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UNITED STATES DISTRICT COURT
SO UTHERN DISTRICT OF FLORIDA
KEY W EST DIVISION
CASE NO.11-CV-10074-M NG
JTR ENTERPRISES,LLC,
Plaintiffs,
VS.

AN UNKNOW N QUANTITY,etc.,
ln Rem Defendant,
VS.

M OTIVATION,m C.,
Claimant.

OPINIO N AND O RDER DENYIN G SANCTION S
One of the greatesttransgressions that can be comm itted againsta federalcourtis to
knowingly perpetrate a fraud and to com mandeerand manipulate the legalprocesses to do so.

Thiscaseinvolvesjustsuchafraud.W hatthisCourtdescribedastheSslegalfinaletoathree-year
opera with a sturming libretto''m ore than two years ago has come back for an even more
stunning--encore.
M otivation, Inc. seeks to invoke this Court's irlherent power to sanction bad-faith
litigation conductone ofthealleged perpetratorsorenablersofthe fraud,PlaintiffJTR'Soutside
generalcounsel,attorney Bruce L.Silverstein.1

1
M otivation also soughtsanctionsagainsttw o otherrespondents:M r. Silverstein's
D elaw are law fil'm ,Y oung Conaw ay Stargatt& Taylor,LLP,and JTR investorand advisory
board m em berPaulSullivan.A fterC laim antM otivation rested its case-in-chief,the Court
granted M r.Sullivan and YCST'SM otionsforlnvoluntary Dismissal,finding thatM otivation

hadfailedtopresentsufficientevidenceatthattimeon(i)Sullivan'ssubstantialinvolvementin
theunderlyinglitigation,or(ii)eitherSullivan'sorYCST'Ssubstantialinterestintheoutcomeof
thelitigation.DE #528.M r.Silverstein isthe onlyremainingrespondent.

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1. Background

Thisease involves a crim inalconspiracy againstthe United StatesDistrictCourtforthe
SouthernDistrictofFlorida,which began with the filing ofacom pletely fabricated adm iralty case
fàlsely alleging afictitiousdiscovery oflosttreasure from an 18th century Spanish galleon.
Thecorruptintentofthe crim inally inspired conspiracy offaking adiscovery oflost

Spanishtreasureofthousandsofjtmkemeraldspreviouslyplantedonthebottom oftheoceanto
belaterStdiscovered''asnewly discoveredres,subjecttotheadmiraltyjurisdiction oftheUnited

StatesDistrictCourt,wastoobtainajudicialdecreeawardingtheconspiratorsnotonlytitleto
thepreviouslyplantedemeralds,butalsoan injunctiveorderpreservingtothecriminalsthe
exclusiverightto continuesearching the fake,im aginary siteoftheçsdiscovery,''thuspreserving

theopportunityto continuetoissalt''thesitewithjunktreasureforsaletoinnocentvictims
(purchasersandinvestors)whohadbeenmisled intobelievingthediscoverywastl'ueand
genuine based on theCourt'sadm iralty decree.
Although thef'
uturevictim softhe conspiratorswould have been thepurchasersofthe
fakegem sand theinvestorswho wereexpectedto investin the continued salvageoperationsof
the fake discovery,the immediatevictim wasthe United StatesDistrictCourtand the Am erican

s'
ystem ofjustice.TheentryofafinaldecreeassoughtbyPlaintiffwouldhavelendedcredence
to theconspirators'outrageously falseclaim sofanew discovery.
Thecorruptcriminalconspiracy ofthefalsediscovery ofan eighteenth century Spanish
treasure galleon and thetsling ofatotally false,fictitiousadm iralty casequickly gained anumber
ofsupporterswillingto believetheincredibleliesoftheoriginatorsofthe fraud,Jay M iscovich

andSteveElschlepp(thediverswhoreportedthediscoveryofthepreviouslyplantedjunk
emeralds).Amongthesesupporterswhoenthusiasticallycommencedtopromotethefraudwere
fam ily membersand theirbusinessassociates,private investors,largecorporate 1aw firm s,local

2

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and nationalmediasources,includingtheCBS progrnm 1160 M inutes,''theSm ithsonian Institute,
and elected officialsoftheColombian govenunent.
The involvem entofalloftheseindividualsand corporateentitiesproduced,in som e
instances,astounding results. Therecord indicatesthatam orethan three million dollar

investm entwasmade in furtherance ofthe crim inalenterprise. The record furtherindicatesthat

various1aw firmshaveinvestedlegalservices(somepaid,someunpaid)ofseveralmillion
dollarsin attom eys'feesand costsoflitigation.Thecase hasadditionally spawned hundredsof

hoursofjudiciallaborinthethreetrialsthathavethusfarbeenconducted.2
Thenumerouspartiesand entitiesarelisted intheforegoingparagraphs. Som eare

innocent,some arenot. Som ecan beproven asknowingm embersofa criminalconspiracy to
deceive and defraud theUnited StatesCourtoftheSouthern DistrictofFlorida,and somearenot
so provable bythehigh requirem entsofthe governing standard ofproofforsanctionable

conduct.Thisistheissueofthispart(thethirdtrial)ofwhatappearstobeanever-endingseries
oftrialsand evidentiary hearingsflowing outfrom theoriginaladm iralty case.3 W ho knew?
W hatdidthey know? W hen didthey know? Didthey participatewith theknowledge and intent

to commitacriminalfraud on the courtand innocentvictim sorwerethey dupesand unknowing
aidstotheoriginalcriminalconspiratorswho werefully awareofthefraud onthecourt?

2

T he originaladm iralty case ofDecember2011spanned fourdaysattheU .S.Courthouse,

KeyW est,Florida(theSlAdmiraltyAction''),andthefirstsanctionstrialontheoriginal

complaintforsanctionsbefore JudgeM oore consum ed threedaysattheU .S.Courthouse,Key
W est,Florida. Theamended sanctionstrialbeforeJudgeKing spnnned 13daysattheU .S.
Courthouse,in both Key W estandM inmi,Florida.

PaulD.Sullivan,suedby Motivation,lnc.forsanctions,onJanuary 13,2015(D.E.
#555),hasfiledaMotionforSanctionsagainstM otivation.Allegeddefrauded investorsare
pursuing an independentseparate case againstD efendants Bruce L.Silverstein,Y oung Conaw ay

Stargatt& Taylor,LLP,PaulSullivanandP&B Finance,LLC (inthisfourth trial)fortriable
RICO damagesof$13.5M (Azalp LLC v.BruceL.Silverstein,etal.,No.14-cv-10079-JEM).
The partieshave stated in pleadingsherein thatthe U .S.A ttorney'sO ftice is m onitoring this
sanctionstrialforpossible crim inalindictm ent. These m attersare currently pending in this
district.

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Asasecondary issuein determ ining proofofsanctionableconduct,arethepersonswho
cannotbeproventohavehad directknowledgeofparticipating in theplanting ofemeraldsin the

oceansubjecttosanctionsfordeliberatelyclosingtheireyestothefraudbeingcommittedin
deliberateindifference to theharm theiractivitieswere causing? Istheproofin thisrecord

substantialenoughtoprovebyclearandconvincingevidencethatsuchindividuals(ifanylareto
be sanctioned? lsita legaloffense forsuch an individualto defend on abasisthatt$Ineverknew
thatthe conspiratorspurchasedfakeem eraldsand planted them on thebottom ofthe ocean since
theynevertold m ethat''? Should they,iftheevidenceisclearand convincingthatJay and Steve
wereobviously lying aboutm aking adiscovery oflosttreasure,havewithdrawn from the
conspiracyatthetime itbecam eknowntothem ormadethefactsofthe fraud known to the
couh?

This,theAmended M otion forSanctionsby Claim antM otivation,lnc.,raisesaplethoraof
legalissuesnotatissue in thisCourt'sorderofJanual.
y 25,2013,orJudge M oore'sOrderofJune
19,2014: Legalissuespertaining to sanctions ofpersons and entitiesnotpartiesto the original
admiralty action;the legalstandard forburden ofproof,i.e.,clearand convincing evidence;the
elem ents ofdeliberate ignorance;the inherentauthority ofa courtto im pose sanctions;and the

Court's jurisdiction to sanction parties who have notpersonally been served or appeared in
litigation pending beforetheCourtpriorto sanctionsbeing soughtagainstthatperson orentity.

A combination ofthisCourt'sJanuary25,2013,Opinion andFinalOrder(DE #199)(the
SçAdmiralty Order'')andtheHonorableUnitedStatesDistrictJudgeK.M ichaelMoore'sJune 19,
2014,FindingsofFactand ConclusionsofLaw (DE #445)(sfludge Moore'sSanctionsOrder'')
adequately detailsthe proceduraland factualbackground ofthis tale,and the relevantportionsof

each willbe reproduced verbatim herein.As Judge M oore succinctly put it,kdltqhe factual
nan'
ative in this matter has two versions:the talltale and the tnzth.''Judge M oore's Sanctions
O rder,DE #445 at2.

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A. TheTallTale- TheAdmiralty Trial
Thisstory- as farasthe Courtknew on January 25, 2013,when itentered itsAdmiralty

Order- beginswith the alleged discovery by two treasurehuntersofa cache ofjewelson the
bottom oftheGulfofM exico offofKey W est,Florida:

On oraboutJanuary 11,2010,friendsand divepartnersJay M iscovich (;$Jay'')
and SteveElchlepp (1$Steve'')retrievedahandfulofgreen stonesfrom thefloorof

the GulfofM exico,som e 30 milesNorth ofKey W est. Asthey continued to dive
the site,thehandfulturned into aheap ofstoneswhich Stevetestifiednow weighs
between 100 and 250pounds.

Jay and Steve were not searching the area by happenstance. As professional
m aritim e treasure hunters, Jay and Steve were following a lead purportedly
provided by a map purchased from Jay's o1d acquaintance M ike Cunningham , a
destitute handym an from Pennsylvania.1 For three days straight, Jay and Steve
went out on a boat to the area of the ocean shown on the map,to search for
treasure.

FN 1.Jay reportspaying $500 forthe map and an accom panying
shard of pottery, and then paying an additional $50,000 for
Cunningham 'srenunciation ofallclaim sto thetreasure.TheCourt
notes that Jay testified in court that he was unable to contact
Cunningham and never had contact information forhim .lnstead,
Cunningham would always call Jay, checking in on a m onthly
basis over the years with a blocked num ber that prevented Jay
from seeing his phone number.Jay testified that he never asked
Curmingham for a phone number or address. Counsel for
M otivation suggested in its closing argument that SsM ike
Cunningham''was m erely a pseudonym for Jay M iscovich.The
Courtfindsthe story ofJay's acquisition ofthe purported treasure
map suspicious to say the least, but at the end of the day
im materialto theresolutionoftitleto theres.

Stevecommenced random diagnosticdives(ltbouncedives'')in approximately 65
feetofwaterw ithoutsuccessuntil,on the afternoon ofthe third day,January 11,
2010, when Jay decided to accompany Steve on the last dive.The visibility

underwaterwaseitherlessthan 15 feet,or 15 to 20 feet,or20 feet(therewas
contradictory testimony asto thisfactfrom Jay and Steve),and the area closeto
thetlooroftheocean had agrey,monochrom atictone.ltwasduringthatdivethat

Jay, according to his testimony in court, noticed some Séshiny objects''
approxim ately fifteen feet away that he thought were pieces of broken glass

$1glistening onthebottom.''zAsheapproachedthe objects,hesaw ;1a1otofgreen
a1loverthebottom.''Jay pickedupafew oftheobjects,and then motioned Steve
up to the surfaceto show him theobjects.Electrified,the two men grabbed the
fourem pty sandwich bags from their lunch and dove back to the ocean floor to
retrieve m ore ofthe green stones.Jay describes itas feeling tdlike picking chenies
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on acherry tree,''because the stoneswere so concentrated in the area and easy to
find.The pairfilled the fourbagsand then stopped forthe day, heading back to
Steve's home.As Jay noted in his testim ony,they did nothave enough air to
m ake anotherdive.

FN 2.ln comparinj Jay's testimony to Steve's,the Courtis

troubled by Jay'stestlmony thathenoticed glistening, shiny stones
on the surface oftheocean floorfrom around fifteen feetaway. On
December3,2012,Steve testified thatiiwe were looking forsigns
ofgold,silverbars,coins,thingslikethat''andheSçhad notnoticed

(thestones)becausethey blend in verywellwith thesediment,the
sand. W hen you're training your eye to look for one thing in
particular,you don'tseethe foresttk ough thetrees.''Testimony of
Steve Elchlepp,Dec.3,2012.The factthat such an experienced
diver feltthatthe stones had blended in with the sand,combined
with the varying reportsofthe visibility thatday,lead the Courtto,
atthe very least,question the reliability ofJay's account of the
m omenthefirstsaw the stones.
#

#

#

Overthe next few m onths,Jay and Steve went back outrepeatedly to retrieve
m ore ofthe stones.Steve testified he wentalone on a num berofoccasions and,

whetherjointlyoralone,heretrieved stonesfrom the siteeverytimehedoveon
the site.The recovered materialwas taken to Steve's Key W esthome,cleaned
and stored in a safe.In addition to the retrievaloperations taking place in Key
W est, Jay and Steve also sought out potential investors for their fabulous
discovery of thousands of what they believe to be lost Colom bian em eralds
scattered on the flooroftheocean.
Adm iralty Order,DE #199 at2-5.
ThisCourtnoted in itsAdmiralty Orderthattestimony presented attrialby Dr.RobertH.
Baer, a professionalarchaeologist hired to draft a treatment of the find for possible public
relationsuses,told avery differentstory ofthe discovery:
M ostnotably,Baer'sdraftreporthasJay diving with Sttwo friendsfrom M exico''
instead ofwith Steve.In addition,the drafttreatment indicates that rather than
picking up a couple stonesand im mediately taking Steve back up to the surface,
Jay picked up some stonesand then continued to swim furtherin orderto look for
other indications of a shipw reck.A ccording to Baer's drafttreatm ent, after Jay
took his friends to the surface,the three ofthem used a system of loose ropes
w herein Jay and one diver w ould load a bag full of the stones and then t'along
w ith a m an in the boatpulling on a rope,they would swim the bag to the surface,

dump the stonesin the boat,then rettmzto the bottom,''recovering ttliln about
fourhours...eighty poundsofemeralds''thatfirstday.Thisaccountsubstantially

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differsfrom Jay and Steve'stestim ony thatthey simply filled theirfoursandwichsized plasticbagsand then,outofair, returned home.

1d.at4(internalcitationsomitted).Nevertheless,thetalecontinues'
.
The stoneswert subsequently scattered acrossthe country, and indeed,theworld.
Jay and Steve'sfirstmovewasto bring stonesto New York City and W ashington,
DC,where they showed the stones to potentialinvestors as wellas gem ologists
and otherexperts,including an officialfrom the Sm ithsonian. Jay gave stonesto a

jewelerin Pittsburgh,Pennsylvania,to have the stonescutand made into some
piecesofjewtlry.JaytestitiedintrialthatthejewelerproducedGnishedpiecesof
jewelry thatfilled fourgallon-sized bagscomprising û$a couplehundred stones.''
One of the investors was given some stones, one of which was made into a
necklace forhiswife.Jay took bagsofthe stones to hisi11olderbrotherand left
them for his brother to photograph.Jay shipped a half bagfulof stones to his
younger brother in Hawaii, who showed them to potential investors before
carrying them back to New York City a few months later.Once this admiralty
case was filed, Plaintiff commenced to try to reassem ble the stones in the

jurisdiction ofthe United States Courtin Key W est.Some of the stoneswere
slowly recalled back to Key W estand New York City,and some stoneswere sent
to expertsin Sw itzerland,France,and Columbiaforevaluation.
ln addition to removing stones from Key W est,the pair actually planted som e
back into the ocean as well. Steve testified that between January and Aprilof
2011, he tilm ed a promotional video at an underwater site location in
approxim ately 35 to 40 feetof water.He placed forty stones into the water,set
them on the tlooroftheocean,and then proceeded to recreatethe originalfind on
film . Steve testified that they pre-counted the stones to keep track of them .
Accordingto Steve,everm ne involved inthe film ing ofthevideo knew itwasnot
theactualsite,and the video wasnevershow nto anyone.
Atsomepoint,representativesfrom theCBS program Sixty M inutes cam eto bein
touch with Jay and Steve.Overseveralmonthsbetween the fallof2011and early
2012, the CBS crew filmed footage for the segment, both in the ocean and
interviewson dry land,and paid forsom e oftheexpertevaluationsofthe stones.
The footage ofthe dive trip shows Jay telling the CBS crew thatthe stonesare
worth millions of dollars, and that one particular find was worth dteasily''

$100,000.These am ounts are in stark contrastto thetestimony presented attrial
on Decem ber6,2012 by M otivation'sexpert,M anuelV.M arcial. M arcial,aKey

W estjewelerwith fifty-six yearsintheemeraldbusiness,testifiedthattheoverall
collection ofstonesthathe inspected (with someexceptions)wasofavery poor
quality thatwould notinteresta responsible dealer.In fact,M arcialtestifed that

in hisopinion a liberalvalue ofthe stoneswould be a combined totalof$50,000,
of w hich 1 or 2% w ould be of com m ercial value. H e further described
dem onstrating to Plaintiffs law yer,on a courtrecess during trial,how one ofthe
Sçemeralds''from the Plaintiffs exhibit crumbled in his hand when he applied
pressure from his fingers.He testified that such crumbling was an indication of
poorquality,w orthlessem eralds.

