a friend suggested earlier this year that John Ropes invest in sunken-ship treasure hunts, he scoffed at the idea. "I don't know how anyone in their right mind could get involved in something that risky," Ropes, a 38-year-old Florida businessman, recalls saying.

A few days later, Ropes invested more than $ 25,000 in a limited partnership searching for gold that purportedly sank with the British luxury liner RMS Republic 55 miles off Massachusetts' Nantucket Island in 1909. "Underwater treasure is adventure," he says, explaining why he changed his mind - without even reading the prospectus.

Dreaming of long-lost riches, thousands of investors are putting money into treasure hunts despite overwhelming odds against success.

Although tens of millions of dollars have been spent on some 30 treasure hunts off American shores in the past five years, only one has recovered any substantial riches. "It's called gambling, and all the odds are stacked against you," says Charles Harper, associate regional administrator for the Securities and Exchange Commission in Miami. "The treasure hunt is today's siren song."

'No treasure; no hunt'

It may also be the latest occupation for some swindlers. "We're looking at blatant frauds where not only is there no treasure, there is no hunt," says Lawrence Fuchs, Florida's deputy comptroller.

Five salvage companies, which have collected $ 1,000 to $ 10,000 from a total of 1,000 investors, are under investigation in Florida, and four more may soon be added to the list, Fuchs says. In addition, investigators are examining whether salvagers are inflating the values of potential discoveries, adequately informing investors of risks and backing claims with historical research.

Still, many investors are undeterred. "It beats talking about HMOs and malpractice with my colleagues," says Richard Brunelle, a 39-year-old Florida surgeon who has also invested $ 25,000 in the Republic search. "Besides, I made the 7 o'clock news with Dan Rather," when the salvage efforts were filmed recently.

Interest in treasure hunts has surged since 1985 when salvager Mel Fisher - following 20 years of futility - recovered a trove off Florida's coast that he estimates is worth $ 400-million. (Its commercial value has yet to be determined.) New technology that permits searchers to scan ocean floors and to lower robots to probe wrecks have also raised hopes.

Indeed, many salvagers have little trouble finding investors. To raise $ 5-million to search the wreckage of the SS Central America off South Carolina's coast, ocean engineer Thomas Thompson says he only had to approach 120 investors; 106 put money in the venture. The ship, a gold carrier, was destroyed by a hurricane in 1857. Investors put in money even though "they were told that there was only a 10 percent chance of finding the gold," Thompson says.

Investors haven't lost interest even though the 1986 tax act has limited the deduction of losses from passive activities such as limited partnerships. (Most treasure hunts are structured as limited partnerships.) Those losses may be deducted only against income from like investments and not from salary income or gains on investments in stocks and bonds.

Finding investors may be easy. But finding treasure isn't. Whether it is because the ships really weren't carrying riches or the salvagers can't find them, there is a litany of failures. The SS Central America's treasure hunters, using remote-control cameras, have taken 2,000 photos and hundreds of hours of video film footage, but there's been no sign of gold. Salvagers have spent $ 2-million looking for $ 500-million in gold that reportedly went down with the British warship HMS DeBraak off the Delaware coast in 1798. They did find 23,000 artifacts - but no gold.

"From a business point of view we fought the good fight and lost," says John Davidson, chief executive officer of the project. But the group may resume its search if it can find suitable electronic sensors - and more money. "My better business judgment tells me stop," he adds. "But my personal judgment tells me the treasure is down there."

The hunt for $ 1.6-billion in gold that supposedly sank with the Republic off Nantucket has been similarly discouraging. With money running out, the group might try to raise an additional $ 250,000 to continue the search for another month. (Republic investors still could get back 60 percent of their money if the partnership sells the ship and salvage equipment, claims Michael Gerber, chief financial officer for Sub-Ocean Salvors International Inc., which is conducting the search.) One problem is that deep-sea searches are expensive. Sub-Ocean says daily operations cost $ 8,000 to $ 10,000. The process is even costlier in deeper waters; the SS Central America project, probing depths of more than a mile and a half, has cost $ 2.5-million so far this summer.

In fact, other than Mel Fisher, who is hunting for artifacts from nine vessels, no treasure hunter has recovered significant amounts of gold or silver. And not all of Fisher's investors shared in the treasure, which comes from the Atocha and the Margarita, sister Spanish vessels that went down off Florida's coast in the 1600s. For the most part, only those who invested in 1985, the year the valuables were found, received some of the treasure.

An investor's booty

Mark Hylind, 33, who invested $ 10,000 in the Atocha in 1985, was lucky. His share: a seven-carat emerald, a 21-ounce gold bar, two silver bars, each weighing 83 pounds, eight silver coins and a silver salt shaker. He says he is having "a million dollars worth of joy, right now," but is wary about redeeming his booty. "I have no idea how much it's worth," he says.

It may not be worth as much as some think, cautions James Williams, editor of Treasure Magazine, a trade publication. "Treasure hunters hype the value of the treasure at the beginning to gain investor interest," Williams says. "Then the values do a slow descent. They get lower for the IRS, and even lower when it comes time to cash in the loot."

Until now, the exact market value of Fisher's find is uncertain because government claims to the treasures, which largely have been denied by the courts, have limited their sales. Since February, Treasure Coins Ltd. of New Jersey has sold 80 silver "pieces of eight" from the Atocha; the coins have fetched $ 350 to $ 1,250, with most selling in the lower range. A clearer picture of the treasure's value will emerge when more objects are auctioned Sept. 26 in Las Vegas.

Investors' interest, however, may soon be curtailed by something other than their losses: passage of a bill, currently in Congress, that would make all wrecks in U.S. waters prior to the Civil War government property. Says Charles Taylor, a backer of Fisher, "Let's face it, we're in this as capitalists, not donors."

reprinted with permission from the Wall Street Journal.

GRAPHIC: BLACK AND WHITE PHOTO, Associated Press; Treasure hunter Mel Fisher, center without shirt, shares a toast with workers aboard the Dauntless, anchored above the sunken treasure find, in this 1985 photo.

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