Indian River Recovery Company – Part II of the Conman

The Delaware coast is the graveyard for hundreds of shipwrecks. For centuries, ships coming in and out of Delaware Bay have had to run the gauntlet of treacherous sand bars, ocean currents, unpredictable weather and even pirates. In 1985, the Delaware coast was the location of a sunken treasure drama that ended in fortunes lost and Delaware’s history corrupted.

On May 24, 1985, a company called Indian River Recovery Co. filed claims to five shipwrecks in the U.S. District Court for the District of Delaware: The Faithful Stewart (sic) 1785, the Three Brothers 1775, the Cornelia 1757, the Santa Rosea Lea 1788, and the Adeline 1824. Five days later, on May 29, 1985, Indian River Recover Co. laid claim to an unidentified shipwreck nicknamed the “China.” This wreck had been visited by divers regularly since 1970 when it was first discovered. It is a favorite site for sport divers because the wreck was loaded with ironstone china which provided souvenirs for those who wished to take them. It is believed to have sunk in the late 19^th century. These claims resulted in two decisions in admiralty court heard in the U.S. District Court for the District of Delaware.

Harvey Harrington, the Vice President of Indian River Recovery Co. (IRRC), was also the president of Sub Sal Inc. which had incorporated the year before for the express purpose of discovering HMS De Braak, a British warship that sank off of Cape Henlopen at the mouth of Delaware Bay in 1798. Rumors persisted since she sank that she was carrying Spanish treasure that would have been worth millions when it was recovered. It would later be discovered that whatever treasure had been on board had been taken off before she sank.

Off the books

The Indian River Recovery Co. case was decided on 1986 which resulted in an unpublished opinion. Most cases decided in district courts result in unpublished opinions unless the case has precedential value or documents new law. Dispute-settling opinions are generally unpublished as they are considered to apply uncontroversial rules of law to ordinary cases and have no value to the public. But value to the public is a subjective interpretation and one that is based at a specific point in time without consideration to the future historical record and potentially the protection of the public interest. The following review of the underlying facts that led to the IRRC judgment and opinion are disclosed here for the sole purpose of protecting the public’s interest in the archaeological and historical record of these ancient shipwrecks.

For each shipwreck claim, Harvey Harrington, as officer of the corporation, swore that the vessel had been discovered and that IRRC had “proceeded to salvage a portion thereof.”  The interesting thing about these wrecks is that they either didn’t exist, didn’t sink, sunk far away, or had already been discovered years before. Then his company began issuing shares of stock at $2500 each and raised nearly $100,000. It was an easy sale because Harrington told investors that the wrecks were worth millions. Unfortunately, it was a worthless proposition.

In January 1981, a company called Subaqueous Exploration and Archaeology, Ltd. filed four fraudulent claims to shipwrecks that did not exist in the U.S. District Court for the District of Maryland: the Royal George 1789, the Santa Clara 1798, the San Lorenzo de Escorial 1820, and the Santa Rosalea 1785. Not only were the identities a fabrication but nothing at all was brought up. The claims were based solely on the “research” of an extraordinarily bold conman named Donald Stewart, who said these vessels had wrecked along the Ocean City beaches. The con game was nothing new to Stewart. He had duped the City of Baltimore, the State of Maryland, and the federal government over the true identity of the USS Constellation moored in Baltimore Harbor. The ship that many believed was built in Baltimore in 1797 was actually built in Norfolk, Virginia in 1854.

I joined SEA, Ltd. in 1980 and was not only an investor in this corporation but the chief diver. Ultimately, in 1983, I exposed his fraud that was being perpetrated in the U. S. District Court for the District of Maryland. News of this was published in the Baltimore Sun.