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Expertreports in evidence as wellas testimony during trialestablished that at
leasta portion ofthe stones in evidence have epoxy or oilon them . Testim ony
indicates that such epoxy is a m odern material that would not have been in
existence prior to the 19th century and would have disintegrated entirely given
enough timeunderwater.
*

On September 6,2012,(Plaintiffj JTR gEnterprises,LLC) filed its Complaint
againstdtA.
n Unknown Quantity ofColombian Emeralds,Amethystsand Quartz
Crystals located within 3,000 yards of a pointlocated atcoordinates 24057.79''
North Latitude and 81055.54''W estLongitude.'' . . . JTR published StNotice of
Action ln Rem and Arrest ofProperty''in The Citizen, a newspaperin M onroe

County,Florida,pursuantto SupplementalRule C(4)forCertain Admiralty and
M aritim e Actions of the Ftderal Rules of Civil Procedure as well as Local

Admiralty Rule C(4). Two claimants respond and filed timely appearances:
Clawdb LLC,Azalp LLC,Darn LLC,and M Ventures LLC filed a SfM otion to

lntervene,''and (ClaimantlM otivation Inc.filed a tiverified StatementofRight
andlnterestand Claim ofM otivation,Inc.''

f#.at5-8(internalcitationsandfootnotesomitted).
The standard procedure for Admiralty cases in the Southern D istrict of Florida is for

Gnders/salvorstotilesuitin admiraltyandbringthesubjectmaterialintocustody oftheCourtto

establish in rem jurisdiction over the material.A warrant for an arrestofthe res issues,a
substitute custodian is appointed,and afler publication of Plaintiffs claim is m ade, anyone
having aclaim m ay so stateand beheardattrial.
LL at12.

M otivation,Inc.,by itsfiling ofOctober16,2011(DE #10),wastheonly Claimant. It
im mediately commenced discovery and demanded inspection of the emeralds to determine
w hetherthey could have com e from one ofthe 17thCentury shipwrecksto which they havetitle,

theNuestra Senora DeAtocha (the G*zqtocha'')orthe Santa Margarita.DE #47.According to
M otivation'soriginaltheory,theem eraldscould havefloated forty miles in abarrelfrom the site
oftheAtocha to thesite ofthe alleged new Stdiscovery''by Plaintiff. DE #10.JTR disputed this

theory,and moved to dismiss.DE #40,filed December 1,2011.Because of this dispute,the
Courtdenied DefendantM otivation's requests for inspection and granted a stay of discovery
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untilthe Courtcould determ ine the legalsufficiency ofM otivation's claim . DE #55;DE #69.
Aftertestresultsrevealing the presence ofmodern epoxy on som e ofthe emeralds were finally
revealed to the CourtDE #82,filed April 18, 2012,and afterM otivation amended its claim to

change itstheory from tloating barrelsto intentionaltheh from theAtocha site(DE #94, filed
July 3,2012),the Courtordered JTR to produce the emeraldsforinspection by M otivation's

expert(DE #117,enteredAugust7,2012).Afterinspection,M otivation'sexpertconcluded that
theemeraldsdid notcome from theAtocha orSantaM argaria. M otivation withdrew itsclaim to
theresonAugust17,2012.
W hat then occurred is best described in this Court's Admiralty Order as tksystemic

difficulty in achieving thedelivery ofthe res into thejurisdiction ofthe Southern Districtof
Florida,''which saw theresistsvemonthsinto thisaction Eifnotlater)...apparently scattered
between Key W est, New York, Pennsylvania, France, Switzerland, and Colum bia, if not
elsewhere.''1d.at 9-10.This fscaused a m arked deviation from this Court's prior and wellestablished procedures''so m uch so that, as Judge King found in the substantively entered

Adrniralty OrderofJanuary 25,2013 (DE #199),theCourtcould notdtfind thatthematerial...
underthe Court'sarrestisthe entireres.''1d.at13.Furthermore,the Courtcould notbe Stcertain
thatthe materialshown to theexpertwitness...wasthe same materialretrieved from the ocean

tloorand...contained (inlthereJ....''1d.
This Court's Opinion and Final Order, entered at the conclusion of the trial held
December3 through December21,2012,denied any reliefto PlaintiffJTR Enterprises,lnc.on
a1lclaim s,holding:
The law of salvage calls for a m arine peril.This elem ent m ay be satisfied by an
fûancient,abandoned shipwreck.''Santa M argarita decision,556 F.supp.at1340.
W hen there is a shipwreck involved,Plaintiffcan provide docum entation ofthe
ship, its cargo, dates, etc. which allows the Court to make certain logical

assumptionsasto the ownerofthe material(e.g.the King ofSpain).Then the
Courtcan require the ow nerto provide a salvage aw ard.

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ln the instantcase,however, there isno shipwreck,and no proofthatthe stones
were everlostin the firstplace.The only evidence isthatJay and Steve retrieved
the material from the ocean floor on and after January 11, 2010. But the
genuinenessofthe actofretrieving the m aterialdoesnotprove thatthe material
was previously lost.The m aterial may never have been lost, if M otivation's
claimsare correctthatPlaintiffowned the material, dropped itinto the ocean,and
then retrieved it.To give an appearance ofdiscovery ofSpanish Treasure, without
a shipwreck,withoutan owner,and indeed withouta showing ofa marine peril,
theCourtcannotfind the law ofsalvageappliesin thiscase.

1d.at18-19.

Further,in lightofJay'sdelivery oftherestoajewelerin Pittsburgh tohavecertain of
thestonescut,finished piecesofwhich filled fourgallon-sizebags, thisCourtfoundthatçdeven if
theCourtweretoapply thelaw ofsalvage, Plaintiffhasforfeited any rightto asalvage claim due

to exploitation oftheresforpersonaluse.''Id.at20.
As forJTR'Sclaim fortitle underthe 1aw offnds,thisCourtfirstlaid outthe elements

required to sustain such a claim:$f(1)intentto reduce property to possession,(2) actualor
constructive possession of the property, and (3) that the property is either unowned or
abandoned.''f#.at16 (intemalcitation omitted).In itsanalysisofthisclaim,thisCourtfound
thatJTR failedtoproveentitlementto titleasfollows:
Theûrstdifficulty ariseswith regard to the requirem entofcontinuouspossession.
Asrelayed above,the retrieved reswasseparated and sent,piecemeal,acrossthe
world.W hile Jay and Steve have testified thatthe entire res has been returned,
Steve also adm itted during crossexamination thathe doesnotknow for sure that
there wasno break in thechain ofcustody.The Courtagrees;even assuming that
any stones sent to laboratories or other scientific experts were treated
professionally and com pletely returned,there were too m any other individuals
carrying thestonesfrom oneplaceto anotheroutofthe presence ofJay and Steve

(e.g.theinvestorwhoreceivedthreestonesandgaveatleastonetohiswife,Jay's
older brother who kept them ovem ight forphotographs and sprayed them with
cooking spray,Jay'syoungerbrotherwho shuttled them around Hawaii,and Jay's
younger brother's wife who canied some stonesto a bank in Hawaii,to name a

few) to rule out interference with, or replacement of, the stones.It is also
im possible forthe Courtto be certain thata11ofthe stoneseventually arrived back
to K ey W estfor thatsam e reason.This issue casts a not-insignificant shadow of
doubtoverthepossession elem entsofaclaim underthelaw offinds.

Thethird elem entcallsfortheresto eitherhave neverbeen previously owned,or
to have been lostand abandoned by its owner.Neverpreviously owned implies

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local flora or fauna that is indigenous to the area of retrieval. The testim ony
indicatesthatthe res iscomprised ofstones which are notindigenousto the bed
ofthe Gulfof M exico.Therefore,the Courtmovesto the other option:whether
the res has been lostand abandoned by its originalowner. In other words,the
Courtmustaddress the elephant in the room :how did these stones come to be
sitting on theocean floorin January of20107
The court in Columbus-America Discovery Group is quite firm on the
requirem entforclearand convincing evidenceofabandonm ent, butcarvesoutan
exception forcasesin which there isEdan ancientand longlostshipwreck''and no
owner files a claim . 974 F.2d at 464-65. In such cases,the court m ay infer
abandonment. This record is devoid of any evidence of any shipwreck, 16th
Century Spanish Galleon,orany proofofabandonmentby apriorowner. The res
has appeared seem ingly outofthin air, withoutproofof the source oforigin,of
transportation orpriorownership.Plaintiffhasfailed in thisessentialelementof

proof.Duncan M atthewson in Ex.#125-1 and 2 (DVDS) suggests that the
emeraldswere possibly contained on the deck ofa Spanish Galleon in a barrelof
gem s,that got washed overboard in a storm , but this is no m ore than mere
speculation by thewitnessobviously intendedto influence theCBS crew that16
Century Spanish Treasure w as involved.
1d.at20-21.

ThefailureofJTR toproveitsclaims,theincrediblenatureofJay andSttve'sstorytand

indeed much oftheirtestimony),and rumors offraud revealed in courttslings(seee.g.,Joint
PretrialStipulation,DE #163,filed November23,2012)and in testimony adduced attrialled
thisCourtto make an observationthatwould laterproveparticularly prescient:
W hen al1issaid and done,there aretwo options:Jay and Stevelegitim ately found
lost stones on the floor of the Gulf,or Jay and Steve placed stones acquired
elsewhere on the ocean floor in orderto ûsfind''them and thereby establish an
ancientprovenance and greatly enhancethevalue ofthe stonesand thereputation

ofthemen astreasure salvors.Thereisjustasmuch supportforthe theory that

Jay and Steveplanted thestonesasthere isforthe assertionthatthey found them .
The Courtcannotsimply acceptthe un-contradicted testim ony of Jay and Steve
thatthey followed a treasure map to the site,dove to the tloor,and found the
em eralds. Each story represents one possible intep retation of entirely
circumstantialevidence,andneitherpersuadestheCourt.
1d.at22.

Accordingly,this Courtdeclined to issue either an award in salvage ortitle to the res
underthe law offinds.Rather,thisCourtsimply returned the res to the parties who physically

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broughtitintocourt(JTR,Jay,andSteve),andexpresslymadeSdnofindingastothetype, source,
value,provenance,ororiginofthestonescomprisingthereJ.''f#.at23.

Therumorsoffraud,thedelayingettingthestonesintothejurisdiction oftheCourt, and
the refusals to allow M otivation an inspection of the em eralds early on in the case, thereby
prolonging its involvem entand multiplying its legalcosts, allresulted in M otivation's original

M otion forSanctions(DE #123,filedAugust27,2012).ThisCourtseveredthesanctionsmotion
from theAdm iralty Trial.DE #172. JudgeK . M ichaelM ooreheld an evidentiary hearing on the
sanctions issue from January 13-15,2014. Itisherethatthe talltale ends,and the discovery of

tl-uth begins.

B.TheTruth-JudgeMoore'sSanctionsTriaR videntiaryHearin/
Afternearly ayearofdiscovery into the issueofsanctions, Judge M oore'sthree-day trial

onthesubjectculminatedwith astunningon-the-standrevelationfrom asubpoenaedwitnessand
a finding by Judge M oore thatthe whole case had indeed been designed from the beginning to
comm itafraud upon theCourt:
The truth is thatin 2010 M iscovich purchased a totalof eighty pounds of raw

emeraldsfrom JR Emeralds,ajewelry storein Jupiter,Florida.According to the
testimony of Jorge Rodriguez (tdRodriguez'), the owner of JR Emeralds,
M iscovich purchased the Emeralds overfourvisits in M arch,M ay,August,and

September(of20101.Each trip Miscovichpurchasedapproximately20poundsof
emeralds forapproximately twenty thousand dollazsfora totalofapproximately
eighty thousand dollars.By purchasing the Em eralds and then idfinding them ''at
the bottom ofthe ocean,M iscovich engaged in fraud to vastly increasetheirvalue
aspurported dssunken treasure.''

JudgeM oore'sSanctionsOrder,DE #445at2.(intemalcitationsomitted).
Further,aherhaving putRodriguez on the stand forthe purpose ofrevealing hisrole in
Jay'sacquisition ofthe em eralds and thereby exposing thisfraud:

4
JudgeM oorewasassigned the firstsanctionsheming/trialby ChiefJudge M oreno during
Judge King'sabsencethe firstw eek ofJuly 2012. The case wasreassigned to Judge K ing aher

JudgeM oore'strialofJanuary 13-15,2014toruleonallproceedingsoftheAmended(Second)
M otion for Sanctions filed by M otivation.

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In the closing argum ents of the sanctions heming, Janssen & Siracusa,JTR 'S
counstl,adm itted JTR'Swrongdoing.They admitted thatftthe scheme to defraud
wasto representem eraldsofacertain quality ashaving a higherquality based on
theirorigin from an antique shipwreck.''JTR'Scounseladm itted thattheSsartifice
to defraud''wasto use theDistrictCourtto grantfithe im prim aturorthe blessing
or the Good Housekeeping seal of approvalto say that . . . these are antique
em eralds.''

1d.atl4.(internalcitationsomitted).
Accordingly,Judge M oore found (çby clear and convincing evidence, that a fraud has

been committed upon this Court,''5 id.at 16, and thattsM iscovich was clearly the m astermind
behind thiswhole schem e.''1d.at18. Judge M oore imposed sanctionsagainstJay in the amount
of M otivation's fees incurred from October 16, 2011,the date M otivation entered the case,

through October29,2013,the dateJay M iscovich committed suicide. Id.at20.

In addition to exercising the Court's inherentpowerand assessing sanctionsagainstJay's
estate forhis actof eomm itting a fraud upon the Court- aboutwhich Judge M oore found that
dûthere is no starker example ofbad faith,''/#.at lg- ludge M oore assessed sanctions against
Plaintiff JTR for not disclosing to the Courtor to M otivation the presence of epoxy on the

emeralds.1d.at 17.AtJudge M oore'ssanctionstrialitwas revealed thatin early December of
2011,JTR and itsadm iralty counselatthetim e,David Horan,learned the resultsoftestingbeing
conducted on theemeraldsby French and Swisslabs.1d.at9-10.These testsshowed thatsome
ofthe emeralds had epoxy on them , and because epoxy did notexistuntilthe 19thcentury,the
emcra1ds could nothave com e from M otivation's 17thcentury Spanish galleonsthe Atocha or
Santa M argarita.1d.

5

Citing Barash v Kates,585F.Supp.2d 1347,1364(S.D.Fla.2006),fortheproposition
thatd'l-flhe Courthasfound no Eleventh Circuitopinion discussing the standard thatthecourt
.

should apply when deciding w hether to im pose sanctions pursuant to the Court's inherent
authority forfraud upon the Court. However,other courts have required thatwhen imposing
attolmey'sfeesassanctionspursuantto theirinherentauthority,the conductbe proven by clear
and convincing evidence.''

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As Plaintiff JTR'S adm iralty counsel, Horan believed he had a duty to the Courtto
disclose the testresults,eonsidering his previous representations to the Courton the possible

origin ofthe em eralds contained in a reportHoran filed on October 18, 2011.1d.at 11.This
reporq authored by archaeologist R. Duncan M athewson, III and titled Slunderwater
Archaeological lnvestigations of the Em erald Site off the Florida Keys Research Design

Executive Summarys''opined thatthe emeraldsStclearly representled)a cargo loss atsea''and
thatan approxim ate date range forthe site could be from 1570-1700, though ttm ore research is
required before a more definite date can be determined.''DE #19 at9. Horan testised before
Judge M oore thathe had Ctheated discussions''with Silverstein overdisclosure ofthe Iab results.
D E #445 at 11-12.

