Insurance Battle Sparkles With Emeralds From A Sunken Spanish Vessel

Blogs.courant.com: Insurance Battle Sparkles With Emeralds From A Sunken Spanish Vessel
'Faye Keith Jolly of Deerfield Beach, Fla., applied for a $10 million life insurance policy with a division of The Phoenix Cos. Inc. in the winter of 2007.

He was 73 at the time, though Jolly claimed to be of healthy, athletic stock. He wrote a letter to the Hartford insurer saying his father had been a Chicago White Sox catcher and his mother an Olympic swimmer.

But by far the most impressive detail of his application was his purported net worth, $1.2 billion -- and the nature of his assets.

Jolly claimed he had 10,920 pounds of uncut emeralds that he recovered 15 years earlier from a sunken Spanish vessel in the Gulf of Mexico -- worth a cool $800 million. The other $400 million was in a trust, he explained in his application to PHL Variable Insurance Co.

Phoenix approved Jolly's policy in March 2007 after the company received reassurance from an independent agent and from the trustee of his trust that Jolly's claims were legitimate.

Then, just as time was running out for the insurer to contest Jolly's application, Phoenix sued Jolly in October 2008 in an Atlanta federal court. In the same action, Phoenix also sued the trust that would have received the money when Jolly died, and the trustee.

Phoenix alleged negligent misrepresentation, fraud and conspiracy. The company asked for payment for damages as well as attorneys' fees. In the end, the insurer did not have to pay out the $10 million Jolly's policy was worth when Jolly died on Feb. 6 of this year.

But the fight continues over premium money Jolly paid, as well as damages and other costs. And the far-fetched story of Jolly's emeralds is bringing a colorful sparkle to an otherwise drab corner of law and insurance.

The court battle involves allegedly forged appraisals, a history of plundered mines in Colombia's Andes Mountains that dates to the 16th century, underwater Spanish galleons chock full of riches, a trail of claims by Jolly that quickly grow cold, a mystery about where premium payments were coming from and an Atlanta attorney who said he once saw Jolly show off buckets of green stones.



No one involved is talking publicly. But at the heart of the story, as pieced together through court records, is the question of how Phoenix could have approved the policy in the first place. Jolly's application contained wild discrepancies and claims, many easily debunked.

Jolly first sought Phoenix life insurance in 2006, court records show, but the company didn't act on it. Martin R. Wetzler, an independent insurance agent in Boca Raton, Fla., filed a new application for Jolly in February 2007, trumpeting the emeralds found in a sunken Spanish galleon.

Jolly and attorneys acting on his behalf assured Phoenix by including appraisals of the jewels. The application also included paperwork detailing how the emeralds were shipped through a duty-free zone and were held in bonded warehouses in Southampton, England, then later transferred to another facility in Felixstowe, England.

"Mr. Jolly is one of the top 5 Treasure Hunters in the World, having discovered a treasure of emeralds with an estimated value of $700mm+," Wetzler wrote in an e-mail to two Phoenix employees.

Phoenix apparently asked Wetzler for Jolly's tax returns and for additional medical records. Wetzler replied via e-mail to say there were no additional medical records.

"Regarding Mr. Jolly's financial situation, and your request for tax returns, because of the complex, sophisticated and confidential nature of his assets, their taxation and his estate plan, there will be no tax returns forthcoming," Wetzler wrote to Phoenix.

Wetzler told Phoenix that Jolly discovered his emeralds while working with famed treasure hunter Mel Fisher before Fisher died in 1998. Fisher was well known for his discoveries off the Florida Keys, including some of the ships in a Spanish fleet that were battered and scattered during a hurricane in September 1622.

After agreeing to sell the policy to Jolly, Phoenix paid Wetzler a fee of $412,116, court records show.

Three years later, in 2010, a federal judge in Atlanta ordered the policy rescinded, agreeing with Phoenix -- although he rebuked Phoenix for missing "red flags."

Phoenix "never attempted" to use "'traditional tools of income and net worth verification" by obtaining information about Jolly's bank account and primary residence or by contacting his accountant to learn his net worth and income, U.S. District Judge G. Ernest Tidwell said in his order.

The remaining lawsuit will determine who gets to keep the $484,843 that Jolly's trust paid as its first and only premium back in April 2007. The court ordered the cash returned to the trust as part of the policy rescission, and the money is now in the court's possession.

Phoenix is also seeking damages, because the company has incurred more than $400,000 in attorney's fees in this case, not to mention the $412,116 it paid Wetzler.

Despite Wetzler's claims, if Jolly ever worked with Mel Fisher, the record is bereft of any evidence.

"I've never even heard of the guy," said Sean Fisher, Mel Fisher's grandson, who is vice president of Mel Fisher's Treasures, which carries on his grandfather's quests. He said his father, Kim Fisher, the company president and CEO, also hadn't heard of Jolly.

Phoenix would not say why the company accepted Jolly's application despite such glaring discrepancies, and comments by its chief underwriter in court filings shed little light on the company's reasoning.

"The important fact is that this policy was rescinded based on misrepresentation," said Phoenix spokeswoman Alice S. Ericson, in an e-mail. Phoenix otherwise declined to comment on the case.

Muzo To Margaritaville

Jolly was 77 when he died on Feb. 6.

He was not one of the top treasure hunters in the world.

Medical records that were part of his application to Phoenix showed that Jolly was employed by a cemetery and worked "in a telephone capacity" for a friend's import-export business. Bank documents show that his trust had less than $300 -- not $400 million, as claimed in the application -- at all times except for a short period before the trust paid Phoenix a premium.

If Jolly was indeed a well-known treasure hunter, the federal government would have logged where he looked for ships and what he found, Sean Fisher said.

