Roanoke Times
                 Copyright (c) 1995, Landmark Communications, Inc.

DATE: SUNDAY, September 26, 1993                   TAG: 9309260049
SECTION: VIRGINIA                    PAGE: B-7   EDITION: METRO 
SOURCE: Associated Press
DATELINE: NORFOLK                                LENGTH: Medium

SUNKEN TREASURE CASE RETURNS TO DISTRICT COURT

U.S. District Judge Richard B. Kellam is to hear closing arguments in the case pitting a syndicate of high-technology salvagers against a group of insurance companies. The prize: a cargo from the California gold rush.

In 1986, the Columbus-America Discovery Group, an Ohio-based team of maritime scientists and engineers, mounted an expedition to find the SS Central America. The Central America was a paddlewheel steamer that sank during a hurricane off the South Carolina coast Sept. 12, 1857, while carrying gold to New York to head off a bank crisis.

Lost in the disaster were 425 of the Central America's 578 passengers and its shipment of more than three tons of gold, valued then at $1.2 million.

The Columbus-America expedition, after several misses, found the Central America in 1988, about 160 miles off Charleston, S.C.

Using a sophisticated remote-controlled unmanned submersible that descended almost 8,000 feet to the ocean floor, the scientists brought pieces from the ship to the surface. Then they filed a claim of ownership with Kellam's court.

However, because the Central America's cargo had been insured, a group of the underwriters and their heirs intervened with rival claims.

In 1990, Kellam awarded the entire treasure to the salvagers under an ancient "finders, keepers" rule in maritime law. The judge concluded that the Central America was an abandoned wreck, because the insurers had not attempted to find it and recover the cargo.

But last year, a federal appeals court sent the case back to Kellam with instructions to consider the insurers' claims that they had paid losses from the sinking.

The U.S. Supreme Court declined to intervene in the dispute this year. Kellam heard the case again over a two-week period in June and July.

Several key issues were before the judge at the retrial, including whether the nine insurers had valid proof of paying claims. Kellam also questioned whether the entire amount of gold on the wreck was insured. Some passengers were gold prospectors carrying private stashes on the voyage.

George Daly, an attorney for the insurance companies, argued that the appeals court settled the ownership issue, giving their clients the cargo, and that the only dispute was what share to give to the salvagers.

Robert Trafford, a Columbus-America attorney, disagreed. But even if Kellam says the insurers own the gold, he said, the syndicate wants a salvage award of 95 percent or more, well above the 25 percent to 35 percent suggested by their opponents.

"They're basing their award on routine salvage," Trafford said. "Those cases often involve a tugboat spending 20 minutes to tow a ship that's in distress into port.

"We genuinely believe that this is the single most extraordinary salvage operation that's ever been undertaken," he said. "We're talking about an effort that involved almost $30 million and at tremendous risk."