JTR did notdisclosethe resultsto theCourt,however.lnstead,JTR reported theFrench
and Swiss1ab resultsto CBS and the 60M inutestenm ,id.at11,and arranged formoretesting of

the stones by another lab with CBS'S assistance.1d.JTR filed a içsecond Status Report''on
January 6,2012,thatonly revealed thattesting wasongoing and resultswouldbesharedwith the
Courtçioncealloftheseanalysesarecompleted ...and JTR isin possession offnalreportsfrom
each oftheGIA,the French and Swisslabs.''DE #54 at3.JTR didnotrevealtheresultsofthese
tests to the Courtor to M otivation for a period of four and a half months from when it first
learned ofthe probableresults in early Decemberof2011,untilApril18,2012,when itfiled its
içrhird StatusReport.''DE #82.Judge M oore held thatonce JTR tirstlearned this infonnation,
iûwhich indicated thatthe Emeralds were notfrom the Atocha or the M argarita,',JTR f'had an
obligation atthatpointto disclose thisinform ation to the Court.''DE #445 at17.Judge M oore

found this obligation to existçslrlegardless ofwhetherthis reportnecessarily meantthatthe
Em eralds could not be from the Atocha or the M argarita.'' 1d. Judge M oore w ent on to
specifically find with regard to thisobligation that

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Atthispoint,JTR wason noticethattheseEmeraldslikely did notcom efrom the
AtochaortheMargarita (orany shipthatdidnotsink inthepastcentury, forthat

matter)andthey shouldhavesimilarlyputtheCourtand Motivation on noticeof

that inform ation.The fact thatJTR told 60 M inutes in no way dim inishes its
obligation to this Court. ln fact, it demonstrates thatJTR knew that something
was going on and that these reports would have a substantial impact on the

adjudication oftheres.JTR wasobligated atthatpointtomaketheCourtaware

ofthe inform ation.

Id.atn.16.

The Courtimposed this sanction because JTR had withheld the epoxy results from the
Courtand M otivation,and awarded M otivation its attorneys'fees incurred from December2,

2.
011,through April18,2012. The Courtimposed this sanction because Plaintiffhad withheld
the epoxy results from the Courtand M otivation.1d.at 18. Itwasnotimposed for Jay's lies
aboutthe alleged tçdiscovery.''
During JudgeM oore'sSanctionsTrial,and afterthe fraud on the courthad been revealed,

the Courtgranted M otivation leave to file an Amended M otion for Sanctions to be directed at
any otherpartiesM otivation thoughtresponsibleforcomm itting thisfraud.Judge M oorefurther

fbund thatthecrime-fraud exception to theattorney-clientcomm unicationsprivilege applied and
compelled theproduction ofpreviously privileged emailand othercomm unicationsbetween and
among JTR, its mem bers, and its counsel. See DE #424; DE #444. This resulted in the
production of hundreds ofemails and discovery of other substantial evidence notpreviously
disclosed to the CourtorM otivation. The evidence thathas come to lightsince those ordersis
the focus ofthisOpinion. A largepartofthefollowing findingsoffactwere eitherdeliberately
withheld in the trialon the salvage case held before Judge King in January 2013 or constitute

completeperjurybytheoriginalconspiratorsJayM iscovichandSteveElchlepp.

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II.FindingsofFact
a. Prologue- TheG enesisofaFraud

Jay M iscovich invested in M otivation,lnc.in approximately 2009. ltwasprobably what
heobsen'ed during thatexperienct asa treasurt salvageinvestorthatinspired him to devisethis

fiaudulentconspiracy to usethefederalAdmiralty Courtto pervertjustice.Though no onebut
Jay could have known what he meantwhen he testified underoath atthe Adm iralty Trial, his
wordsforeshadowedhisfraud:

Istarted realizingthat(with)mostofthese treasurehunting companies,the real
treasure was making m oney by taking itfrom theirinvestors,and they weren't

reallylookingfortreasure.(Sojldecidedto doitonmyownand decidedlcould
do itbetttr.
Jay M iscovich 12/4/12 Adm iraltyTrialTestimony,Ex.M 41at10.
Ofcourse we now know thatthisisprecisely whatJay did.As Judge M oore found, Jay

içmanaged to successfully convince his investors, lawyers, employees of the Sm ithsonian,

appraisers,jeweltrs,fnmily,friends,thegeneralpublic,andmanyothers,includinginvestigative
reporters from CBS' 60 M inutes,that he had discovered and recovered thistreasure from the

sealloorlandlallowed millionsofdollarsto beinvestedinto thisfraud before theComplaintin
the instantcase waseven filed.''DE #445 at19.
b. B ruce Silverstein'sInitialInvolvem entw ith Jay M iscovich

BruceSilverstein haspracticed law atthe Delaware 1aw firm ofYoung Conaway Stargatt

& TaylorLLP (ICYCST'')forhisentirecareer,approximately 28 years. Hispracticefocuseson
com oration law,which hedescribesastiincluding alternativeentities...limited partnerships...
large mergers and acquisitions . ..''and similar issues. Transcript of Amended M otion for

SanctionsHearing,December4,2014 (sçllearing Tr.6''),at112-13.6In late January of2011,
6

H ereinafter, theCourtwillciteto Day 1ofthesecond (Judge King)sanctionshearing,

whichtookylaceon 11/19/14,asfsl-learingTr.1.''ThisportionofthetranscriptisDE#543.The
Courtwillclte to Day 2 ofthe sanctions hearing,w hich took place on 11/20/14,as dfllearing Tr.

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Silverstein received a phone callfrom HawaiiattorneysM ark Davisand M ike Livingston ofthe

law 51114DavisLevin Livingston (tûDLL'')aboutthepossibility ofrepresenting Jay, Steve,and

ScottM iscovich (Jay'sbrother)in defenseofalawsuitfiledagainstthem in theDelawareCourt
ofChancery (thetsDelaware Litigation').f#.at116.TheDelaware Litigation,filed on January
19,2011,wasbroughtby investorsin Jay'semerald find (the$$New York Investors''), and w as
described by Silverstein as dealing tswith a question ofcorporate governance and who was in
charge of an entity,an alternative entity.''ld.at 117.According to Silverstein,the Delaware

Litigation boiled down to Sfthere'sbeen this am azing and valuable em erald fnd and people are
fightingoverwho ownsit.''1d.at124.
Silverstein testifed that,in addition to the phone callfrom Davis and Livingston about
YCST'Spossible retention in the Dtlaware Litigation,on the snme day he also received aphone
calland an em ailfrom New Orleansattom ey Lou Fislunan aboutYCST'Spossible retention in

the same matter.f#.at 117.According to Silverstein,attached to the em ailfrom M r.Fishm an

wasanemailfrom JeffreyPost,Ph.D.($$Dr.Post''),theCuratoroftheNationalGem andM ineral
Ctollection atthe Sm ithsonian lnstitute,to theN ew York lnvestors dated September9,2010,in
which Dr.Post describes results of analytical scanning electron m icroscope testing on the

emeralds.Id.at123.Dr.Post'semail,which Silverstein testified to having read the day he was
firstapproached torepresentJay,Steve,and Scottin theDelaware Litigation,statesthattlecksof
gold,silver,and copperwere found in cracks in the emeralds,the presence of which elements

2,''which can befound atDE #544.Day 3,on 11/21/14,willbecited asdfllearing Tr.3,'5and can
be found atDE #545.Day 4,on 11/24/14 willbe cited as çsl-learing Tr.4,5'and can be found at
DE #567.Day 5,on 11/25/14 w illbe cited as tillearing Tr.5,9'and can be found atDE //554.D ay
6,on 12/4/14 willbe cited asSdl-learing Tr.6,''and can be found atDE #546.Day 7,on 12/5/14
willbe cited a.
s tsl-learing Tr.7,''and can be found atD E #547.D ay 8,on 12/8/14 w illbe cited as
(iHearing Tr.8,59and can be found atDE #548.Day 9,on 12/9/14 willbe cited astsllearing Tr.
9,5'Imd can be found atD E #549.D ay 10,on 12/10/14 w illbe cited as ç'H earing Tr.10,''and can
be fbund atD E #550.D ay 11,on 12/15/14 w illbe cited as ççl-learing Tr.11,''and can be found at
DE #552.Day 12,on 12/16/14 willbe cited astsl-learing Tr.12,''and can be found atDE #551.
And Day 13,on 2/2/15 willbecited asftllearing Tr.13.''

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çsseem s consistentwith the idea thatthese emeralds were on the seatloor associated with gold

objects for some period of time.'' Silverstein Ex. 1. Silverstein and YCST accepted the
representation and were engaged by Jay,Steve, and Scott for their defense in the Delaware
Litigation.HearingTr.6 at117-18.

In addition to Davis and Livingston of DLL, Jay, Steve, and Scott were also being
advised by Paul Sullivan, Scott's neighbor and friend in Hawaii and a self-styled political

organizer who worked on the campaigns of Presidents Carttr and Clinton.1d.at 8.Sullivan
becnme involved with Jay and Steve through Jay'sbrotherScottsometim ein early 2010.1d.at9.
Sullivan testified that,in additionto acting asan advisorto Jay,Steve,and Scott,in Decem berof
2010 he had traveled to Colom bia atJay's request and m etwith the presidentofColombia to
convey Jay's offer of 70% of the em eralds in exchange for the government of Colombia's
physically running the salvageoperation.Hearing Tr.10 at113-14.Sullivan furthertestified that
he made asecond trip to Colombia in M arch of2011 forfurtherdiscussionswith theColombian
presidentialcabineton this issue.1d.at 115.Silverstein testified thathe wasaware ofSullivan's
tripstoColombia,made both before and shortly afterhewasretained in theDelaware Litigation,
and thathefound itStinconceivable ...thatJay M iscovich would notonly allow,butsupportthis
processifthese werenotemeraldsthathad been found in the GulfofM exico and were genuine
Colombian emeralds.''HearingTr.9 at22.
Shortly afterbeing retained in the Delaware Litigation,in late January of2011 and into
February of2011,Silverstein began to review many documentsrelated to thatcase.TheVerified
Com plaintin the Delaware Litigation,which the New York investors filed againstJay,Steve,
and Scott on January 19,2011,w as filed by law yers atthe N ew York 1aw 51131 W illkie Farr &

Gallagher (ssW ilkie Farr'').Silverstein Ex.7.Further,the New York Investors had filed on
January 11,2011,anotherV erified Com plaintagainstJay and Steve in the CircuitCourtforthe

18

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16thJudicialCircuitin and forM omoe County, Florida,in which case the New York Investors
were represented by both the Florida law firm Colson HicksEidson as wellasby W illkie Farr.

Silverstein Ex.4.Filed along with this complaint were aftidavits by two of the New York
lnvestors, M r.Dean Barr and M r.Neil Ash. Silverstein Ex. 5; Silverstein Ex.6.In these

affidavits,these New York Investorsstated thatJay had m ade a discovery ofdtsunken treasure,
namely emeralds and other gemstones.''1d.These affidavits,dated January 10, 2011, further
stated thatthese New York Investors had invested approximately two million dollars in Jay's

discovery.1d. Silverstein rtceived and rtviewed a copy ofthis com plaintand these affdavits
shortly aherhe wasretained in theDelaware Litigation.Hearing Tr. 6at142.Silverstein testified

that Stthe factthat (the Ntw York Investors) were represented by these lawyers and were
spending a lot ofmoney to takt controlofthe emeralds''contributed to his own beliefin the
legitimacy ofJay'sfind.1d.at 158.Further,Silverstein testified thathe believed theN ew York
lnvestors'investmentsand selection ofthese expensive,respected,and high-powered 1aw tsrm s

said alotabouttheirown assessmentofthe veracity ofJay'sstory and the value ofthe em eralds.
f#.at135,160.
Also am ong those documents that Silverstein reviewed around the tim e he was first

retained in late January of 2011 was anotherem ail,dated July 13,2010,sent by Barrto Bob

Toppe(anotheroftheNew York lnvestors),reportingtheresultsofameetingthatBarrand Jay
had had thatday with Dr.Postofthe Smithsonian.Hearing Tr.6 at164.In the email,Barrtold

Toppe thatDr.Postwasvery txcited by the emeralds ht had inspected,exclaim ing them to be
itthe mostrare type of emeraldshe had everseen,''thatexnm ining them had been a çtonce in a

lifetime experiences''and thathewasinterested in curating a tsmajordisplay''ofthe emeralds
alongside the H ope D iam ond. Silverstein Ex. 8. Silverstein testified that after review ing this

emailin lateJanuary 2011,he called Dr.Postto confirm itscontent.Hearing Tr.6 at131-132.
During thisphone call,Dr.Postconfinned whatSilverstein had read in the July 13,2010,and
19

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the September 9,2010,emails;specifically, thatDr.Posthad examined some ofthe emeralds,
thatSçthey were one ofthe m ostexciting thingshe had seen asthe curatorofthe gem collection
()fthe Sm ithsonian Institute,''that the Sm ithsonian did want a five-year loan of some of the
em eraldsfordisplay neartheHopeDiamond,and thatDr. Posthad identified m icroscopictlecks
ofgold in theemeralds.1d.at133,163.
In addition to the inform ation he obtained from Dr. Post,shortly after Silverstein was
retained in the Delaware Litigation, in late January or early February of 2011, Silverstein

received and reviewed inform ation on the appraised value of certain ofthe stones. 1d.at 135.

Among these appraisals was a report (dated December 9, 2010) by Josh Lents of the
(JemologicalAppraisalLaboratoryofAmerica(the$çGAL'').Silverstein Ex.2.Accordingtothe
GAL,which in preparing itsappraisalhad only evaluated the characteristicsand value ofa sm all

fradion ofJay'semeralds,the estimated retailvalueofjusttwenty stoneswasapproximately
$120,000.1d.Thistotaldidnotincludeonespecim en,aboutwhich the GAL had concluded tsDue
to rarity and exceptionally preserved condition,valuecannotbeaccurately stated.''1d.Finally, in
an observation thatwould laterprove signiticant,the GAL described each stone itexnm ined as
dçuntreated - No evidence of oil or resin.''1d.ln late January or early February of 2011,
Silverstein went to N ew York City and personally m et with Lents,the GA L appraiser who
prepared the report. Hearing Tr.6 at 136.Silverstein broughtto the m eeting $éa few selected

emeraldSrincludingonesthatgLentsqpreviouslyhad appraised.''?Id.at138.Finally,Silverstein
testified thathe personally broughtcertain em eraldsto Sotheby's in New York City,where he
metwith thepresidentofSotheby'sand itshead gem ologist.1d.at 174.Accordingto Silverstein,

thehead gemologistexamined one emerald in particularunderajeweler'sloupeand estimated
itsvalue to bebetween $25,000 and $40,000.1d.