"There would be a public record," he said. "The guy would have had to file for admiralty. That means that the federal courts give him the right to work that wreck. Once you have an admiralty claim on a shipwreck, you can salvage it, but you still don't even own the artifacts until it goes through what's called adjudication."

Mel Fisher and his team discovered hundreds of millions of dollars worth of gold, silver and gems from the remains of the Spanish galleons Nuestra Señora de Atocha and Santa Margarita. Fisher's largest find in 1985 -- of lesser total value than Jolly claimed his emeralds were worth -- attracted worldwide interest, drawing journalists and even "Margaritaville" songwriter Jimmy Buffett, who sat on a pile of silver bars and played for Fisher's crew.

The proportions of Jolly's story are askew, Sean Fisher said. A mere 80 pounds of emeralds from a Spanish galleon would be worth $1 billion, he said.

At Fisher's per-pound estimate, Jolly's 51/2 tons of emeralds would be worth $136 billion.

Even the amount of the emeralds is inconsistent in Jolly's application. In one document, Jolly has 3,600 pounds of emeralds worth $200 million. In another, he has $619 million. Still other references put the value of Jolly's gems at $800 million, or $900 million to $1 billion.

Phoenix never attempted to contact the appraiser or the British storage company, Judge Tidwell said in his April 2011 ruling.

The finest emeralds in the world are worth more than diamonds, and many of the best come from the Colombian Andes, where the Muzo tribe was mining for centuries before the Spanish began pillaging those gems in the mid-16th century. Spanish galleons took emeralds from Colombia to Spain via Cuba, but many ships were destroyed by hurricanes, and their wreckage slumbers in the turquoise waters to this day.

Every significant discovery since the late 20th century has been a major news story. And yet Jolly's supposed find turns up no reports in LexisNexis, a research archive of millions of court cases and news articles.

'A Little Plastic Bag'

Jolly's insurance agent, Wetzler, said he and Jolly concluded that a $10 million policy would suit Jolly's desires, future tax obligations and other needs.

In order to get such a big policy, Jolly would have to prove that he had a high net worth. That's why the question of the emeralds mattered, even if Phoenix received its premiums.

Providing policies and other financial products for people of significant wealth was Phoenix's niche before the company lost most of its distribution network and suffered ratings downgrades in late 2008 and early 2009.

Life insurance is not meant as a way to get rich, but rather to provide cash at a time of need, or to indemnify for a loss, said Marv Feldman, president of LIFE Foundation, a nonprofit that helps consumers understand life insurance products.

"You have an issue of unjust enrichment if you have somebody with high insurance values without the financial justification or need for owning such a policy," Feldman said. "It's really not designed to create a $10 million stake for somebody if there's no financial justification for doing that."

The original intent of the policy was to have Phoenix pay the benefit to the Faye Keith Jolly Irrevocable Life Insurance Trust in Atlanta when Jolly died. The trustee of that trust is Atlanta attorney Kenneth E. Shapiro.

That trust would pay another one -- the Jolly Family Trust. A different Atlanta attorney, A.J. Block Jr., is the trustee of that trust.

Block had helped Jolly set up the company that supposedly had title to his emeralds. The company is Troy International Inc.

Jolly told Phoenix he would finance the premiums through loans from a bank. He later told attorneys in a court deposition that he didn't know who was paying premiums on the Phoenix policy, but it wasn't him. That raised questions that are still unanswered about who initiated the policy in the first place.

In recent years, the life insurance industry has been roiled by the practice of well-heeled investors giving elderly people cash to apply for coverage, maintaining premium payments and, ultimately, collecting benefits when the policyholder dies. It's called stranger-originated life insurance, and has led to stiff regulations in many states and a number of lawsuits filed by insurers.

Jolly said in his deposition that he did not receive cash for this or other life insurance policies he was involved in. But he declined to answer many of the attorneys' questions, taking the advice of a criminal defense attorney to invoke the Fifth Amendment to not incriminate himself.

Shapiro, the trustee of the first named trust, claimed to know very little about the application, Jolly's net worth or his finances. Shapiro said in his deposition that Peachtree Financing, a lender that provides financing for life-insurance premiums, contacted him about being a trustee for Jolly's trust. Shapiro said he had very little interaction with Jolly.

Attorneys for Shapiro declined to comment. Block did not return phone calls. A phone number registered to Jolly's widow, Janice, was answered by a woman who said there was no Janice there.

Phone calls to the insurance agent also were unsuccessful -- Wetzler's office number no longer works and he did not answer several calls placed to a home number listed in his name.

Through it all, some people involved in the case did attest to seeing glimmering green stones.

A Georgia gemologist, Dean L. Honeycutt, said in an affidavit that he appraised 3,600 pounds of uncut emeralds for Jolly in 1995 and deemed them to be worth more than $200 million. That value, however, was a replacement value for insurance purposes, "multitudes higher than the actual cash value or the collateral value of the uncut emeralds."

Honeycutt also could not be reached. In his affidavit, he said other appraisals with his name were apparent forgeries in 2004 and in 2007.

Block, the Atlanta attorney who is trustee for the trust that eventually would have received Jolly's benefit payout, told attorneys for Phoenix that he couldn't be sure the stones he saw were real emeralds.

"Well, at one time, he brought a little plastic bag in with emeralds in it," Block said in a court deposition. "And on one occasion, there were two or three buckets, as I recall, as he refers to them; they look like buckets, filled with what was purported to be emeralds."

Attorneys for Phoenix asked Block if Jolly told him where he acquired the emeralds.

"I could be making this up in my mind, so pardon me," Block said. "I have heard a lot of stories, but my recollection is he dove on a ship, and this was the ballast on the ship or something. I think there were emeralds on one side and rubies on the other or something. It's rather an interesting story, but that's my best recollection