Early in the summer of 1985, I was contacted by Peter Hess, a young admiralty attorney from Delaware. Peter had been following my actions against Donald Stewart in both federal and state court. It appeared that one of the IRRC wrecks, the “Santa Rosea Lea” was one and the same as the “Santa Rosalea” in the federal admiralty claim initiated by Stewart in Maryland. Hess did not know until I told him that Stewart had already expressed an interest to me in each of the Delaware shipwrecks, including the China wreck and HMS De Braak. I told Peter that I was convinced that Stewart was behind all of this and it reeked of fraud. I also told Peter it appeared that Stewart was now trying to establish a third spelling for “Santa Rosalia” (correct spelling) to confuse the court in Maryland hearing the SEA investors’ fraud suit.

Peter asked that I intervene in that case that was being heard in Wilmington before Judge Caleb Wright. I agreed and filed my motion to intervene on June 25, 1985. Here, I told the court that there was no such ship of that spelling and that the real Santa Rosalia wrecked at Cape Charles, Virginia, in 1788, not at Cape Henlopen, Delaware. The State of Delaware had also intervened on June 20 claiming these shipwrecks for the state. Peter represented a group of divers, dive shop and dive boat operators called Ocean Watch who had intervened in the China wreck case. IRRC was trying to take this wreck away from sport divers who had visited this wreck for years. It was only four years before that Donald Stewart convinced Subaqueous Exploration and Archaeology to do the same thing. Fortunately, he could not convince investors to fork up the cash.

I informed the court that it was my opinion that IRRC had failed to establish subject matter jurisdiction and the court lacked in rem jurisdiction since nothing had been recovered from the “Santa Rosea Lea.” I also said that IRRC’s compliant failed to meet the reasonable inquiry requirement promulgated in Rule 11 of the Federal Rules of Civil Procedure. The Supplemental Rules of Admiralty go further and require the in rem libel to be verified under oath.

Rule 11(b): Representations to the Court

By presenting to the court a pleading, written motion, or other paper—whether by signing, filing, submitting, or later advocating it—an attorney or unrepresented party certifies that to the best of the person’s knowledge, information, and belief, formed after an inquiry reasonable under the circumstances and at

(3) the factual contentions have evidentiary support or, if specifically so identified, will likely have evidentiary support after a reasonable opportunity for further investigation or discovery.

It was obvious that Harrington had done very little research. In fact, four of the five shipwrecks, the Faithful Steward, the Adeline, the Cornelia, and the “Santa Rosea Lea” came from one published source, Robert Marx’s Shipwrecks of the Western Hemisphere. The Three Brothers he no doubt got from Walter and Richard Krotee’s Shipwrecks off the New Jersey Coast. The Krotee’s listed this wreck as occurring around 1775. The lack of specificity proves that the Krotee’s had no contemporary source document to back it up. The coordinates given were identical to those given in their book for the Faithful Steward suggesting the two wrecks were one and the same. The map contained in the book totally misplaced the Faithful Steward off Cape Henlopen.

The Faithfull Steward had wrecked one hundred yards from shore and north of Indian River Inlet. The Adeline wrecked in December of 1823 on the beach at the pitch of Cape Henlopen and was salvaged. Harrington swore it was wrecked in 1824 (as said Marx) and that she was found in eighty feet of water. The Cornelia did not sink at all as reported by Marx, yet Harrington and his diver said that it was discovered in eighty feet of water. Marx described a ship called the “Santa Rosalea” that wrecked in 1788 at Cape Henlopen and was salvaged. The real ship, the Santa Rosalia, was lost at Cape Charles, Virginia. Harrington swore that his diver located this wreck in seventy feet of water off of Cape Henlopen. For some reason Harrington insisted on using the name “Santa Rosea Lea” even after being informed the truth of the matter.

Once these claims were filed, Harrington had no trouble selling shares to investors at $2,500 each because he told them these shipwrecks were worth millions. It was reported that $100,000 dollars was raised.

The receipt of the investors’money was timely, however, as Sub Sal was having serious financial problems in its quest for the illusory treasure of the De Braak.

After my motion to intervene was filed, IRRC objected to it. Harrington’s lawyers argued that I had no standing to intervene. They seemed to make it clear that the Santa Rosalia wrecked at Cape Charles was different than the “Santa Rosea Lea” that IRRC had claimed. This was a fraudulent argument since there was no such shipwreck called the “Santa Rosea Lea.”

