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A tangled tale of modern-day treasure hunting

Freed from a legal abyss, three tons of gold are headed to market. The first batch, 525 coins, goes up for sale today.

The lost gold of the SS Central America, one of the largest sunken treasures in American history, is emerging from legal limbo and up for sale at last.

After shelling out $50-million, a group of investors led by Dwight Manley, a prominent California sports agent, plans to begin selling three tons of the glittering golden cache _ thousands of coins and ingots recovered from the abyss.

The first batch, 525 gold coins, goes up for sale today. The bounty recovered from the doomed steamship will be sold piecemeal by several parties and may eventually haul in more than $100-million, based on appraiser estimates. The avalanche of gold is likely to swamp the rare coin and collectible markets over the next two years, perhaps depressing the market for coins.

Some 12 years after treasure hunters began recovery off the coast of South Carolina, the trove has been lost in a legal labyrinth involving several courts, the recovery team, their investor group, the Union Bank of California, Christie's International and insurance companies that had paid off on policies 143 years ago.

The SS Central America went down in a hurricane off the Carolinas in 1857. En route to New York, the sidewheel steamer was loaded down with gold cargo worth $1.2-million, then a staggering sum. The tragedy claimed the lives of some 425 gold-rush prospectors and crew, and the ship's loss contributed to America's financial panic of 1857.

The shipwreck was brought back into the public eye with the 1998 publication of Ship of Gold in the Deep Blue Sea, a bestseller by Gary Kinder.

In 1988, treasure hunter Tommy Thompson, backed by a team of investors called the Columbus-America Discovery Group, began to salvage the gold in a high-tech rescue mission that grabbed national headlines. But eight insurers claimed the treasure for their own based on policies their corporate predecessors had paid off on more than a century ago.

To that, Thompson essentially offered this rebuttal: finders keepers.

After a tortuous road of legal rulings that centered on how much treasure hunters should be rewarded for their risk and derring-do, a judge in U.S. District Court in Norfolk, Va., divided the treasure in Thompson's favor in 1998, awarding 92 percent to his group and 8 percent to the insurers.

Auctioneer Sotheby's Holdings Inc. has appraised the 8 percent share, consigned to it by the insurers, at $7-million to $10-million. Thompson is still fighting the insurers in the Fourth U.S. Circuit Court of Appeals in Richmond, Va., over their claim for the minority stake.

Manley says his group's high-stakes bet on the 92 percent share will pay off anywhere between $100-million and $250-million in sales. Prices for the 7,500 gold coins and other items will start at $2,500 and reach into hundreds of thousands of dollars for antique gold bars. "It's bigger than anything that will ever happen in the numismatic world," says Manley, who represents basketball star Karl Malone and others.

A friend who was a coin dealer first mentioned the possibility of buying the treasure to Manley in July 1998, while playing golf at the Big Canyon Country Club in Newport Beach, Calif. A former coin dealer himself, Manley was intrigued by the possibility, and soon flew to Virginia, where the treasure was under lock and key, to inspect it. He later assembled the investors, forming California Gold Group, of Newport Beach.

In a huge marketing campaign that centers on the story of the shipwreck, California Gold Group will begin touring its gold and a giant replica of the SS Central America next month. Five stops are planned: New York, Las Vegas, San Francisco, Philadelphia and Long Beach, Calif.

The Manley group's purchase of Columbus-America's share of the gold heralds a big payday for some peripheral players who had sued the treasure hunters for their share: Christie's and Union Bank of California, which provided financial backing for Thompson's group and a planned sale of coins. The Manley group has paid Christie's $40-million to relinquish its lien on the gold and awarded the auction house highly desirable auction rights to $4-million in gold. Christie's had loaned Columbus-America $35-million.

Christie's took the offer, says Jo Laird, general counsel for the auction house, after being satisfied it "involved effectively being made whole on the money we had tied up on the gold." Manley's group paid some $3.5-million to Union Bank, which sought to recover $4.5-million from the Columbus-America group. "We're satisfied with the settlement," says William J. Moore Jr., senior counsel for the bank.

Since it owed Christie's and Union Bank money, the Thompson group will get a share of the profits from the gold sale, Manley says. "The intent from the very beginning has been to market the gold," says Rick Robol, general counsel for Columbus-America Discovery Group. A small portion will be donated to museums, including the Smithsonian Institution, the New York Historical Society and the American Numismatic Association Money Museum in Colorado Springs, Colo.

The insurers, meanwhile, were blocked from selling their gold at Sotheby's last December by a court order, sought by Thompson, that prevents them for now from taking their gold to market. Christie's says it plans to hold its gold auction within a year.