Effort to Salvage $500-Million Sunken Treasure Sparks Controversy : Colombia Sails Into a Storm Over Ship’s Booty

The Spanish galleon San Jose went down under attack by English warships off the Caribbean coast of South America, not far from a sandy spot called Isla del Tesoro--Treasure Island. It carried silver, gold and jewels worth hundreds of millions, perhaps billions of dollars--reputedly the greatest treasure ever to disappear at sea.

Those riches have been lost for 280 years--but not forgotten.

In 1981, high-tech treasure hunters using sonar and marine magnetometers found what they think is the San Jose on the Caribbean’s dark and sloping floor under 820 feet of water. Since then, Colombians and foreigners have schemed and squabbled heatedly over prospective shares of the still unrecovered booty.

And as the government of Colombia now prepares to award a salvage contract, the San Jose treasure hunt is getting hotter still. The government has asked Sweden to arrange for the salvage operation, but that decision has infuriated American investors in a company that claims finder’s rights.

Salvage Effort Delayed

A Colombian Senate debate on the salvage negotiations has delayed the start of work, but it may begin next spring. And by this time next year, the treasure could be up from the depths and glimmering in the light, if all goes well. But the saga of the San Jose is not a tale of all going well.

It began in 1708, when European powers were locked in the War of the Spanish Succession, a conflict over dynastic alliances and Atlantic trade. Spain, a fading naval power, had been unable to bring home a shipment of silver and gold from the Peruvian viceroyalty since 1695. Precious metals piled up in Lima while the Spanish crown, desperate for funds, tried to organize a convoy that could carry the treasure, safe from enemy ships.

Finally, a fleet of merchant ships and armed galleons brought the treasure up the Pacific coast to Panama. The cargo then crossed the Panamanian isthmus by mule to Portobelo on the Caribbean.

The man chosen to take the treasure from Portobelo to Spain was Jose Fernandez de Santillan, Count of Casa Alegre. He set sail from Portobelo on May 28, 1708, with a fleet of 14 ships, including the galleons San Jose and San Joaquin, each with 64 guns.

But before the long Atlantic crossing, Casa Alegre needed to stop in Cartagena, Colombian, to caulk the hull of the San Jose, which was leaking badly. And waiting off the coast were three English men-of-war under Adm. Charles Wager, who knew from spies that Casa Alegre was sailing with treasure.

Casa Alegre was within sight of the harbor at Treasure Island on June 8 when Wager intercepted his convoy. About 7:30 p.m., as cannons barked, a powder magazine aboard the San Jose apparently exploded and the galleon quickly sank. The San Joaquin escaped with what Colombian historian Rodolfo Segovia estimates was half the convoy’s treasure.

Based on incomplete shipping manifests and other available information, Segovia estimates the current value of the San Jose treasure at $500 million--”not counting the undoubtable numismatic and aesthetic value” of the coins, jewelry, lamps, chalices and other articles of gold and silver.

“It is the richest shipwreck known, inaccessible until recently because of its depth, but now technology has put it within our reach,” the historian wrote in a 1985 monograph regarded as authoritative.

In an interview, Segovia said salvaging the San Jose would be more important for its archeological value than for its monetary value.

“It’s a unique time capsule,” he said. “You can’t find a whole galleon to study anymore.”

For that reason, Segovia said, he was “intensely worried” early in the 1980s when a partnership named the Glocca Morra Co. was negotiating for the San Jose salvage rights. Glocca Morra, according to Segovia, showed little interest in the niceties of archeology.

A Colombian partner in the company, Rodrigo Leyva, said in an interview that it recruited three American historians to research the sinking, then applied for a Colombian permit to explore the area, which is near the Rosario Islands.

Using deep-water diving equipment, magnetometers and a leased submarine, the group found “a very interesting anomaly, which apparently is a shipwreck and apparently is the San Jose,” Leyva said.

Sea Search Armada, a partnership that evolved from a Chicago investment group incorporated in the Cayman Islands, absorbed Glocca Morra. Jack Harbeston, managing director of Sea Search, said in a telephone interview that more than 100 investors in the company have sunk nearly $10 million into the treasure hunt. He is trying to raise more money to fight the Colombian decision not to let Sea Search salvage the galleon.

“Our present investors are really very angry and feel very put upon by this brazen action of the Colombian government,” Harbeston said. “They (Colombian authorities) are clearly trying to steal it.”

According to Harbeston’s optimistic calculations, there is a lot more money to be made from the treasure than Colombian historians reckon. The millions of silver and gold coins in the treasure could be worth five to 10 times their “meltdown value” if they are wisely marketed to collectors, he said.

Harbeston broadly hinted that if Colombia and Sea Search do not reach a friendly agreement, the company will take legal action that could cloud the title to the treasure.

Sea Search claims that its original permit to explore, and official recognition of its notice of discovery, give it preferential rights as salvager and 50% of the treasure.

Negotiations between the Colombian government and Sea Search were under way when Sweden began offering to participate in the salvage project.

In 1987, Colombia accepted Sweden’s proposal, and the countries agreed that the state-owned Swedish Investment Bank and Ecopetrol, Colombia’s state oil company, would be in charge of the project. The bank would engage the Neptun Salvage Co., a century-old Swedish marine salvage and construction firm, as a master contractor for the salvage work.

The Colombian Senate recently debated the San Jose affair, calling government ministers to testify. Sen. Eduardo Mestre, a leader of the governing Liberal Party and organizer of the hearings, said he fears legal problems if the government signs a contract with Sweden.

“I believe that there are unforgivable errors that are going to jeopardize the whole effort,” Mestre said in an interview.

Hernando Galindo, a Colombian lawyer representing the Neptun Salvage Co., said that even if a contract is signed between the governments soon, it would be difficult to start salvage work right away. Seasonal rough seas make next March or April a better time to start, Galindo said.

Galindo said that if the San Jose is where it is thought to be, the salvage will take about four months and cost $6 million to $7 million. The Swedes have agreed to reconstruct the galleon in a new maritime museum in Cartagena, contributing $30 million to the museum’s cost.

Colombia will pay the Swedish government bank on a sliding scale, ranging from 37% of the recovered treasure’s value under $500 million to 20% for the value over $1.5 billion. Sweden would pay a 5% discovery fee to Sea Search Armada.