7

Therecord doesnotrevealwhatwasdiscussed atthismeeting.
20

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W ith a1lofthis infonnation in hand, in July of2011,Silverstein created an entity called
P&B Finance LLC through which he and Sullivan invested in and obtained a 1. 5% equity
interestin theemeralds.Hearing Tr. 9 at37.Silverstein testified thathe invested $80,000 ofhis
own money.1d. Silverstein further testised that as part of the retainer agreem ent for the
Delaware Litigation,hislaw fil'
m , YCST,aswellasthe Hawaiilaw firm who referred thatcase
to him ,DLL,each obtained a5% equity interestin theemeralds. 1d.at16.
c. DaveH oran Retained by JTR

Silverstein testified thatearly on in his representation of Jay, Steve,and Scottin the
Delaware Litigation he advised his clients that they should seek the advice of an adm iralty
lawyerto determ inewhetheran admiralty filing would be appropriate and advisable. H earing Tr.
6 at 115.In early M arch of2011,Silverstein,Jay, Steve,Scott,Sullivan,Davis,and Livingston,
interviewed Key W estadm iralty attonwy David Horan by videoconference. 1d.M r.Horan has
extensive experience in the area of salvage.Hearing Tr.1 at 142.By M arch 15, 2011, Jay
entered into a retainer agreem entwith M r.Horan for representation Stwith respectto, am ong

other things,admiralty and eustom s issues.''M 25.This agreem ent listed Silverstein as Jay's

çûgeneraloutsidt counsel.''Id.at!1.Paragraph 4 ofthisagreement,titled StAuthorization and
Decision M aking,''required Horan to Sçseek specific authorization from Client and Client's
generaloutsidecounsel''before undertaking any ofa litany oftasksnecessaryto the maintenance

ofthe instantaction.1d.at!4.Horan testified thatin practice,as his representation of Jay
progressed,td(Mr.SilversteinlwastheprimaryattorneyrepresentingJTR.''HearingTr.1at45.
Horan testified thatpriorto hearing from or being retained by Jay,Steve,Silverstein,
Sullivan,ordtany ofthe JTR peopleh'--or prior to early M arch of 201l- he received a callfrom

Len Tepper,the producerof60 M inutes.Hearing Tr.1 at42.During this callM r.Teppertold
Horan that he was considering producing a segment for the show on Jay's find,and asked
w hether H oran w ould be an tsexpertsource''for the segm ent. 1d.A fter m eeting w ith the JTR

Case 4:11-cv-10074-JLK Document 568 Entered on FLSD Docket 03/16/2015 Page 22 of 58

people,but before being retained in early M arch 2011, M r.Horan,an ç'accomplished diverr''
wenton whathehascalled aççsanity check''dive with Steveatthe siteofthe find. H earing Tr.1

at142;DE #372 at100-10.Horan testifed thatduring thissanity check dive he found a number
ofemeraldsand am ethysts,with severalofthe stonesbeing ('impacted''in them ud underseveral
inchesofsilt,which indicattd to him thatthey had been down thereforsome tim e. H earing Tr.1
at57,141--42.Horan testitied thathe then became interested in this case, saying Sûwhen you
pullup a handfulofem eralds,you getinterested.''DE #372 at 109- 10.Horan wasretained as
admiralty counselaherthisdive.1d.at110.

BeforeJTR filed thiscase on September6,2011,the DelawareLitigation settled. 8/28714

Bruce Silverstein Affidavit,M otivation Ex.M -8 at:18.According to Silverstein'saffidavit,a
settlem entagreement was executed and prelim inarily approved in the Delaware Litigation on
M arch 29,2011,and wassetforatinalapprovalhearingon August19,2011.
d. Peter Tobia W arnsSilverstein ThatJay isN otTruthful

On August 19,2011,the Delaware CourtofChancery held a hearing to consider final

approvalofthe settlem entin tht Delaware Litigation.Hearing Tr.6 a.
t 179. Justprior to this
hearing,Silverstein was approached by Peter Tobia,afriend ofJay's,who asked to speak with

Silverstein.f#.at180.Tobiatold Silverstein thatheSfknew informationthat(Silverstein)should

have aboutJay and his discovery,and itwas importantthat (Silverstein)understood it.''1d.
Silverstein testified that during that meeting Tobia refused to provide details about this

''information''until he Sçhad his deal.''1d.According to Silverstein, after Tobia refused to
elaborate further,eitheron the étdeal''he required orthe infonnation thathehad, Silverstein told
Tobia that he had a hearing to attend and didn't have tim e to dealwith him . 1d.at 181-82.
Silverstein thoughtTobiaw as an dtuntrustw orthy character,''and atthatpointSilverstein retum ed

to the Delaware settlementhearing forapprovalthatsameday. Id.

22

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Thatnight,at 10:34p.m .on August19,2011 afterthe settlem entheming had concluded
,

,

Silverstein forwarded to Horan, with copiesto Jay Steve,Sullivan,Scott
,
s,and Livingston
, Davi

,

a copy ofan emailJay had sentto Tobia on June 28, 2011.Silverstein Ex

.

em ail,Jay informed Tobia that a 3% interest in the find

9.In the forwarded

was a11 he was going to get, and

mentions Tobia's Edmisconception that (the treasure! was found in a treasure chest on land

somewhere,''adding ûiwewish itwas(found in atreasurecheston land somewhere be
cause)a
beach/land find in Florida is tfinderskeepers'no litigation ofany ki

nd ...(but)becauseitisin

intenmtionalwaterswehave ahugem ess.''1d.at2.ln Silverstein'scoverem ailto Horan and the
restofthe JTR people,he explained thata series ofem ails from Tobia thathe had reviewed
demonstrated an dteffortto persuade Jay to award M r. Tobia a 5% ownership interestin (tjhe

treasure.''1d.at1.Silverstein wenton totellthegroupthatSçghelrevieweda1lofthee-mails, and
there is no suggestion thatJay ishiding anything orthathe found the em eraldsanywhere other
than in Intem ationalW ateri''that(tlay and Steve both understand the drastic consequencesthat

would tlow from theirsupporting afalse admiralty filing (includingthepossibility ofjail), and
that itwillbe very easy to determ ine whetherthe treasure truly com es from the site they have
identitied.Nonetheless,they both supportm aking the admiralty filing, so thatthey can proceed
to obtain titleto thetreasure.''1d.
The nextmorning,at10:27 a.m.on August20, 2011,Silverstein sentan emailto Tobia.

Silverstein Ex. 10 at4.Silverstein referenced their brief encounter atthe courthouse the day
before,and told Tobiathat

(tlhisisa very seriousmatter,and you havea responsibility to come forward if

you truly believe thatJay and Steve are comm itting a fraud and/orothercriminal
m isconduct.On the other hand, if you do not have a legitim ate basis for your
claim s,lencourage you to form ally retractthem now , before any harm befallsmy
clients as a result of your assertions. O ne w ay or another, you m ust stop
threatening to reveal what you claim to be the truth in the absence of Jay's
agreem entto honor what you claim to be your arrangement for an ownership
interestin thediscovery.

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Ifyoutruly have knowledge thatJay and Steveare misre
J
presentingthelocation of
kay'sdiscovery thatgaverise to the Delawarelitigation, 1encourageyou to letme
now the specifcsand source ofyourinform ation imm ediately and withoutany
,
stringsattached toyotlrdoing so.
1d.

Silverstein concluded this em ailwith a requestthat, should Tobia wish to discuss this
issue further,he reply to this em ail and Silverstein will call him . 1d.W ithin the next forty

minutes,Silverstein and Tobia spoke, prompting Silverstein to send a second em ailat 11:07 a

m.

.

thanking Tobia forthe calland asking Tobia to speak with him again at

some pointthatday

between noon andthree. 1d.at3.
Laterthatafternoon,at2:33 p.m .,Silverstein sent a third,and lengthy, em ailto Tobia,

revealing thatthey wereableto speak again ashe had requested. 1d.at2.Silverstein'sem ailfirst
statesthat
I understand from our call earlier today that you continue to contend that the
Treasure Jay discovered was notdiscovered in intem ationalwaters offthe coast
ofFlorida,asJay insists to be the case. M oreover,Ifurtherunderstand thatyou
believe the Treasure to have been discovered tion land in Florida--orsomething

likethat.''Ialso understand thatyou contengd)thata Treasure Chestmay have
been involved.lspokewith Jayand Steve,and they both deny yourassertionsand
insist thatthe Treasure was discovered in Internationalw aters off the coast of
Florida.
161.Silverstein continued'
.
Based on theforegoing,Jay hasauthorized m eto m akeyou thefollowing offer:
1. You willprovide your complete and unrestricted cooperation in helping
Jay and his advisors understand al1details and supporting evidence for your
story,which contradictsJay'sassertions.
2. lf,asyou contend,the Treasurewasdiscovered ata location differentthan

Jay already hasidentified to us,Jay tand others)willallocate to you a 10%

interestin any treasure and/orany value thatm ightbe realized as a resultofits
discovery.

3. If,as Jay contends,the Treasure was,in fact,discovered in lnternational
W aters offthe coastofFlorida,you willrelinquish any claim you believe to
have in the Treasure and/orany value thatm ightbe realized asa resultofits
discovery.
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Jay also hasasked me to com municatethe following altem ati

ve to you:

Despite whatJay views to be fraudulentand defamatory accu
J
sations respecting
ay and the location ofhisdiscovery, Jayrecognizesthatyouwere(untilrecently)
agood friend,who provided meaningfulm oralsupportin thepast. Accordingly,if
you truthfully do notbelievetheinfonnation you have been hinting atforth
few month
epast
s(andwhichyoudiscussedwith methismorning), and you are willing
to acknowledge thatyou have no knowledge thatcontradicts Jay's a
h
ssertion that
Je discovered the Treasure in Intem ationalW aters offthe coastofFlorida,then
iay is willing to forgive yourpast transgressions and allocate a 2% ownership
nterestin the Treasure thatJay sayshe discovered in InternationalW atersoffthe
coastofFlorida.
J#.So asnotto bem isconstm ed, Silverstein added:
To be perfectly clear, Jay's alternative proposal is not intended to be an
inducem entto causeyou to changeyourstory ifyou truly believe yourstory to be
tnle.Indeed,ifyou truly believe yourstory to betrue, Iencourage you to bring it
to theattention ofthe appropriateauthorities, so thata proper investigation can be
conducted into the location ofthe Treasure's discovery. If your story turns outto
be true,Iexpectthatyou willbe rewarded forbringing itto the attention ofthe
appropriate authorities.And,ifyourstory turns outto be a fabrication thatwas

created to placepressureon Jay to allocate some ownership interestto you (or
provide you with some othervalue),Iam sure you can guess whatpotential
consequences will follow.One way or another, however,your reporting your
story to appropriate authoritieswillhelp getto the truth- which you claim to be

youronly objective.
Finally, although you told m e that you are not represented by an attorney in
connection with this matter,you did tellm e thatyou had,atsom e point,spoken

with (attorneyPeterlHess- whoalsowas(atlthesettlementhearingyesterdayon
behalfofTheKirbyGroup (whichinitiallyclaimedthatJay'sTreasurecamefrom
The Kirby Group site,buthas now retracted thatclaim).Accordingly,I am
copying M r.Hess on this e-m ail.If M r.Hess believes your story or has other

infonnation (beyond his now debunked story about The Kirby Group), I
encouragehim to come forward with hisinform ation,and notto make any further
threatsto interferewith Jay'sendeavor.
1d.at2-3.

Horan w as copied on this em ail as well.1d.Tobia responded by em ailthe next day,

August21,2011,statingthat1)hehadcallsintothreeattorneysbuthadn'theardbackfrom any
ofthem,itbeingaweekend;2)M r.Hesswasgoingto seekpermission from theKirby Group to
alsorepresentTobia;and3)someonewouldcontactSilversteinsoon.1d.

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On September8,2011,Silversteinem ailed Tobia afourth and finaltim e stating:StYoure-

mailbelow (which isourlastcommunication)statesthatyouhavecallsinto threeattorneysand
som eone would contactme soon.Thatwas nearly three weeks ago, and nobody has contacted
m e.Have you retained an attorney with whom lshould be speaking?lfnot, how do you wish to
proceed?''f#.at1.Thatsam eday Silverstein forwarded thisentireem ailchain, com prising allof

the tm ails between Silverstein and Tobia in Silverstein Ex.10,to Jay,Steve, Sullivan,Scott,
Davis,Livingston,and Horan.1d.

Silverstein testifed thathedid nothearanything f'
urtherfxom Tobia afterthis lastemail,
and none ofthe membersofJTR to whom Silverstein had forwarded the em ailchain placed any

stock in Tobia's assertions. Hearing Tr. 6 at 198.ç$To the contrary,'' Silverstein testified,
Sieveryone thatIspoke with took the position thatTobiaw asnottobebelieved and wastrying to

getsomething,people couldn'tquite understand whatorwhy,including David Horan,who went
forward with the adm iralty filing despitethischain ofcomm unications.''f#.Silverstein testified
thatas of September 8,2011,he thoughtTobia to be dian extortionist''and the factthatTobia

neverprovidedanyinformationandhisç'abjectrefusal''todosowastelling.1d.at199.
Prior to January 19,2011,the date on which the Delaware Litigation was filed and
Silverstein wasretained,and asdiscussed previously,two oftheNew York lnvestors,Dean Barr
and NeilAsh,executed affidavits--each dated January 10,201l- in a case filed by the New
York Investors against Jay and Steve in the State CircuitCourtin M onroe County,Florida.
Silverstein Ex.5,
'Silverstein Ex.6.ln addition to stating thatmillionshad been invested by the
tim ethose affidavitswerefiled,theaffdavitshad attached asan exhibita schedule dated August

6,2010,ofequityownershipsharesinStany emeralds(ortreasurewhatever)recovered tocurrent
dateand moving forward.''Silverstein Ex.5 at10;Silverstein Ex.6 at8.Tobia islisted ashaving
a 3% equity ow nership interestin each ofthese schedules.1d.

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Silverstein testified thatin conveying Jay'sofferto Tobia on A

ugust20,2011,hedid not

participate in any sortofcoverup. Hearing Tr.6at196. Hetestitsed that

To thecontrary,Ithoughtthatwhatwasgoing on here wmsthatwe
i
weretrying to
ncentivizeM r.Tobiato com eforwardwith hisinform ation sothatwe could have
an accurate understanding ofwhathappened, and we were encouraging him both
by
h providing a financialincentive forhim to come forward with hisinformation if
ewastelling thetnzth;and on top ofthat, 1told him thatifhedidn'twantto do a
dealatall,in any eventheshould go to the authorities.
ld

Tobia did not acceptJay's offer, nordid he recanthis claim thatJay did notfind the
em eraldswherehesaid he did.
Two days aher Silverstein talked to Tobia, on August21,2011,he received additional

details ofTobia's story.Horan forwarded to Silverstein an emaildated August 19, 2011,that
Horan had received from PeterHess, a lawyerin W ilmington,Delaware. M otivation Ex. M -31.
ln Hess'August19 emailto Horan,he said thatthatTobia isison the periphery, buthe's know n
Jay M iscovich fora long tim e and saysthatht firstbecame aware ofthe emeralds in January,
2010.'5Hessreported thathe had received a callfrom Tobia on January 23, 2010,during which
Tobiaçsasked ahypotheticalasto the legalconsequencesfortreasurediscovered (in international

B'attlrs.'''1d.at2.Further,Hessclaimed thatTobia reported being presentwhen çithe gemstones
were firstshown to Steve- whose eyesbugged out.''1d.Hessclaimed thathehad 'sno reason to
believethatPeterTobia would tellm eanything exceptthetruth,Perhapsnotthewholetruth, but
trustworthy as far as itgoes.''1d.Silverstein testifed thathe read this emailand it gave him
concerns,not about any part of Jay's story, but about Hess:ç'That gave me no suspicious

(siclwhatsoeverabouttheveracity ofJayand Steve'sclaim.Butitgaveme concernsaboutM r.
H ess,because he w as revealing attorney-client inform ation in this e-m ail.''Hearing Tr.9 at 77.
Silverstein furthertestified thattdhe spoke to M r.Horan aboutM r.H ess, and he told m e thatM r.

Case 4:11-cv-10074-JLK Document 568 Entered on FLSD Docket 03/16/2015 Page 28 of 58

Hessatonetim eworked forM r. Horan and had stolen anumberofhisfilesandthath

e w as nota

person to betrusted.''1d.

In Octoberof2011, afterthis admiralty case wasfiled JTR agreed to settle with Tobia
,
,

granting him a 3.25% equity interest.3 Hearing Tr. 9 at 72.Silverstein testified thathe was
againstthedecision to enterinto any agreementwith Tobia butthathe wason vacation with his
,

family when thissettlementwasreached. 1d.
e. Non-spanish Coins- Jay and SteveLietoH oran

Priorto the filing oftheAdmiralty Action, Jay wasadvised by the New York Investors
and others thatbecause the emeraldshad been fotmd in internationalw

atershe should take his

discovery to a foreign country to obtain title ratherthan the Courtsofthe United States

.

Atthe

Adm iralty Trial,Jay testified thathe wasiçadvised, forthe firstyearand ahalf from atleast20
,

admiralty attorneys,notto file in (the U.SJ and to take the action to another country
.

.

