Firm to Keep Most of Shipwreck’s Coins

Nearly 134 years after miners, soldiers, politicians and prostitutes perished in California’s deadliest shipwreck, a legal settlement has awarded most of a fortune in gold coins that sank with the Brother Jonathan to a group of Southern California treasure hunters.

Deep Sea Research of El Cajon will get to keep more than 1,000 coins it recovered from the wreckage off Crescent City, under a court agreement that ends the firm’s lengthy dispute with state and federal authorities.

The settlement in U.S. District Court in San Francisco also gives the company the right to seek more treasure from the vessel, which it discovered in 1993 after years of research and searching. Among the potential prizes still 250 feet beneath the sea: the ship’s safe.

The state Lands Commission, meanwhile, gets 200 coins valued at about $1 million and the right to oversee historic preservation efforts. And, in a quirky provision of the settlement, the descendants of a 19th century circus owner still have the chance to win a portion of the treasure if they can prove that the circus payroll was on the ship.

The settlement between Deep Sea Research and the state last week culminates a quarter of a century of research, exploration and legal battles. Some issues in the case made their way to the U.S. Supreme Court, where state lands officials argued unsuccessfully that they were entitled to control the historic treasures and Gold Rush-era booty.

With the matter finally settled, the treasure hunters said they were weary but thankful for their long-awaited payday. State officials expressed relief, saying the agreement will ensure preservation of artifacts from one of the proudest and most active vessels to ply the waters off the West Coast in the 19th century. But the acrimony of the long legal struggle and a feud that tore apart the salvage company lingers.

“When I was a kid, I said I was going to find a treasure,” said Jim Wadsley of Torrance, secretary of Deep Sea Research and one of the original discoverers of the Brother Jonathan. “This just goes to show that, in this day and age, you can still dream and you can still accomplish things.”

He conceded, however, that the protracted struggle over the company’s share of the coins, valued at $5 million to $10 million, has taken “most of the glitter” off the victory.

Nevertheless, he said the company still expects to be able to deliver a profit to about 100 small investors--”ordinary folks who had faith we could do something everyone said was impossible.”

None of the proceeds will go to the man who initiated the paper search for the Brother Jonathan in 1974. Donald G. Knight of Diamond Bar called the legal settlement a travesty that will allow his former partners to damage one of California’s historic treasures.

“These people don’t care anything about archeology or conservation,” said Knight, who added that he was forced out of Deep Sea Research less than a year after the 1993 discovery. “They have desecrated this site.”

Deep Sea Research officials deny that charge, saying Knight voluntarily sold his share in the company and is now merely embittered to have given up his share of the fortune.

U.S. District Judge Louis C. Bechtle praised the remaining members of the firm for their preservation efforts.

It was just three months after the assassination of President Abraham Lincoln, in July 1865, that the Brother Jonathan’s last voyage began. Heading north toward Seattle, the tri-masted, side-wheel steamer encountered rough weather near Crescent City and smashed onto a hidden rock.

Only one lifeboat, with 19 people aboard, made it to shore. At least 145 died. Among those lost were the newly appointed governor of Washington Territory and the commander of U.S. forces in the West during the Civil War. For weeks, bodies and debris--including the corpse of a U.S. Army camel--washed up along 120 miles of coastline.

Observers at the time widely blamed the sinking on the ship’s heavy load. As the vessel was going down, Capt. Samuel De Wolf reportedly shouted: “Tell them if they had not overloaded us, we would have got through all right.”

The wreck prompted passage of federal laws prohibiting the overloading of ships and led to construction nearby of what was then the country’s most expensive lighthouse.

For more than 100 years only amateurish attempts were made to salvage the ship from the rough, wind-swept seas of the North Coast.

But in 1974, Knight became intrigued and launched 12 years of archival research before he even began to look for the wreckage several miles offshore. In 1991, he founded Deep Sea Research along with Wadsley and two other partners, including Harvey Harrington, a commercial diver with experience on many other major salvage operations.

It was in 1993 that they finally located the ship, more than 1 1/2 miles south of the rock that now bears its name. On Oct. 1 that year, a mini-sub operator radioed back to the salvage ship: “Eureka! I have your target on site!”

But the struggles over the Brother Jonathan were continuing on land.

Beginning in the late 1980s state Lands Commission officials insisted that they oversee any search of the ocean floor and issue a permit to any commercial salvage crews.

When the salvors insisted that the state had no right to control their work, the whole matter was thrown into the courts. A year ago, the U.S. Supreme Court ruled that the state’s ownership of offshore lands does not inherently give it title to the Brother Jonathan or other shipwrecks. The court said, instead, that lower courts must decide such claims on a case-by-case basis.

Such a trial would have taken place in federal court were it not for last week’s settlement.

Now, the New Hampshire-based firm of Bowers and Merena will auction 1,007 coins on behalf of the salvage company. David Q. Bowers, who plans the sale for May 29 in Los Angeles, said the coins--$5, $10 and $20 gold pieces from the 1830s to 1865--are so unusual and in such good condition that their value is unknown. But he guessed they will draw $5 million to $10 million.

As for the state’s allotment, attorney Peter Pelkofer of the Lands Commission picked up the 200 gold coins from a San Francisco bank Tuesday and drove them to Sacramento, where they will be kept until they can be distributed to museums in Crescent City and elsewhere.

The settlement leaves open the possibility of later claims, but only by the U.S. government and one California family.

Regina Phelan of La Habra Heights and six of her relatives filed a claim last month, saying they may be entitled to a portion of the treasure.

Phelan’s grandfather, Henry Lee, owned a circus and his second wife, a trick rider in the show, was on the ill-fated ship with the cash payroll for her comrades, Phelan’s lawyer said. But to claim any of $100,000 placed in escrow by the state, Phelan will have to produce evidence from the wreck to back her claim.

“The family story is that she was delivering the payroll to her husband, who was in Oregon with the circus at the time,” said the attorney, John Edgcomb. “We just hope there is a purser’s safe or safe deposit box with something to prove that.”

The settlement gives 80% of any other future finds at the wreck to Deep Sea Research. The San Diego County firm is expected next month to receive a permit to continue the salvage operation. A Lands Commission official, or designee, will observe the work to ensure that objects of historic value are properly cared for.

Most intriguing are reports of the lost safe. But the treasure hunters said they’re not sure what is in the safe, or if it will ever be found.

“The wreck is draped with fishing nets,” Wadsley said. “Who knows who maybe ended up with it, if anyone did? It’s a 134-year-old riddle.”

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Times staff writer Bettina Boxall contributed to this story.