Court OKs Kent man's audacious high-tech venture to recover Alaska's sunken treasure

From Puget Sound Business Journal: Court OKs Kent man's audacious high-tech venture to recover Alaska's sunken treasure

More than a century after the steamship Islander sank near Juneau with a purported cargo of Alaskan gold, a Kent man hopes to cash in on his two-decade-long quest to retrieve the treasure.

Theodore Jaynes, 72, a former professional diver, got a federal judge last month to approve his latest plan to recover the gold, clearing the way to aim high-tech imaging gear at the sunken vessel this summer.

"He is wary and excited, enthused," said Jaynes' attorney, Jed Powell, with the Seattle firm of Cairncross & Hempelmann. "One way or the other, we're going to know the answer to the SS Islander story."

That would be the answer to the question of how much gold, if any, lies under 175 feet of frigid water in Lynn Canal, south of Juneau. Top-end estimates are that the Islander sank with 480,000 ounces of gold, which at current prices of about $1,500 an ounce would be worth about $720 million.

Or there could be nothing.

"Some people say none, some say a lot," Powell said. "Sworn affidavits from 1902, from people on the docks in Skagway - some of them said there were tons of gold, others saw there were boxes of gold."

"The company's purser said there wasn't anything on the boat," Powell added, "just a little bit in his safe."

While nobody's sure what is down there, that hasn't stopped people - a lot of people - from trying to find it.

If Jaynes turns out to be the one who finally succeeds, he would complete a major chapter in the saga of the Klondike Gold Rush, an event that helped turn Seattle into the business capital of the Pacific Northwest. After an 1896 gold find in Alaska's Klondike, some 70,000 "Stampeders" passed through Seattle, buying supplies and frequenting hotels while waiting to sail north. Seattle's population tripled in less than 15 years, to 240,000 by 1910.

Amid the thousands of lives lost to the Klondike gold frenzy were those of 65 passengers and crew of the Canadian Pacific Navigation Co.'s SS Islander. Heading south from the gold gateway port of Skagway, the 240-foot steamer hit an iceberg and sank on Aug. 15, 1901, more than a decade before the same fate befell the Titanic.

Numerous expeditions have attempted to find the Islander's lost gold. In 1934, a monumental effort partly funded by Weyerhaeuser Timber Co. President Norton Clapp raised the ship's hull, but little gold was found - possibly because the prize remained in a bow section that had broken off and was still on the bottom.

"If it's there, it's the biggest ever," said Powell, referring to the potential treasure. "A lot of people have lost their fortunes on this thing over the years."

Jaynes created a company called Ocean Mar Inc. and assembled a team of fellow divers and a vessel to lift the gold. But on arrival in Juneau in 1996, Jaynes was served by a restraining order by a federal marshal, obtained by a rival salvage company, Yukon Recovery, of Puyallup.

From that point on, Jaynes spent more time in court and his lawyers' offices than underwater, until April 30, when a "Third Amended Plan" from U.S. District Court of Alaska approved the updated details on how his Ocean Mar Inc. will proceed to pull up the gold. Part of the legal proceedings has been to work out a contractual arrangement with the Salvage Association of London, an organization that brokers settlements between insurers and salvage companies such as Ocean Mar. Under that contract, Powell said, Ocean Mar will pay the Salvage Association 25 percent of the value of any "insured gold" recovered, to reimburse any insurers who might have previously paid claims on the gold. Ocean Mar's recovery plan is being kept away from the public view by the court, reflecting the company's stated intent in its court filing that the specifics should be "confidential - extremely confidential." A 2010 court document suggests that Ocean Mar will use sonar equipment and software that also has been deployed by the Navy "to 'see' through the seabed material for a number of inches, in order to locate the gold bars." Powell suggested that technology advances since 1996 should make the mapping more precise. The court papers said Ocean Mar had been in talks with Science Application International Corp., a major Pentagon contractor with a branch in Bremerton, to conduct the mapping. But the SAIC deal never came to fruition, Powell said, and Ocean Mar is still negotiating with contractors.

"For 15 or so years, Ted Jaynes and Ocean Mar have been trying to put together the science to actually do the salvage," he said. "They have a much greater ability to go down and see what's on the bottom." Powell declined to make Jaynes available for comment, and Jaynes did not respond to other attempts to contact him.

Some of Jaynes' 40-year diving career was in France, working for a Marseilles company called Intersub, or International Submarine Services.

While Powell declined to say how much money is available to pay for the salvage operation, he said the costs "could be" $3 million to $4 million.

Powell said the undisclosed lender is a "financial entity," but not a bank. He declined to say if the entity is based in the U.S. or overseas.

Over the years, Jaynes has attracted investors to his treasure hunt. Undisclosed investors in a Jaynes-led entity called Islander Bullion Partners LLC are entitled to divvy up approximately $147 million in potential proceeds from the Islander's gold, according to a Securities and Exchange Commission notice dated May 15.

Islander Bullion Partners is not the only investor group. Another set of backers, called Islander Partners LP, dates back to the 1990s. According to another recent SEC filing, an entity called Douglas Island Group LLC is entitled to about 22 percent of the Islander Bullion Partners' payoff.

Douglas Island, off Juneau, is where Capt. H.R. Foote back in 1901 had hoped to ground the distressed Islander after it hit the iceberg to keep the ship from sinking.

He didn't make it.