Gibraltar,theDom inican Republic, theCaym an lslands.''Jay M iscovich 12/4/12 Adm iralty Trial
Testimony,M otivation Ex.M -41at25.
On August 18,2011,Horan sentan em ail to Jay, Steve, Scott, Sullivan,Davis and
,
Livingston,notcopying Silverstein, and attached a draftofthe Admiralty Com plaint

,

which he

said he was tsready to file.''M otivation Ex.M 1-7.Horan further Ststronclv recomm ended''that
JTR Sdm eetwith a professional salvage organization who have the persormel, experience and
equipmentto do itright.''1d. Citing sim ilarities between Jay's find and thatof another case

Horan was familiarwith (e.g.,very little shipwreck materialand lotsofvaluable items lying

exposed on the sea tloor),Horan described the salvage company in thatcase- odyssey

-

as

having done Ssit correctly from the start.''1d.Horan wenton to warn everyone copied on the

emailthati'Spain will,1'm sure, intervenein ourcase and claim thatwearehiding the identity of
8
Therecord isunclearasto how orwhy Tobia'sinterestwasincreased from hisinitial3%
interest.
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the shipwreck,thatwe have irreparably destroyed the integrity ofthe m ecksite
n will
, and Spai
tlood uswith litigation . . . the sam eway they attacked Odyssey.''1d.
On theevening ofAugustl9, 2011,withthe settlementoftheDelaware Litigationhaving
been approved earlierthatday, Silverstein wrote an em ailto Horan

,

copyingJay,Steve,Sullivan,

Scott,Davis, and Livingston, telling Horan that both Jay and Steve are in favor of a U
.S.
Admiralty filing.Silverstein Ex. 9.M r.Silverstein continueddtlalslunderstandthings
,

the only

thing that currently stands in the way ofa tiling this M onday (, August22,2011,!is the
possibilitythatOdyssey willpersuadeJay thatGibraltar(oranothercountry)isabetteroption

.

Personally,lremain in favoroffiling in the U.S.,andIam hopingthatJaywillgive (Horan)the
green lighttomorrow orSundayto fileon M onday.''1d.
However,by August21,2011, justtwodaysafterthesettlementwasapproved andthree

daysafterHoran'swarning,in lightofStthe risksattendantto''an Admiralty filing, the plan had
apparently changed.On thatahernoon,Silverstein sentan emailto Jay, Steve,and Scott,copying
Sullivan,Davisand Livingston,in which he reaffirm ed hispreference fortiling in the U .S.and
tlweatened to withdraw from hisrepresentation should a U ,S.filing notbe m ade.Silverstein Ex.
11.Silverstein'sem ailto Jay,Scottand Stevt statesasfollows:
As you a11 know,as of last Sunday evening,the plan of action following the

settlementhearing in Delaware (which has now occurred)was (i) to make an
appropriatecustomsfilingno laterthan tomorrow moming (M onday,August22,
2011j,and (ii)to makean Admiralty Courtfiling afew hoursafterthecustoms
tsling w asm ade.

Although I would have preferred to see the custom s filing made m any m onths
ago,David Horan washired to have responsibility forthatissue,and he did not
see a need to follow through untilnow .I did preferto see the Admiralty filing
awaitthe settlem enthearing in Delaware,butlalso agreed thatthe fling should
be earlier than that if D avid H oran believed that it w as necessary to m ake the
filing soonerin orderto protectJay's interestin the D iscovery.
A s of Yesterday, l understand that you are considering new dfadvice'' from
Odyssey thata custom sfling isnotnecessary ifthe Discovery iswithin acertain

distancetotheFloridacoast.Iam notacustomsattomey,andIdonotknow gorj
have any personalknow ledge asto where the D iscovery is located. A ccordingly,I
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have no opinion respecting the validity of the advice y
Od
ou are getting from
th yssey,and Ihave no opinion respecting yourdecision to follow ordisregard
atadvice.Ido believe,however, thatitis importantthatyou speak with David
Horan or som e otherattorney who can provide you with advice on the c
i
ustom s
ssue.I also believe that itis better to m ake a custom s filing you m ay not be
required to make,as opposed to failing to m ake a custom s filing you m ay be
required to make.
Asofyesterday,1also understand thatyou no longerintend to makean Adm iralt

Courtsling tomorrow (Monday,
y
f
August22,2011).1believethisisabigmistake

orallofthereasonsIexplained to you yesterday, which Iwillnotrepeatin this
e-m ail.ltshould suftice to say thatan Admiralty CourtGling isthe only way to

guarantee that you are doing the tsright thing''(assuming the Treasure was
discovered how,where and when Jay and Steve say itwasdiscovered)without
regard to the risksattendantto such a filing. Any othercourse ofaction isfraught
with legal,financial,and practicalrisk.
lcontinuetoencourageyou to steerthe coursethatwassetpriorto thesettlement
hearing in Delaware,and proceed with a custom s filing and Admiralty Court
filing tom orrow .As Itold you yesterday, ifyou pursue a differentcourse, 1will
wish you the best,and Iwillbe availableto providem oralsupportand guidance

butIcnnnotcontinue gto)guarantee thatIwillbewilling to devote furthertime,
andexpensetothismatter(beyondthecleanupworkneededtohelpcomplywith
the settlementagreement- which is nottechnically required by ourengagement

arrangement,butwhichlwilldo,nonetheless).
hi.at1-2.
Afterreceiving both Horan'swam ing aboutthe potentialforSpain to m ake aclaim,and
this tm ailfrom Silverstein,butpriorto the com mencemtnt ofthe Adm iralty Action, Jay and

Steve showed up atHoran's office with a number ofcoins,none ofwhich were Spanish,and
asked Horan,liwell,would thisprove thatthis is nota Spanish Galleon orhave anything to do
w'
ith Spain?''Testimony of David Horan,Hearing Tr. 1 at 64-65.Horan testified that upon
looking atthese coins,which herecallsasbeingDutch,English andFrench,he

said something affirmative (to Jay and Stevejlike,tldo notbelievein any way
thatthese came from the area where you are finding emeralds.Ido notbelieve
they have ever been in the water.And I certainly understand the concern you
m ighthavewith regardto tryingto proveitsnotSpanish,butthisisnotthe way to
do itand take those coinsoutofm y office and don'teverletme see them again.
. . . It
old them thatlunderstood whatwould motivatethem to makethatkind ofa
claim because of the fear of Spain com ing into it,butthatw as notthe w ay this
case was going to proceed and thatIwanted them to confirm to me that,in fact,

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they had notrecovered these coins.They did confirm thatto me and then they left
m y office.
1d.at70-71.

Silverstein was not present at this meeting, but Horan testified that he then called
Silverstein and Sullivan to reportthis incident.1d.According to Silverstein, tçlay's story about
the non-spanish coinsdid give me reason to beskepticalaboutJay'sveracity.Againstthe then-

existing evidence supporting the veracity ofJay's accounting ofhis discovery ofthe em eralds

(includingHoran'slaterç'Sanity Dive''),however,Jay'sindiscretion regardingthecoinsdidnot

causemetobelievethatthediscoverywasafraud.''MotivationEx.M 8at! 157.
Despite this incident with the coins, on Septem ber 6, 2011, Horan instituted the

Admiralty Action by filing theVerified ComplaintforMaritime Salvage (DE #1)on behalfof
JTR,and verified by Jay M iscovich.Horan testified thathe relied on Jay'sverification in filing
thiscase and thathetscertainly didbelievehim .''HearingTr.1at141.
Horan had dived the site çtm ultiple tim es''and told Silverstein aher each thatSthe was
extremely excited this ...wasa realdeal.''Hearing Tr.8 at34.On September 9,2011,tltree
days after this case was filed,Horan made another dive,with Steve, and again recovered
em eralds. Hearing Tr. 1 at 141. Shortly after this dive,Silverstein, Horan and 60 M inutes
producerLen Teppertraveled by boatto the discovery site.Hearing Tr.11at8.They were met
there by another boat carrying Jay, Steve,and a crew of persons from CBS N ews and 60
M inutes.Silverstein did notdive,buttestised thathe witnessed Horan and Steve dive into the
water and resurface with a number of em eralds. During thattrip, Silverstein also witnessed
Horan climb onto theboatwith an em erald between histeeth and exclaim ,tsm ark thatone forme
w hen we gettitle.''1d.

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f. Sudden Produvtion of a 20 Ib. Bag of Em eralds That Jay and Steve H ad
Glleld Back''From Disclosing to theCourt.

Silverstein testified that in late September or early Octob
er of 2011, soon aher the
commencementofthe Adm iralty Action, htreceived atelephone callfrom Horan informing him

thatJayand StevehadjustcometoHoran'soffcewithatwtntypound bagfullof
emeralds(the
(:2()lb.group'')andthatHoran didnotbelievetheyhad comefrom thesite Hearing Tr.7 at15
.

.

Horan described the stonesasitfairly sm all,''ddnotany biggerthan yourGngernail
'and (tbright
,'
green.''Hearing Tr.1 at73. A ccording to Horan,Jay and Steve told him thattheseem eraldshad

been found atthe site and would have to be included in the res butthatthey hadn'ttold him
,

aboutthem before because dçthey were stillworried aboutSpain com ing in and th
ey had held
these back so thatifSpain cnme in, they would stillhave something left.''1d. However,Horan
initially Sédid notbelieve those emeralds had been recovered by them because based upon my
dives on the site,they would have been tmderneath abouta four-inch overburden ofvery light

like m ud and crushed up shells and things like this and itwould take, to (his) recollection,
something like a year ofbeing on the bottom,much less being 60 feetdeep, to recover that

numberofsmallemeralds.And (he)did notbelieve they came from the site.''1d.at73-74.
Horan testified thathetold Jay and Stevehedidn'tbelieve thatthey came from the site, butthey
explained thattsthey did come from the site and thatthere were certain concentrations ofthem
thatthey found that were on the bottom that were kind of like in little holes and they could
recoveraverylargenum berofthem in avery shortperiod oftime.''Id.at74-75.
Horan testified thathe called Silverstein and Sullivan aboutthis incident,and expressed
hisconcernsthatJay and Steve mightbe Sfattempting to supplem enttheirrecovery orsom ething
to thateffect.''1d.at75.Silverstein testised thatatthat pointhe told Horan tfto do whatever
investigation he needed to do to be satisfied thatthese emeraldscame from the site, and he was
theadm iralty attom ey so itwashisresponsibility to makesure itwasbeing doneright.''Hearing

Case 4:11-cv-10074-JLK Document 568 Entered on FLSD Docket 03/16/2015 Page 33 of 58

Tr.7 at20.Horan responded thathe would follo
w through.1d.Horan does notrecallwhether
these emeraldswere included in the res, Hearing Tr.1 at75

,

butaccording to Silverstein, both

Horan and Jay each told Silverstein on separate telephone callsthatthis 20 lb

.

deposited in the safe-depositbox thatcontained the res. Hearing Tr.7 at28

,

group had been

Silverstein testified

thathe believed Horan tthad done his diligence and was s
atisfed thatthe em eraldshad come
liom the site''afterall. 1d.at22.Sullivan testified thatthis incidentshowed him that J
ay and
Stevehad comearound and startedto trustin the courtprocess. Hearing Tr.10at123
.

On September30, 2011,Horan fled aStatusReporton behalfofJTR

.

DE #7.Thisstatus

reportadvised thata safe-depositbox had been leastd in Key W estand th

atdtthemajority ofthe

recovered item s are in those boxes. The remaining recovered item sare in a bank vaultin New
York and arrangements are being m ade to transportthem to a bank i
n South Florida.''1d.The
repcd furtherstated thatthirty-six ofthe stoneswere atthe Smithsonian.

Following this Status

Report,Horan filed the ReportofDuncan R . M athewsson,discussed above which had opined
,

thattheemeraldsStclearly representged)acargolossatsea''and thatan approximatedate range
forthe site could be from 1570-1700, though dtmore research isrequired before a more definite
datecan bedetennined.''DE #19 at9.
A lso,asdiscussed previously, on October 16,2011,M otivation filed its Verified Claim

(DE #10)asserting apotentialinterestin the emeraldson theAtocha dçtloating barrel''theory

.

Horan testifiedthathedididnotbelieve(Motivation'slclaim tobevalidwithregardto itfloating
overin a barrelfrom theAtocha and M argarita wreck site.''Hearing Tr.1 at 139. ln an October
29,20l1, email to Silverstein, Sullivan,and Scott,Horan advised thatM otivation wasjust
'slooking forcover from dissatisfied investors and are inviting them on a fishing expedition.''
Silverstein Ex.13. Silverstein responded to Horan thatsame day saying için Delaware,we could
,

moveto dismissforfailuretostateaclaim (ifwebelievewehaveabasisforsuch amotion, and
getdiscovery stayed pending resolution ofthe dism issalmotion''and ask

ed $$(i)sthata viable

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option in the adm iralty proceeding?''1d.On Decem ber 1,2011,Horan filed JTR'S M otion to
Dism iss M otivation's claim arguing thatits fatally flawed legal basis and facially implausible

ïàctualallegationsdoomedtheclaim .DE #40.
g. Indications of Epoxy

Prior to filing the Admiralty Action,Horan advised JTR to retain the services of a

Professional Salvage company (see Motivation Ex.M 1-7) to assist with the recovery and
m arketing ofthe em eralds,Hearing Tr.1 at 81,and,as discussed previously,Jay and Steve

began to getadviceon the subjectfrom salvage company Odyssey M arine. On November9,
2011,atthe requestofOdyssey,Horan and DanielM cA llister,an em erald consultantOdyssey
recommended,went to the bank in Key W est at which the emeralds were being kept and
examined the stones.f#.at82.M r.M cAllistersaid thathe believed he'd be able to determine
which em erald mining region in Colombia the emeralds came from, and he selected several

stonesto be forwarded to the Ecole NationalSuperieure de Geologie de Nancy (the ttFrench
Lab'')and to Laboratoire Gemtec (the SdswissLab'')so the labscould determine theirmining
origin and age.1d.M cAllisterselected these labs,and Iaterdescribed them in an emailto Horan
and Sullivan as Sithe world's best gemological labs specializing in colored stones,emeralds
specitically.''M otivation Ex.M 1-18 at3.Odyssey M arine paid forthistesting.Hearing Tr.1 at
148.

OnNovember23,2011,Horan filed aStipulation foranAgreed Order(DE #37),which,
among otherthings,stated thattesting wasbeing done on anumberofthe stones(çsfewerthan

505) in France,Switzerland,and Colombia,and thatthestoneswould be returnedto Key W est
after testing w as com pleted. The Court entered this Stipulation as an Order on D ecem ber 1,

2011.DE #38.Thatsameday,Horan filedJTR'SM otiontoDismiss(DE #40).
On December 1,2011,M cAllistercalled Horan and informed him ofissuesthe labshad
com m unicated to him :ti-l-he Sw iss and the French laboratories w ere having som e difticulty and
34

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were actually asking him whetherhe wastrying to play
indicated thatthere wassom etype ofan enhancem

a trick on them because they had- they

entorcoating on the emeralds.''Hearing Tr.1

at83.Horan was shocked atthis information, /#.at147,and called M r

.

and inform ed them ofthese findings, who were similarly sum rised

.

Silverstein and others

Hearing Tr.10 at 127. A s

discussed previously, the Sm ithsonian had examined a num ber of the eme
ralds in July and
Septemberof2010 and did notdiscoverany residue on th
e emeralds.Silverstein Ex. 1.And the
December9,2010, GAL analysisspecifcally stated thateach and every stone ith
ad exnmined
was çiuntrtattd - No Evidtnce ofOilorResin.''Silverstein Ex.2. No reportdisclosing these
resultswasfiled with theCourtatthistime.

W ithin a couple days ofreceiving the firstindications ofmodern enhancem ents on the
stones,Silverstein had a telephoneconversation with Horan in which Silverstein asked Horan if

hewouldbewillingtoçidoanotherdivetoretrieveemeraldsthat(Horanjselectedinthewater

. .

.

bring them outofthewaterin seawater, encapsulated in seawater,and send them to the GIA to

beexam ined.''Hearing Tr.7 at30-31;Hearing Tr. 1at154.Silverstein had informed CBS ofthe
French and Swiss 1ab results,and had gotten CBS to agree to pay for further testing by the

GemologicallnstituteofAmerica(((GIA'').Motivation Ex.M 1-l8 at2-3.Theemeraldsthatthe
Smithsonian had were uncleaned and had also been encapsulated in seawater. M otivation Ex.
M 1-18.Horan agreed to dive fornew samples.On Decem ber8,2011,Silverstein sentan email
to Horan,copyingJay,Steve,Scott,Sullivan,Davis,and Livingston,saying:

1,too,am troubled by w hatIam told the Swissand French labshave found,m ost
of which 1 stillhave not seen.Inm not,however, convinced thatwhat l have
heard isdispositiveproofthatJay hasbeen untruthfulregarding anything stated in
theverifed filingsin the admiralty proceeding,orin the filingsin Delawareorthe
Settlem entA greem entin D elaware,forthatm atter.Thatis w hy I have in courage

Jay,you glloranq,andCBStoconductfurtherexnminationbytheG1A ofeitheror
both of(i)theuncleaned materialprovidedtotheSmithsonianor(ii)anew batch
ofm aterialto besalvaged from thesite.
Unless and until we are presented with conclusive proof that Jay has been
untnlthfulin thestatem entsmade in thecourtfilings, itwould be agrossviolation
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ofprofessionalresponsibility,aswellasa breach oftheattorney-clientprivilege,

ifeitherofus gsilverstein orHoranjwere to make any disclosure ofwhatwe
currently know (orbelieve we know)aboutthe French and Swiss labsto any
person who isnotundera non-disclosureagreem entwith Jay orJTR.Needlessto
say,itwould be grossly inappropriate foreither ofus to disparage Jay to others
withoutregard to whatafurtherinvestigation m ightreveal.