On August 27, 1985, Judge Wright denied my motion to intervene for lack of standing. But he then ordered that my memorandum in support of my motion be treated as an amicus curiae brief on the jurisdictional issues involved in the case. He also invited me to submit an additional brief which I did in August 1985.

Judge Wright held a meeting of the parties on December 19, 1985, and on the next day he raised, sua sponte, the issue of lack of subject matter jurisdiction. He issued a show cause order against IRRC giving them until February 1, 1986, to prove the court had subject matter jurisdiction.

When IRRC filed their initial complaints they made no reservation as to the identity of each vessel. After submitting my Supplemental Brief which challenged the identities of all five wrecks other than the China, IRRC argued that the court had jurisdiction regardless of the identities of the wrecks. They then moved the court to change the captions in the cases to name the defendant vessel as “unidentified” but say that each was believed to be the vessel in question.

Ocean Watch moved to intervene in China on March 3, 1986.

It is time now to take another look at Rule 11.

When IRRC filed the law suit it was obvious that very little research into the shipwrecks had been done by Harvey Harrington. Up to the time that I had entered the litigation, he could have used ignorance and poor preparation had he been challenged by the court. Had he been challenged and unable to support his claim to discovery of these shipwrecks he could have withdrawn his suit. But Harrington and IRRC had been selling stock to unwitting investors who were encouraged not only by Harrington’s promises of millions in treasure but just as importantly the federal court had arrested the vessels on IRRC’s behalf which lent a great deal of legitimacy to the operations of IRRC.

When I, as an amicus curiae, challenged Harrington’s so-called research, Rule 11 dictated a review of the facts I had put before the court by Harrington and his attorney because his factual contentions no longer had evidentiary support. But to admit to any deficiency in the facts that IRRC had put before the court and the investors, it would have triggered a law suit. IRRC chose to double down on their misrepresentations.

IRC argued that the ship’s identities were irrelevant to the court’s admiralty jurisdiction. This is true but IRRC had not even salvaged anything so there was no success and no admiralty jurisdiction. IRRC attempted to blunt my challenges by filing motions to change the captions of the five cases naming the defendant as an unidentified shipwreck but IRRC insisted on adding “believed to be” for each shipwreck. I had challenged the spelling on two of the shipwrecks: the “Faithful Stewart” [Donald Stewart ?] and “Santa Rosea Lea.” IRRC tried to trivialize the matter of misspelling. IRRC requested that the caption be changed from “Stewart” to “Steward” but insisted on leaving “Santa Rosea Lea” as it was even though I presented original archival documents from the Port of Baltimore that said “Santa Rosalia.” But by then they were claiming that their Santa Rosea Lea was a different vessel.  In spite of the fact that without a doubt the Cornelia did not sink and their claim was unsupportable, the Adeline had wrecked on the beach and was salvaged, and the Three Brothers did not exist, IRRC proposed no changes to these shipwreck claims. They were still advocating their false claims of discovery of these vessels. In their letter of March 3, 1986, IRRC argued that they had been unable to prove success because the State of Delaware had barred them from retrieving anything from the wrecks. Had these wrecks actually been discovered prior to filing claims in admiralty court, IRRC could have easily retrieved artifacts to present to the court for symbolic arrest.

Judge Wright wrote to me on May 5, 1986, and asked for my opinion on the matter. After reviewing the history of each of the shipwrecks, I suggested that IRRC had made no inquiry, reasonable or otherwise, before or after filing the claims. I also called his attention to 12 RCL FRAUD AND DECEIT S94 (1916):

“If one asserts that a thing is true within his personal knowledge, or makes a statement as of his own knowledge, or makes such an absolute, unqualified positive statement as implies knowledge on his part when in fact he has no knowledge, whether his assertion is true or false, and his statement proves to be false, he is as culpable as if he has willfully asserted that to be true which he absolutely knew to be false and he is equally guilty of fraud.”