I intend to discuss the current situation further with CBS, and see what, if
anything,they can do to facilitatethenextleveloftesting.Iffurtherinvestigation

disclosesthatJayhasbeenuntruthful(which Ido notbelieveto bethecase),we
should provide fullcooperation with CBS to uncoverthatfact.In the meantime,
we all need to be carefulto avoid doing or saying anything to anybody that
interferes with the ongoing investigation into the facts and/orwhich wrongfully
impairstheinterestsofJay orJTR.Otherwise,therem ay be seriousconsequences
ifittum soutthatJayhasbeen truthfulin hiscourtdeclarations.
M otivation Ex.M 1-15.

Silverstein testified that,on the aftem oon ofDecember 13,2011,he and Sullivan had a
telephoneconversation with Jay and Steve atHoran'srequest.Hearing Tr.7 at25.Thatevening,
Silverstein sentan em ailto Horan,copying Jay,Steve,Scott,Sullivan,Davis,and Livingston,
summ arizing the contents of that telephone conversation.M 1-16.According to Silverstein's

email,çilsullivanjand lexplainedto Jayand Stevethatthereareseriousconsequencesresulting
from making falsestatem entsto a federalcourt.''Id.Silverstein testified that,though he doesn't
recalltheprecise questionshe and Sullivan asked ofJay and Steve,the phone callkswasakin to a
cross-exam ination ofa witness in atrial.Iwastrying to naildown the factsand Iwas trying as
bestIcould,also,to do itin a way thatwouldn't lead them to the rightanswers.Iwanted to
actually trip them up ifpossible to tind out ifthere were inconsistencies in their story.''H earing

Tr.7 at27.Silverstein'sem ailsum mary ofthe conversation statesthat

JayandStevebothstated/confirmedthefollowing(nmong otherthings):
1. A l1m aterialthat is currently in JTR 'S safe depositboxes atCentennialB ank

(the tiAdmiralty Res''),including the entirety ofthe 20 Pound Group,came
from the Treasure Reef Site.A s both Jay and Steve put it, SéEvery bit of it
cam e from the site.''
2. Neither Jay nor Steve placed any of the Adm iralty Res atthe Treasure Reef
Site.In otherw ords,they did notSssalt''the site.
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3. NeitherJay norSteve has any knowledge of any one else having placed the
Admiralty Resatthe Treasure ReefSite forJay and Steve to é'find.''In other
words,they know ofnobody else havingsalted thesite.

4. NeitherJay norSteve(noranyoneelse to theirknowledge)hasenhanced the
Adm iralty Re or otherwise treated itafter it was discovered, other than by
cleaning the Adm iralty Resin them annerthatJay and Steve havepreviously
explained.Namely,Jay and Steve cleaned the Admiralty Res using water
detergent, and paintthinnerand/orm ineralspiritsin a basin ortub atSteve's,
house in Key W est.
M otivation Ex.M 1-16 at1.

Silverstein then repeated his suggestion that, as the source of the epoxy remains a
mystery,the emeraldsatthe Sm ithsonian be sentto the GlA fortesting, and thatHoran dive the
site and bring up new,uncleaned em eralds to be sentfortesting atthe GIA , which would also
testarandom sampling ofpreviously salvaged m aterial. 1d.at2.
In an emaildated December 16,2011,M cAllister recom mended to Horan thatthe test
resultsbtdisclosed publicly Ssvery soon,tom orrow ortheday after.'' M otivation Ex.M 1-18 at 5.

He also stated,$iIendorse the decision taken to resend further sam ples to the GIA lab in New
Yolk butwhateverkind of results they m ightproduce,the European results so far are, by a11
tecimical standards, rock solid.''

On December 18, 2011, Silverstein responded to

M cAllister's email,with copies to Horan and Sullivan,among others.1d.at 2-3.Silverstein
statcd that Jay had agreed to work exclusively with CBS Broadcasting regarding his emerald
story,and thatthey had informed CBS ofthe Stprobableresultsfrom the French and Swisslabs''
and direquested their assistance in getting to the bottom of this %m ystery.'''/#.at 3.He told

M cAllisterofthe plan to send emeraldsto the GIA from the Smithsonian and from a new dive,
aswellastheirintentto havetheFrench and Swisslab emeraldssenttothe GIA .1d.Silverstein's
em ailclosed w ith a requestthatthe French and Sw iss labs cease their current testing, asthose

em eraldswould besubmittedto the GIA foranalysis.f#.

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Thenextday,on Decem ber 19,2011,Silverstein sentM cAllistera finalemailto correct

a iimistake in (the December 18,2011,)email''which could havecaused the intention ofthat
emailto 'shave been m isconstrued.''1d.at1.Silverstein stated that,ratherthan ceasing testing as
thepreviousday'semailhad requested,
Jay and JTR do wantforthe Swissand French labsto complete theiranalysesand
prepare a finalwritten reportof theiranalyses.. ..Also,when the Swiss and

French labsare finished (sic)theiranalysesand haveprepared theirreports,Jay
and JTR do not want the emeralds sent back to JTR. Rather, they want the
em eraldsto be sentdirectly to the GIA,so thatthe GlA also can perform itson
analysesupon thesame materialand reach itsown conclusions.
1d.at1.
Essentially,Silverstein was seeking to avoid the appearance thatthere was any sortof

'tcover-up''ofthetestresults.ld.at2.Hisemailwentontostatethat,Stlojbviously,onedoesnot
work with CBS Newsand 60 M inuteswith any expectation thatthe resultsofthatinvestigation

wouldnotbemadepubliconcetheinvestigation isproperlyconcluded,''andftlolncewehavea1l
the facts,we intend to disclose them to the Courtthrough an appropriate filing.Untilthattim e,
and untila1lthefactsare in,itwould beinappropriateforany ofusto comm entpublicly.''1d.at
2-3.

A spreviously discussed,on January 6,2012,Horan filed JTR'S Second Status Report

(DE #54)which did notrevealto theCourtthatepoxyhadbeen foundon the emeralds,butdid
disclosethatthetestingreferredtointheStipulationforanAgreedOrder(DE #37)wasongoing,
thatfurthertestingwasbeing done,and thatthe testresultswould beproduced and tiled with the
Court.The Second StatusReportstated,in relevantpart,that:
JTR has subm itted samples of the em eralds for analysis by the Sm ithsonian
lnstitute,the G em ological lnstitute of A m erica,and laboratories in France and
Sw itzerland.JTR is currently awaiting finalreports ofthe analyses from France,
Sw itzerland and the G IA .The snm ples analyzed by the French and Sw iss labs
havebeen sentto GlA forfurtheranalysis.JTR isalso sending furthersamplesof

theemeraldstotheGIA oncetheyarerecoveredbytheundersigned (Horan)from

the D iscovery Site. Sam ples previously sent to the Sm ithsonian lnstitute have
been sentto G1A foranalysis.Once alloftheseanalyses are com pleted,and JTR
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isin possession offinalreportsfrom each ofthe GIA and French and Swisslabs,
JTR intendsto fileacopy ofthoseûnalreportswith thisCourtin connection with
a furtherStatusReport.

17E #54at!5.

According to Silverstein,isknlo one everdoubted thatatsome pointin timethere was
going to be fullpublic disclosurt ofallthe inform ation.Tht question was,when do you m ake
thatdisclosure and how much information should you have in yourhandsbefore thatdisdosure
wasmade.''Hearing Tr.6 at218.
On January 18,2012,Horan once again dovethediscovery site,with Steve and salvaged
twenty em eralds.Hearing Tr.1 at 154;Silverstein Ex.25.These emeraldswere broughtup in
seawaterand senttothe GIA foranalysis.ld.JTR did notreceivewritten reportsfrom the French
or Swiss labs untilFebruary 12,2012.Soon after receiving the French and Swiss 1ab reports
Horan began to prepare a draftofa Third StatusReportthatwould be subm itted to the Courtto
revealthe results ofthe ongoing testing,including thatepoxy had been found on some of the
em eralds. M otivation Ex.M 1-27 at 2,February 28,2012,email from Horan to Silverstein,
Sullivan,Steve,Scott,and Jay.Silverstein responded to Horan's emaillaterthatday and pointed
outthatthe GIA results had notyetbeen received,and the Second StatusReporttold the Court
thataThird Reportwould be filed oncea11testresultswerereceived,and questioned whetherthe
reportwas even required.1d.at 1.Horan feltstrongly thatthe Courtneeded to be told ofthe
epoxy results because of the previously filed reportof Dr.M athewsson that opined these
em eralds could be of ancientorigin.See M otivation Ex.M 1-3,M arch 1,2012,em ailfrom Horan

to Silverstein.Silverstein,however,was notin favor of imm ediate disclosure.M otivation Ex.
M 1-27 at1. ln addition to waiting forthe resultsofalltesting before disclosure,on M arch 26,

2012,inan emailto Horan and John Siracusa,(whohadbeenretainedasnew admiralty counsel
to JTR in M arch of2012) Silverstein suggested thatfsthe besttime to file (the Third Status

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Reportjwould be on the Friday afternoon before the broadcastofthe 60 M inutes segment.''
M otivation Ex.M 2-9.
0n April 17,2012,JTR received the testing results from a lab Sullivan had retained
called M atco.DE #82 at 16.The nextday,April 18,2012,JTR filed its Third Status Report,

which forthefirsttim erevealedto theCourtthatm odem epoxieshad been found on some ofthe
emeraldsmonthsbefore,and thatthe salvaged materialmighthave com e from amore tsm odtrn''
shipwreck.DE #82.Priortothefinalversion being filed,Silverstein edited and circulated several

drafts(seeM otivation Ex.M 2-9,March 26,2012,emailchain between Silverstein,Horan and

Siracusa),and expressed in no uncertain termsthatHoran did tinothave authority to file''the
Third StatusReportuntilhe (JTR'Sgeneraloutside cotmsel)and Jay ûisigned off.''Motivation
Ex.M 2-44,April18,2012,emailchain between Silverstein,Horan,Siracusa,Jay,and others.
h. H oran'sW ithdraw alA sJTR 'SA ttorney

The record retlectsthatasearly asDecem ber8,2011,Silverstein understood thatHoran
was ttconsidering withdrawing from representing JTR in the admiralty case,''and that Horan
believed he needed to inform theCourtoftheresultsofthe Swissand French lab testresultsand
ofhisdoubtsasto Jay'struthfulness.M otivation Ex.M 1-1at3.M oreover,itisapparentthatthis

wasnotthefirsttimeHoran had considered withdrawing.Seeid.(fçIfurtherunderstand thatyou
are,onceagain,consideringwithdrawing...'').
OnFebruary28,2012,HoranemailedSilversteinandotherstotellthem that1)theSwiss
and French labsagreethatepoxy resinwaspresentontheemeralds;2)he wasdraftinga third
status reportto the Court;and 3)Judge King mustgetthe infonnation aboutthe tests from
them - notfrom CB S,the Fishers,oranyone else.M otivation Ex.M 1-27 at 14.

Silversteinresponded,observingthat1)they hadyettoreceiveareportfrom theGIA;2)
theywerenotrequired to submitathird statusreportyet;3)thesecond statusreportrepresented
theywouldfileathird oncea11resultswerein;and4)theCourtneed notnecessarilylemm about
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thetestsfrom them (asopposed to from someone else).Id.Silvtrsttin also wrote that,in tht
absence of new investment in JTR,there were no funds to continue to pay Horan under his
currentagreem entasofM arch 1.1d.Silverstein commented thatHoran may electto withdraw or
to renegotiate the term s of hisengagement,butthatif Horan elected to withdraw they would
need to have substitute counselin place,which substitution Silverstein said he believed could be
accomplished by the end ofthatweek orsoonerifnecessary.Id 'iunlessand untila decision is
m ade as to who is going to be representing JTR in the adm iralty proceedings,''Silverstein

continued,dlthere should be no activity,whatsoever,thatis notmandated by the Court(or
applicableCourtrules.l''1d.JTR thenretainedtheW estPalm Beach,Floridaadmiralty1aw t11114
of Janssen & Siracusa as co-admiralty counsel with Horan. Notice of Appearance of John
Siracusa,DE #73,M arch 9,2012.
Horan took exception to Silverstein'scomm entthatthe Courtneed notnecessarily learn
aboutthe tests from them .On M arch 1,2012,Horan emailed Silverstein and told him that,in
Horan'sm ind,failure to advise the Courtofthe French,Swiss,and GlA enhancementreports
would be equivalent to an affirmative misrepresentation in violation of his professional
responsibilities asa lawyer.M otivation Ex.M 1-3 at 17.He cited relevantethicalrules.1d.He
explained that he would wait until a final testing reportwas issued, but that if Silverstein
attemptsto Sddelay the disclosureofthisrelevantissueto thecourt,''then Horan would Eçwithdraw

and inform the court.''Id Horan also wrote,çslslometime ago you made the mistake of
threatening me with litigation. l hope l made myself clear on that point.''Id Silverstein
responded that while he agreed that Horan could tdwithdraw at any tim e if you have lost
confidence in your clientss'' H oran's proposed course of action t'would be actionable in
D elaware.''Id at 16. Silverstein cautioned him not to reveal confidential inform ation, ending

with,Sithis isnota threatoflitigation.Itissimply a straight-forward statementofwhere things
stand.''1d.In the instantproceedings,when asked on cross-exam ination ifHoran threatened to
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withdraw ifthe epoxy resultswere notreleased to the court,Silverstein said he was tçnot sure
that'saccurate.''Hearing Tr.9 at105:5-9.

On August22,2012,Siracusaem ailed Silverstein to tellhim thatHoran waslikely going
to withdraw thatday.M otivation Ex.M 2-24;Hearing Tr.9 at146:18-20.Silverstein wroteback

that'dltlhereisabsolutely noreason forDavid Eldoran)to withdraw now,asheisnotrequiredto
do anything.''1d.at68.Silverstein continued:Sçsomeone otherthan m e needsto talk sense into
David.Alternatively,he needstobethreatened with sanctionsand/orasuitform alpractice- and

remind him thathecontractuallyconsented to personaljurisdiction in Delawarein theeventof
any disputewith theclient.''Id

Sometime aherthisemailexchange (between late Augustand early Octoberof2012),
Silverstein wentdown to Key W estand spoke with Horan.Hearing Tr.9 at147:13-17,150:4-7.
The reasons Horan was withdrawing,as faras Silverstein understood,were Stthe coins and the
zo-pound bag,'' and the epoxy findings. Id at 150:13-19.9 Silverstein characterized the
interaction as cordial,with only abriefmom entoftension when,afterhe re-stated hisposition
that Horan's withdrawal would be actionable, Horan misunderstood that Silverstein was
thzeatening him with a malpractice suit.See id at 158.Horan indeed testified thathe t'took that
asathreat,''and thatthey dtdid nothaveaphysicalaltercation,butitwasclose.''Hearing Tr.1at
125:14-16.

Horan ultimately moved to withdraw on October8,2012 (DE //138),which the Court
grantedtwodayslater(DE #141).SilversteintestiûedthatHoran'swithdrawaldidnotcreateany
doubtin hismindaboutthe genuinenessofthe find.1d.at152:21-24.

9

Silverstein stated that Horan had been expressing his desire to w ithdraw éssince February

orM arch when he stopped receiving hisretainer(i.e.when Silverstein told him he would no
longerreceiveitin responsetoHoran'sinsistenceon filingtheThird StatusReport),andhehad
beenraising thoseissuesfrom timeto tim e.''Id at150:23-25.
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i. $50,000.00 Paym entforTreasure M ap

Silverstein doesn'trememberexactly when the subjectofJay'sacquisition ofthe map
and the subsequentrelease he claimed to havt secured from its sellercam eup,butsays itwas

idlwlithin the tirst 30 to 60 days of our reprtsentation of Jay M iscovich in the Delaware
litigation.''Hearing Tr. 9 at12:14-15.Silverstein'smem oryofwhatJay told him isthataherJay

found the emeralds,Jay called hisbrotherScot'
t, who called a friend ofhisnam ed Dean Barr

.

Id

1tt 12:16-20.çiDean Barrthen setJay up with Dean Barr'saccountant NeilA sh,and M r.Ash
,

antlM r.BarrsetJay M iscovich up with ProskauerRose in New York City.''Id at12:21-23.The
ProskauerRose attorneys, Bam and Ash asked Jay to obtain a release from M ike Cunningham
.
1d.at21:24-13:7.

Silverstein rem embers Jay telling him thathe was in Latrobe, Pennsylvania,when ((a
young associate from theProskauerfirm dictated areleaseto him overthe telephone lthink he
-

said itwasapay phone- and Jay wrote itdown and then typed itup and then atsome pointm et
with''Cunningham .ld at 13:14. Jay said he paid $50,000 forthe release with money thathad

beenprovidedtohim.Silverstein did notreceiveacopy oftherelease(nordid heask Jay fora
copyofit)untilNovember18,2011.Id at94:12-21.Silverstein doesnotrememberwhetherhe
knew thenam eM ike Cunningham beforehereceived a copy oftherelease. Id at94:22-24.This
isthe release:

43

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.A '
J

.

M

AGREEMENT
1,M1 Cunningham, dohee byrelease
,r
ellnqui
s:andconveytoJay
M vloh,alINght,e e,cl
aim orinterestlmayhavein
a map ofthe ocean
and yclaim efany natuœ whafM everIn an
yjewels,stones,coins,
antl
qi
tie8,goldorsllverbars, musket.weapons
,x l
ectibles,oranyother
ltem worththatmayarlse e m theuse
ofsald map.D isreleaseiu

madeforand i
nconsidqrationofthepaymentcf51 thousanddollae .the

recei ofwhichIsheœby acknowledged bythe undeoign's

executlonhere
of. lsrelease i
s toad asafull, 5na1and com pbete rel
easo ofa1Iri
ghts
and cl lmstheundersigned mayhaveofanynatur.
, whe eratI
aw orin

equity Thepaymentoflheéum of$50,000 lspaymentlqfull4nd is

sccep daspaymentlhfullbytheundeolgnedforanyclaim orcauseof
adl
on hetmdersi
gned may have egal
nstJay Mîscovich h!s agenl ,
,
emplo eea,successoo, orau igns.Therefore,intending to be l
egally
bound herebyandin ackn- ledgem entofthe receiptoffey thousand
dollars MlkeCunningham doesh œbyexecutethisr.l

W

ease and

œ nve ancethisthe Q> dayof

>

Mlke

SIGNED AND SWORN

.

nnlngham

2010.

<'

Jay E i
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M otivation Ex.M -27.
Silverstein wastold thatthe handwritten addendum wasadded atCunningham'srequest.
Hearing Tr.9 at98:5-6.Even after seeing the release,Silverstein believed Jay's story aboutthe

ProskauerRoseattom ey dictating therelease.f#. at95:14-19.Silverstein had no suspicion atall

44

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thata ProskauerRose attom ey m ightnothavedictated the release.Id at96:19-22.10silverstein
did notask Jay which Proskauerattorneys he worked with orcallanyone atProskauerRose to
inquire afterJay'sstory. Id at96:16-97:2.11Silverstein also failed to ask Jay forbank recordsor

other docum ents to contirm that he had paid $50,000 to Curmingham Id at 118:11-15.
.

Silverstein stated that,asfarashe understood, the release tshad nothing to do with . . . anything
thatwasgoing on in Florida.''Id at97:1-23.

Thesubjectofthereleasecameup approximatelytwoweeksbeforetheadmiraltytrial, in
a chain ofemails between Silverstein, M iscovich,Janssen,and Siracusa. 12j
d Jay
anssen presse

fbrbank statem entsindicating thathewithdrew $50,000 from hisPNC bank account M otivation
.

Ex.M 2-54 at 9.As far as Janssen could tell, the withdrawals leading up to the date ofthe

Culmingham releaseonly addedupto $43,193Id at8(stwereally need theidentificationofthe
v/ithdrawals that add up to $50k. A contorted explanation is not going to tly with the

Cotl
rt....'').Siracusa chimed in,stating thattdthe money going outof your (Jay's)account
leadinguptoyouragreementwithM ikegcurmingham)isnotenoughtopayM ikethe$50K and
yourexpensesforthatmonth.Ifyou did notpay $50K to M ike,itscriticalweknow now before
we go to trial - we cannot properly representyou if we did not know this.'' 1d at 7. Jay
.

responded,explaining thathe kepta 1otofcash athom e,enough to have paid the difference,
because ofhisworry thatifhe kept a lotof money atthe barlk, various creditors or potential

creditors would be able to getit.1d.at4.Janssen fired back:is-l-hen why did you have no issue

leaving the 10k in the bank atthe end ofthem onth when you had lessthan $100 atthe start?
10
Silverstein testined that Jay told him the reason the release was dictated, rather than
drawn up and sentto him ,was because Jay Sswas living from place to places he didn'thave a
placeto live,he couldn'tafford aphone,he didn'thavea working printerorcom puter, and that
w asthe w ay ithad to be done.''1d.at96:10-13.
Silverstein said itwould have been inappropriate forhim to do so becauseJay, Scott,and
Steve were contem plating bringing legalaction againstProskauer. Id at97:3-9.

Case 4:11-cv-10074-JLK Document 568 Entered on FLSD Docket 03/16/2015 Page 46 of 58

Thistype oftalewillnotfly attrial.''1d.Jay'sresponse.(sit(islnota tale...............itsnota
tale..........you can a11go (
t'
**# yourselves.''1d.

Janssen wrote to Silverstein and Siracusa:$tHe (Jay)needsto realize thathe can'tjust
muddle tllrough this.He has lied to us in the pastaboutthis case,and has changed his story
severaltim es to fitwhatever new factswe discover.''1d.at3.Silverstein pressed Janssen and
othersrepeatedlyto tellhim whatJay had lied about,butJanssen wouldn'tsay,responding,fsitis
nothing thatIwish to putin writing,and nothing thatwould affectanyone's testim ony in the
case.''M otivation Ex.M 2-55 at 16.

Silverstein testified thathe did notunderstand,from reading these em ails,thatJanssen

and Siracusa thoughtthe map story and the paymentwere untrue;rather,he understood that
Janssen and Siracusa iûwere concerned that they didn't have enough proof to presentthat in
court.'' Hearing Tr.9 at163:2-6.W hen asked on crossexamination,Silverstein acknowledged
that Janssen and Siracusa were saying that dtthe bank records did not supportJay's account.''
llearing Tr.10 at22:18-20.
Atthe adm iralty trial,Jay testified generally to the sam e story aboutM ike Cunningham
thatSilverstein sayshe heard from Jay,though attrialJay provided m uch more detailthan the
record shows Silverstein to have been aware of previously.Jay revealed M ike Cunningham 's

nameoverobjection,and described him asilliterate,with psychologicalproblems,often on the
verge ofhom elessness or actually homeless,with no fam ily,M otivation Ex.M 41 at 134:24135:10,whose contactinformation is unknown,and who would callJay every few weeks for

twenty years from unknown sources.(Jay testised that his cellphone would always show
idwithdrawn''when Cunningham called).Cunningham's twenty-year tradition of bi-weekly
anonymous callsceased after Jay paid him the $50,000,ata barin Latrobe,Pennsylvania,and
gothim to sign therelease;Jayhadn'theard from him since.1d.at130:1-3.
12

P1aintiffJTR new counsel, hiredaherM r.Horan withdrew .
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Asto the$50,000,Jay testified thathe éçgot$50,000 from a bank overaperiod ofseveral
days,''Id at16:20,starting in early April2010, overa period offourweeks,from PNC banksin
and around Latrobe,Pennsylvania.f#. at16:21-17:3.Seealso id at17:4-15, 18:7-9.In response

to a direct question about how m uch money he withdrew , Jay responded,$ç$50,000.''Id at
18:12-13.

Jay made no mention ofthe release being dictated, even in the face of questions by the

Courtabouthow theNew York lawyersifgave(him)adocument,''ld at130:25-131:4, ordtgave

(him)thepaperwork....''Id at133:8-9.Asforthenotarywho notarizedthereleaseinthebar
whcre Jay metCunningham to give him the m oney, Jay firstsaid he didn'tknow who she was.
1d.at131:7-12.Helaterclariied thathe arranged forthenotary:ttshe, atthetim e,wasa notary
for an attorney that I didn't know , but he had done som e real estate closings for other

parties....I didn'tknow this lawyerat all.''1d.at 137:15-22. W hen asked forthe attom ey's

namehesaid$$1believe''hisnamewasAlan (orAlen)Roth.ld at138:5-6.Jaytestifiedthathe
thoughtsomeonehad told him thatthe notary m oved to Chicago. Id at137:24.ltwasonly when

Jaystated (inresponseto theCourt'squestioning)thatthereleasewasunavailablethatSiracusa

interjected,informedtheCourtthatPlaintiffdidhaveacopyofit,andproducedit.Id at139:23140:20.

Bruce Silverstein wasasequestered witnessduring theadm iralty trial.He wasnotpresent
forJay'stestim ony.However,Silverstein received a transcriptofJay'stestimony atsome point,
though he couldn't rem ember when.Silverstein's best recollection of when he received the
transcriptwas M arch,April,or M ay of2013.Hearing Tr.10 at 17:13-17.Silverstein testified
thathe did notread itcarefully:é$Idon'trecallwhatJay said during histestim ony in the trial. I

read the transcript.I skimm ed the transcriptwhen I received itand Ido not recallwhatM r.
M iscovich said in histestimony.''Hearing Tr.9 at160:25-161:5.Silverstein stated thefollowing

in an affidavit:'dW hen lread the trialtranscript(ofJay'stestimony),Idid notunderstand or
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believe thatanything thatJay had said underoath to have constituted perjury.''Motivation Ex

.

M -8 at70.

As we now know,Jay's story about M ike Cunningham was fiction. W ithin weeks of
Jay'srevealing Cunningham 's name atthe adm iralty trial, M otivation found Cunninghnm and
deposed him . Silverstein leam ed in January 2013 that M otivation had found a M ike

Cunningham ,who had worked forJay in Latrobe, Pennsylvania.Ittum ed outthatCunningham
wasin prison atthe tim etherelease waspum ortedly executed on April20, 2010.Hearing Tr.10
at l5:25-16.Faced with this information,Jay asserted that there were actually two persons
nam ed M ike Cunningham who worked for him in Latrobe,Pennsylvania, and that M otivation

had the wrong one.Silverstein testified thathebelieved this--orashe clarised am om entlater,
$$lhad no reason to disbelieve thathe had and Ididn'tform aconclusion one way orthe other.

That'sactually whatIrem ember.''1d.at16:21-17:2;seealso id.at55:7-16.Silverstein testified
thathewasn'tcuriousaboutthe contentsofCunningham 'sdepositiontestimony. 1d.at53:10-13.
M oreover, in investigations leading up to Judge M oore's sanctions trial, Siracusa's

invtstigation revealed thatthere was yetanother executed 'drelease''from M ike Cunningham .
Siracusa says he had a conversation with Tobia overthe telephone that1ed to hisw ithdrawal.

Hearing Tr.2 at49:7-11.Tobia told him thatthere was an earlieragreement(prior to the
$50,000agreement)betweenJay andCunningham.ThiswasthefirstSiracusahadheardofit.1d.
at49:12-20.He confronted Jay,who adm itted the existenceofthe agreem ent,butdenied having
a copy orknowing where one was.1d.at49:17-20.Tobia also claimed notto have a copy,but
directed Siracusa to another associate ofJay's,ScottHeimdal.Siracusa convinced Heimdalto
give him a copy.Id at 49:21-50:3. Siracusa received it in October 2013. Id at 50:24-51:1.

Siracusa testified thatidthis (was)the firsttime that 1had personally caughtJay (inljusta
boldfaced lie.''1d.at51:4-5.

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Siracusa then called Silvtrstein and told him that they had to withdraw for ethical

reasons.1d.at54:19-24.Siracusa(and hislaw finnlmovedto withdraw ascounselon October

17,2013 (DE //287).Judge Moore denied the motion upon considering thatPlaintifflacked
additionalcounselofrecord.See DE #291.Judge M oore noted that,StBefore a renewed motion
willbe granted asto Plaintiff,replacem entcounselmustfileanotice ofappearance,''butJTR did
notobtain replacem entcounsel.Id,.see also Hearing Tr.2 at55:11-14.Siracusa latertestifed
that,upon hearing Rodriguez's testim ony,he knew he had really been fooled;but when he
moved to withdraw on October 12,2013,in his mind he had reached a pointwhere he knew or
should haveknown thatsomething waswrong and thathe had an ethicalobligation atthatpoint
to withdraw.Id at83:22-84:2.Notthathe necessarily believed the find to be false,buthe did

believe thatthe Cunningham story was made up,çswhich certainly cutagainstthe actualfind
itself.''1d.at84:5-10.
Ultim ately,afterthe fraud on the courtwas revealed,Judge M oore allowed Janssen &
Siracusa to withdraw .DE #433.Janssen & Siracusa settled Stany potential settlement claim s''
with M otivation on February 28,2014.DE #406.
Ill.conclusion:ofLaw
A. L ezalStandard
a. The N ature and Scope ofInherentPow ers:

No statutory mechanism authorizes monetary sanctions against Silverstein,a non-party

whowasnotsubjectto aCourtorderandwasnotcounselofrecordintheunderlying action.The
Court'sability to sanction Silverstein can derive only from itsttinherentpowers.''

Ithaslongbeen understoodthatSslcjertain impliedpowersmustnecessarilyresult
toourCourtsofjusticefrom thenatureoftheirinstitution,''powersçswhichcannot
be dispensed w ith in a Court,because they are necessary to the exercise of all

others.''United Statesv.Hudson,7 Cranch 32,34,3 L.Ed.259 (1812);see also
Roadway Express, Inc. v. Pi
p er, 447 U .S. 752, 764, 100 S.Ct. 2455, 2463, 65

L.Ed.2d 488 (1980) (citing Hudson).For this reason,lscourts ofjustice are
universally acknowledged to be vested,by their very creation,with power to
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impose silence,respect,and decorum , in theirpresence,and subm ission to their
lawfulm andates.''Anderson v. Dunn,6 Wheat.204,227,5L.
Ed.242 (1821);see
also Ex parte Robinson,19 W all. 505,510,22 L.Ed.205 (1874).These powers
are tfgoverned notby nlle orstatute butby the controlnecessarily vested in courts
to m anage their own affairs so as to achieve the orderly and expeditious
disposition of cases.''fink v. Wabash R. Co., 370 U .S. 626,630-631, 82 S.Ct.

1386.1388-1389,8L.Ed.2d734(1962).

Chambers v.NASCO,Inc.,501 U . S.32,43 (1991).dt
lnvocation ofa court's inherentpower

requires a finding ofbad faith.''In re M roz, 65 F.3d 1567,1575 (11th Cir.1995).An attorney

actsin bad faith where he,e.g.,knowingly orrecklessly13pursuesafrivolousclaim orneedlessly
obstructs the litigation ofa non-frivolousclaim . Amlong tf Amlong,P.A.v.Denny '
s, lnc.,500

17.3d 1230,1242 (11th Cir.2006).Asa sanction forbad faith conduct,the Courtmay assess
attom eys'fees.

gAJ courtmay assess attorney's fees when a party has Siçacted in bad faith,
vexatiously,wantonly,or for oppressive reasons. ''' . . . In this regard,if a court

findststhatfraud hasbeenpracticed upon it,orthattheverytempleofjusticehas
been defiled,'' it may assess attorney's fees against the responsible party,
UniversalOil,suprat328 U.S.,at580,66 S.Ct.,at 1179, as itm ay when a party
ttshows bad faith by delaying or disrupting the litigation or by hampering
enforcementofa courtorder,''Hutto,437 U .S.,at689,n. 14,98 S.Ct.,at2573,
n.14.The imposition of sanctions in this instance transcends a court's equitable
power concem ing relations between the parties and reaches a court's inherent

powerto police itself,thus serving the dualpurpose of Stvindicatgingjjudicial
authority withoutresortto the m ore drastic sanctions available for contem ptof

courtand maklingl the prevailing party whole for expenses caused by his
opponent'sobstinacy.''Ibid.