It was my opinion that there was now a complete lack of good faith shown by IRRC. IRRC and Harrington were between a rock and a hard place: he was already spending investors’ money and if things went badly in the admiralty proceedings it could trigger an investor lawsuit.

It is unknown if Harrington had fraudulent intentions or not. But what is certain, at least to me, is that Donald Stewart, who was a con man, was working behind the scenes with Harrington. He was previously expressed interest with all seven shipwrecks which Harrington was now involved in and that included the HMS De Braak.

Judge Wright scheduled a hearing on the China wreck in late May of 1986. Peter Hess called me and invited me to attend with him. After lunch, I was called to Judge Wright’s chambers where he asked what my opinions were about these cases. I told him of my past experience with SEA, Ltd. and the fraud I encountered there. I also elaborated on the close parallels between the two court cases. Anybody who needs a paycheck can file a claim to a shipwreck, sell stock, put themselves on the payroll, and when the money runs out or the wreck is determined to be not located, the investor is left with little recourse. But that’s only when the shipwreck is real and the historical or archaeological record places it the jurisdiction of the court. If the shipwreck is made up then a disgruntled investor is forced to prove a negative. Winning in court would be expensive and difficult.

Judge Wright asked me if I would be willing to testify which I said I would be glad to do. He said he did not like what was going on but was uncertain as to what he would do. Ultimately he took the prudent approach and dismissed the cases on June 11, 1986. Included in his unpublished opinion was a valuable precedent that could be used to protect the public interest and discourage reckless or fraudulent salvage suits:

“Moreover, allegations in the complaints about the existence and location of ancient wrecks based upon research and investigation alone do not satisfy the Court that such vessels actually rest at that location or exist at all…Here IRRC filed the five salvage actions prematurely. The Court did not satisfy itself at the time that conditions for an action in rem existed, and improvidently ordered that warrants for the arrest of the vessels issue. See Fed. R. Civ. P. Supp. Rule C(3). It is now apparent that IRRC has conducted no on-site salvage activities to date at the locations where its divers served the warrants of arrest.  Affidavits that timbers and other encrusted objects exist at those sites do not remedy the absence of success in whole or in part, a necessary element of any salvage action, nor do they satisfy the court that a salvageable wreck is located there…IRRC can initiate new actions by filing new complaints once it physically has performed salvage activities on actual wrecks located at the sites and can satisfy the Court that valid actions in rem exist.

IRRC closed up shop. They did not try to reestablish these salvage cases. No one since then has either.

Harvey Harrington’s Sub-Sal corporation was taken over by a disgruntled but savvy investor. Millions were spent raising and salvaging the De Braak. Millions were lost. Harrington left town and moved to California. He became principal in Deep Sea Research, Inc. which discovered the sidewheel steamer, SS Brother Jonathan off of the coast of California in 1993. Peter Hess was on the team of lawyers who were successful in the battle against California who sued to gain title to the wreck. The case was decided by the Supreme Court in 1997.

Peter Hess has represented many salvors and divers over the years. A huge victory to his credit was his case against the federal government for rights of technical divers to explore the wreck of the Monitor in 235 feet of water off of Cape Hatteras, North Carolina. Peter dove on this wreck and many others which included the Nuestra Señora de Atocha and the Andrea Doria. Peter’s victory in the Brother Jonathan case was overshadowed in 2000 by the loss for his client in Sea Hunt Inc. to the Kingdom of Spain. Spain won the rights to two Spanish warships even though the wrecks had not been found by Sea Hunt. During the IRRC litigation, Peter and I talked often on the phone and met socially. He was my legal sounding board that I consulted regularly. During this time, I shared with him my report of 1983 on the discovery of the Spanish warship, La Galga which ran ashore on Assateague Island, Virginia, in 1750. We stayed in touch and shared many shipwreck and salvage stories. Peter passed away on January 12, 2012, but before he did he confided in me that Sea Hunt had not found La Galga.

Next up The Sea Hunt Case; Stewart’s final round

John L. Amrhein, Jr.