C/xr
lzl:eru
çv.NASCO,Inc.,501U.S.32,45-46(1991)(footnoteomitted).Suchan assessmentof
attorneys'feesisan exception to the Am erican Rule,which generally prohibitsfee-shifting.The

exception'spurposeispunitive.1#.at53 (intemalquotation marksomitted)(quoting Hall,412
U.S.at4-5).

13
The parties have also highlighted the doctrine of willful blindness, under which
isknowledge can be imputed to a party who knows ofa high probability of illegalconductand

pumoselycontrivestoavoidlearning ofit.''Williamsv.Obsfeld,314 F.3d 1270,1278(11th Cir.
2002).
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Justbecause a Courtcan assessattorneys'fees for bad-faith conductunderits inherent
power does notmean that itshould.(çBecause oftheirvery potency, inherentpowers must be
exercised with restraintand discretion.... A prim ary aspectofthatdiscretion is the ability to

fashion anappropriatesanction forconductwhichabusesthejudicialprocess.''1d.at44-45 The
.

extent of a court's inherent powers dfmust be delimited with care, for there is a danger of
overreaching when one branch ofthe Government,withoutbenefitofcooperation orcorrection

fiom the others,undertakesto detine itsown authority.''Degen v.United States,517 U .S.820,

823 (1996).S%principles ofdeference counselrestraintin resorting to inherentpower...and
requireitsuseto bea reasonableresponseto theproblemsand needsthatprovoke it.''Id at82324.Ofcourse,the courtSfm ustcomply with the mandatesof due process, both in determ ining
thatthe requisite bad faith existsand in assessing fees.''1d. at50.
b. T he C ourt's InherentPow er to Sanction N on-parties:

M r.Silverstein,who wasneithercounselofrecord noraparty,arguesthattheCourtlacks

the inherentpowerto sanction him .The Courtdisagrees.Although Chambers does notdirectly
address whether,underitsholding,courtshavethe inherentpowerto assessmonetary sanctions
againstnon-parties,existing Suprem e Courtprecedentsupportsthe conclusion thatcourts have
theinherentpowerto do so.

In affirm ing sanctions for a party's bad-faith litigation conduct,the Chambers Court

explainedthatSçltlheimpositionofsanctionsinthisinstancetranscendsacourt'sequitablepower
concem ing relations betw een the parties and reaches a court's inherent pow er to police itself,

thus...fvindicatgingljudicialauthority ....'''1d.at46 (alttrationsin original).Thisinhtrent
poweroftheCourttopoliceitselfandtovindicatejudicialauthorityextendstonon-partiesunder
UniversalOilProds.Co.v.RootRehning Co.,328 U.S.575,580 (1946).Therethe Supreme
Courtestablishedthati'ga)courthasthepowerto conductan independentinvestigation in order

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to determine whether it has been the victim of a fraud.''Chambers, 501 U .S. at44 (citing

UniversalOil,328U.S.at580).TheUniversalOilCourtexplainedthescopeofthispower:
The power to unearth such a fraud is the power to unearth it effectively.
Accordingly,a federalcourtmay bring before itby appropriate m eans allthose
who may be affected by the outcome of its investigation. . . . No doubt,if the
courtfindsaheraproperhearing thatfraud hasbeen practiced upon it, orthatthe

very temple ofjustice hasbeen desled,the entirecostoftheproceedingscould
justlybeassessedagainsttheguiltyparties.
UniversalOil,328 U.S.at 580.Thus,the Supreme Courtexpressly authorizes a courtto bring

non-parties($$al1those who may be affected by theoutcome ofitsinvestigation'')before itby
appropriatemeans.The Court'sconclusion thattdtheentirecostoftheproceedingscouldjustly
be assessed againstthe guilty parties,''when read in context, clearlyembracesnon-parties(that

is,'
the Courtdid notuse tiguilty parties''asa term of artl.Chambers does notdepartfrom
UniversalOil.Rather,Cham bers reaffirmed itsvalidity,ashas the Eleventh Circuit. See In re

F,.f DupontDeNemoursd;Co.-BenlateLitig.,99F.3d 363,367 (11thCir.1996).ThisCourtis
bound by thosedecisions.

Further supporting the Court's inherent power to sanction non-parties is the fact that
Chambersaffirmed sanctionsagainstChambers foractshe com mitted beforehebecam e aparty

orwassubjectto anycourtorder,andmentionedwithoutcommentthatthedistrictcourthadalso
sandioned non-pm ies. Chambers, 501 U.S. at 40 n.5. And the Eleventh Circuit recently
affirmed adistrictcourt'simposition ofsanctionson a non-party.Sciarretta v.fincoln Nat. Lfe

/?;,
&.Co.,- F.3d- ,No.13-12559,2015W L 795593 (11th Cir.2015).AndwhiletheEleventh
Circuit, in In re Novak,held that a district court lacked the inherent power to compel an
employee ofa non-party insurance company to attend a settlem entconference where to do so
was 'fneitherauthorized by Congress nornecessary forthe courtto perform its duties.''932 F.2d

1397 (11th Cir.1991).Thatdecision impliesthata courtmay exercise itsinherentpowerover
non-parties in the absence of congressional authorization where to do so is ç'necessary forthe

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court to perform its duties,'' an implication consistent with Chambers's admonition'4 that
available statutory mechanism s should be used before a court resorts to its inherent power.
Chambersn501U .S.at50.

A court's inherentpower çsis both broader and narrowerthan other m eansof imposing

sanctions....gW lhereaseachoftheothermechanismsreachonly certain individualsorconduct,
the inherentpower extends to a fullrange of litigation abuses. Atthe very least,the inherent
powermustcontinue to txistto fillin the interstices.''ld. at46.ln these proceedings,M otivation
alleges that Silverstein, through direct and indirect influence in the underlying litigation,
perpetrated a fraud on the Court.lfthese allegationsare proven, the Court's ability to vindicate

itsauthority,toholdresponsiblethosewho defiledthetempleofjustice,reacheshim.Thatheis
a.non-party means only thatthe powerto sanction him falls within those Stinterstices''between
m echanisms otherwise available to the Court. See,e.g.,Odyssey M arine Exploration, lnc. v.

Unidentsed Shi
pwrecked Vessel,979 F.Supp.2d 1270,1272 (M .D.Fla.2013)(sanctioning
treasuresalvagecompanyPlaintiffsgeneralcounselpursuantto28U.S.C.j1927wheregeneral
counsel had nlade an appearance in the case on Plaintiffs behalf and was found to have

vexatiouslymultipliedproceedingsinunderlyinglitigation).
c. H eiahtened Burden ofProof:

M otivation'sburden to prove itsallegationsisheightened in two respects.First,because
Silverstein isa non-party,he isprotected by two proceduralhurdles.In Helmac Products Corp.

v.R0th(Plastics)Corp.,theEastern DistrictofM ichigan devised atwo-parttest:$$Tobesubject

totheCourt'sinherentpowertosanction,anon-party notsubjectto courtordermust(1)havea
substantialinterest in the outcome of the litigation and (2) substantially participate in the
proceedingsinwhichheinterfered.''150F.R.D.563,568 (E.D.M ich.1993).Somecourtsinthe
Southern District of Florida have applied this test.See, e.g., Feldman v. Davidson,No. 0514

In re Novak wasdecided oneday afterChambers and doesnotcite it.
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61760-ClV,2009 W L 995473,at*2 (S.D.Fla.Apr.13,2009).Indeed,JudgeM ooreappliedthe
Helmactestin assessing sanctionsagainstJay M iscovich (DE #45 at20 n.19)and Motivation
acquiesced in ithere (DE #407).ThisCourtwillapply theHelmac standard in evaluating the
instantm otion.

Second,M otivation m ust prove its allegations by clear and convincing evidence. See

Barashv.Kates,585F.Supp.2d 1347,1365(S.D.Fla.2006)(holdingthemovantto aclearand
convincing evidence standard of proof of conduct that warrants attorneys' fees as sanctions

pursuantto thecourt'sinherentpower);c/ InreBellsouth Corp.,334 F.3d 941,963 n.19(11th
Cir.2003)(notingthatcourtsrequireafsheightened showing''in orderforacourttoexerciseits
inhertntauthoritytosusptndordisbaran attorneyfrom practicingbeforeit).Sç-f'
he tintermediate
standard ofclear and convincing evidence'lies ibetween a preponderance ofthe evidence and

proofbeyond areasonabledoubt.'''Kenyeresv.Ashcroh,538U.S.1301,1305(2003)(quoting
Adtlingtonv.Texas,441U.S.418,425(1979)).
The Courttherefore decrees that M otivation must prove by a standard of clear and
convincing evidencetheallegationsofitsM otionforSanctions.
B. D iscussion and C onclusions ofLaw
a. Silverstein.a non-pao .can be reached bv this CourtunderH elm ac

A s a preliminary m atter,the Court finds that M otivation has established that though
technically a non-party,and an attorney who did notformally appearin this case,Silverstein is
w ithin reach ofthisCourt'sinherentpowerto sanction bad-faith litigation conduct,ifM otivation
provessuch conduct.

Theevidence showsthatM r.Silverstein invested atleast$80,000 ofhisown m oney and
ow ned a 1.5% equity interest in JTR him self, and that YCST, the law fil'
m of w hich M r.
Silverstein is a partner,had a 5% equity interestin JTR.The Courttinds that M r.Silverstein's

investmentand his equity interests in JTR,both personally and through his law firm ,gave M r.
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Silverstein asubstantialinterestin the outcom eofthe litigation sufficientto m eetthe firstprong
ofHelmac.

Further, the evidence overwhelm ingly shows that Silverstein substantially controlled
JT1k'sactionsin these proceedings. For starters,the retaineragreementbetween Jay, JTR,and
Horan designates Silverstein as JTR'S fsgeneraloutside counsel,''and requires Horan to seek

ç'specific authorization''from both Jay and Ssgeneraloutside counsel''(i.e., Silverstein)before
undertaking any of a litany of tasks necessmy to the maintenance of the instant action.

M otivation Ex.M -25.M oreover,and asdetailed throughouttheCourt'sFindingsofFact, supra,
countless emails from Silverstein to JTR'S admiralty counsel demonstrate that he was
substantially in controlof this litigation. From forbidding the filing of various reports in this
case,to drahing and revising pleadingsand motionsin thiscase, to participating in trialstrategy
discussions,Silverstein'scontrolisplain. The CourtthereforefindsthatSilverstein'sconductin

thiscasewasm orethan sufticientto m eetthesecondprong ofHelmac.
Accordingly,Bruce Silverstein can bereached by thisCourt'sinherentpowerto sanction
bad-faith litigation conduct,should M otivation prove such conduct by clear and convincing
evitlence.
b. M otivation hasnotm etits burden ofprovine sanctionable conduct

Having found thatSilverstein can be reached by the Court's inherentpower,the Court

will now address whether M otivation has proved by clear and convincing evidence that
Silverstein should be sanctioned.After nearly twelve days of taking evidence, including the
testimony ofeightwitnessesand thousandsofpagesofdocumentary evidence,15M otjvatjon jaas
been unable to presentany evidence thatSilverstein had actualknowledge ofJay's scheme to

IS
M ostofthisdocum entaly evidence took the form ofconfidentiale-m ailcommunications
believed to be covered by the attom ey-clientprivilege atthe tim e they were m ade, the future
piercing ofwhich privilege by application ofthe crim e-fraud exception could notreasonably
have been foreseen atthe tim e.
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commita fraud upon theCourtpriorto thatschem ebeing revealed on January 13, 2014,the first
day of the sanctions hearing in front of Judge M oore. Therefore, the Court m ust tum to
M otivation'sitRed Flags''in orderto determ ine whether Silverstein acted in bad faith i.e.,that

he acted recklessly or with willfulblindness to Jay's fraud yetpersisted in participating in the
prosecution ofthiscase.Assetforth below ,the CourtfindsthatM otivation hasnotestablished

by clearand convincing evidencethatBruceSilverstein acted recklessly orwith willfulblindness
to Jay'sfraud.
i. R ed Flazsanalvsis:

The Courtfinds,and M otivation concedes,DE #560 at 2, that when Silverstein first
began representing Jay in January of2011,he did notknow thatJay'sstory wasafraud. ln fact,
Silverstein had been presented with circum stantialevidencethatseem ed to supportJay'sstory of

discovery ofavaluable tsnd thatthe gtnuinenessofthe tind.ln arguingthatSilverstein'sconduct
amounted to bad faith,therefore,M otivation identifies numerous isred tlags''which occurred
during the course ofSilverstein's representation ofJTR and Jay both before and afterthis case
wasfiled.
W hetherSilverstein'scontinuingto actin the case aftera given red flag orseriesofthem

wasrecklessordemonstrated willfulblindnessto Jay'sfraud dependsupon viewing the red flag
notwith thebenefitofhindsightbutin lightofthe universe offactsknown atthe time each red
flag occurred.Though they take um brage with much of Silverstein's conduct in this case,

M otivation chiefly relieson six events in their claim that Silverstein acted in bad faith:(1)
Silverstein's encounter with Peter Tobia at the settlement ofthe Delaware Litigation and the

offerSilverstein conveyedtohim afterwards;(2)Jayand Steve'sattemptto thwartany claim by
Spainbylyingaboutrecoveringnon-spanishcoinsfrom thetreasuresite;(3)the20lb.groupof
emeraldsJay and Steve held initially held back from the Court;(4)the entire epoxy episode,
from hisfirstlearningoftheresultsthzoughtheireventualdisclosuretotheCourt;(5)Jay'sstory
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ofhow he cam e to purchase the m ap and subsequent$50,000 paymentfora release from M ike

Cunningham,andthatstory'sunravellingpriortotheAdmiralty Trial;and (6)thewithdrawalof
JTR'S attorneys and the events leading up to their decisions to withdraw . The Court has
exhaustively analyzed these events,and indeed the entire record ofthese proceedings, and finds

thatthe evidence presented by M otivation does notm tetthe standard ofclear and convincing
evidence required to sanction Bruce Silverstein,eitherwhen viewed individually orwhen taken
curnulatively.

As set forth above,the Courttsnds that M otivation has not established by clear and
convincing evidence eitherthatSilverstein knew ofthe scheme to defraud the court,orthathe

acted in bad faith by continuing his involvem ent with the case recklessly or with willful
blindnesstothefraud.Accordingly,M otivation having failed to m eettheirburden,theCourtwill
notsanction Silverstein.
IV .C O NC LU SIO N

W hethercivilly in thisaction,anothercivilaction,orcrim inally in a future action,there
isno question thatanyonewho knowingly orrecklessly participated in the attempted fraud upon
theUnited StatesDistrictCourtsshouldbe called to account.However,atpresent,theCourthas
before itonly the lim ited question raised in the Am ended M otion forSanctionsand the lim ited
evidence presented by Claim antin these proceedings.Thus,through thisOrder,the Courtonly
m akes a detennination ofwhetherClaimantproved Respondent'sparticipation in the fraud by
clear and convincing evidence.The Courtconcludes thatClaim antdid notmeetthis burden.
However, Claimant's failure neither establishes Respondent's innocence nor forecloses the
possibility of future civil or crim inal liability. M oreover, given the lim ited nature of this
proceeding, this Order does not foreclose the possibility that other actors, against w hom no
sanctions were sought,can be held accountable for the attem pted fraud upon the Court.Indeed,

theseproceedingshave leftunanswered many questions.
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Therefore, it is ORDERED, ADJUDGED, AND DECREED that M otivation's

AmendedMotionforSanctions(DE #407)be,andthesameisherebyDENIED.
IT IS FU R TH ER O RD ER ED A N D A D JUD G ED thatthis m atter is R EFER RED to

the United States Attorney for the Southem District of Florida, for such action as in his
discretion hedeemsappropriate.
DONE and O RDERED in Cham bersattheJamesLawrence King FederalJustice
ilding and United StatesCourthouse,M iami-Dade,Florida,this16thday ofM arch, 2015.
I3u.

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M ES LAW RE CE IN G
ITED STA TES D ISTRICT JU D GE
SOUTHERN DISTRICT OF FLORIDA

Copies furnished to:
ChiefJudge K .M ichaelM oore

W ifredo A.Ferrer,United StatesAttom ey
A1lCounselofRecord

58

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.