Treasure Fever, Fraud, and Sunken Riches

By John Amrhein, Jr. witness and SEA, Ltd. investor

The Hidden Galleon: The true story of a lost Spanish ship and the wild horses of Assateague Island

The Hidden Galleon: The true story of a lost Spanish ship and the wild horses of Assateague Island

It was 1980 when I began my search for the Spanish warship, La Galga, which ran ashore on Assateague Island, Virginia, on September 5, 1750. After two years of research, I was ready to begin ocean survey work. By all estimates it was going to be a quick discovery because the galleon captain reported to the governor of Maryland that the shipwreck had been surveyed and found to be “two ships lengths” inside the Maryland line. I had found reference to the fact that in 1750 the Acting Virginia governor said that the boundary line was at latitude thirty-eight degrees. This would put the wreck nearly two miles south of the present line. The fact that the ship had grounded on shallow water, the two mile search area between the two boundaries was nothing to prevent an easy discovery. What lay ahead, though, was an obstacle that I never anticipated. I would be sidetracked by a con man named Donald Stewart. Unknown to me at the time, that during the last three years of my archival research, Stewart was laying the groundwork for a monumental fraud that not only involved La Galga but four shipwrecks that didn’t even exist. And for Stewart, he was unaware that our meeting, the result of an invitation printed in the Wall Street Journal, would later become his undoing:

April 25, 1980

Salvage Venture

“After 5 yrs. We have located several wrecks off the Delmarva Coast. One has over $100,000,000 in gold & silver. Require working partners w/capital to form salvage company…””

By 1980, Donald Stewart had become a fixture around West Ocean City, Maryland. His family-owned Atlantic Ship Historical Society, Inc. had set up the Five Fathom Lightship as a museum. The lightship had been brought to West Ocean city after Stewart was asked to leave the USS Constellation museum in Baltimore. But the floating museum was not a financial success and Stewart needed money. In 1977, he laid the foundation for his treasure scam with his phony San Lorenzo story and now he was ready to solicit gullible investors.

The Race is on

I knew that one of Stewart’s shipwrecks was La Galga, even though her manifest found in the Spanish archives documented very little treasure. I was determined to beat Stewart to the wreck but his published accounts of the wreck diverted me from the area of latitude thirty eight. On May 16, 1980, the Maryland Beachcomber published his story about an unnamed Spanish warship which was lost on Assateague. There was no doubt that this was La Galga but Stewart stated that Spanish archives had listed treasure on board of 4,250,000 pesos. The article also described the shipwreck hitting an offshore sand bar forcing her bow up and her stern, containing the treasure, to sink in “six fathoms of water.” There was only one place with the sandbars that he described and that was at the present Maryland line. The article gave his credentials with the “Atlantic Ship Historical Society” and his twenty years with the USS Constellation in Baltimore. I was impressed so I forgot about latitude thirty-eight and focused on where I knew Stewart was looking.

The Beachcomber article found its way into the hands of Richard Cook, an Ocean City contractor. Cook was so taken that he invested $20,000 in SEA, Ltd. His investment was touted to other prospective investors to persuade them to sign on. And on his own, he talked friends and customers into investing with him.

On June 14, 1980, SEA, Ltd. held a meeting for prospective investors. I attended in the hopes of getting more information on where they were in there treasure hunt. I found out that they were months from getting started. Stewart was already drawing a paycheck on a $30,000 annual salary contract. Stewart had a table set up with Spanish artifacts, coins, a belt buckle, a swivel gun, and so forth with a sign that read “Artifacts Found from Wreck Site.” I had previously found out that Stewart was convinced that La Galga lay on the north side of the present Maryland line. The artifact display convinced me that Stewart had recovered items from the wreck of La Galga.

At the investor meeting, Stewart told the crowd that he had a friend who was a Spanish general who had the records of the 1750 fleet locked up. He said that he wanted to thwart any potential competition. To me, this explained why my researcher could not locate any record of the 4.2 million pesos in treasure he had advertised. I was convinced that millions in treasure would be mine if I could beat Stewart to the wreck.

The summer wore on with no success. My diving partner gave up the hunt and with no other recourse I called Stewart and told him what I was up to.

During the phone conservation, I explained to Stewart that I had found a magnetic anomaly on the sand bar just south of the present Maryland-Virginia border. He retrieved his navigation chart and zeroed in on the area in question. It matched the description he gave in the Beachcomber. We set a dinner date the following week at the Ocean Pines Yacht Club. At the meeting, he was both charming and disarming. He then invited me to his house where he showed me what he described as a survey of Assateague done in 1752 by a British navy vessel which showed a number of wrecks. I was amazed to see that there was a wreck symbol on a shoal just south of the boundary line and the words “Spanish Point” on the land opposite the wreck. I said that was exactly where I found the anomaly. Stewart then said “I think you have already found her.” I did not realize then that he had drawn the map in preparation of our meeting.

He then showed me a typewritten “transcript” of a document he said came from the Spanish archives and was purported to be a letter from La Galga’s captain which described a fabulous treasure. It was signed Don Daniel Mahony. His real name was Huony, but Stewart convinced me that I was wrong. I pulled out my checkbook and gave him $2500 for a share of SEA, Ltd. stock. I also promised to bring my search gear to help him get started.

It was on our first trip out that I met Rick Cook. We were headed for the sandbar located twenty miles south of Ocean City inlet where I directed the boat over the area where I had discovered the anomaly with the magnetometer. When the unit registered the “hit” Cook was beside himself. He was wild-eyed with treasure fever. The word spread that Stewart may have found La Galga on the first trip out. Stewart then hired me to be his assistant. This now gave me a front row seat to what would become his “fraud on the whole world.”

Because the weather would seldom allow the long run to the Virginia line, Stewart directed the company’s search along the beaches of Ocean City. We were in search of his “San Lorenzo.” We were all excited about this as Stewart had showed us his story about this shipwreck that had been published in the Baltimore Sun in 1977. Stewart had documented that the wild horses on Assateague had come from the San Lorenzo. And she was loaded with treasure:

3,973 gold doubloons

173,700 silver pieces of eight

255 bars of gold

303 bars of silver

A solid gold statue of the Madonna and a baptistery, also of solid gold

Before long there were other shipwrecks added: the Santa Rosalea, 1785; the Santa Clara, 1798; and the Royal George, 1789. Stewart described a fortune aboard each shipwreck. But all four of these shipwrecks were fabrications. Nobody bothered to check them out because Stewart pointed to Spanish coins found on the beach over the years. But nobody knew that such coins were legal tender in this country until 1857 and could come from any shipwreck. The remaining shares of SEA, Ltd. sold out.

After months of searching a fairly limited area in front of Ocean City, some magnetometer anomalies were detected but were not uncovered.

In December of 1980, SEA, Ltd. hired a Baltimore law firm at the insistence of Raymond Cardillo, a lawyer from Baltimore and co-founder of SEA, Ltd., to explore the option of filing admiralty claims in federal court to these four ships. An admitted purpose for this made by Cardillo was to put pressure on the State to issue a permit for search and recovery. However, there mere act of filing these claims added a great deal of credibility to SEA, Ltd.’s operation and new investment money flowed in including more shares that I purchased.

On January 13, 1981, SEA, Ltd. filed in rem admiralty claims in the U.S. District Court for the District of Maryland to the four make-believe shipwrecks as described by Donald Stewart. Co-plaintiff was Stewart’s so-called Atlantic Ship Historical Society which gave more credibility to the claims. The magnetometer readings that had prompted SEA to file the admiralty claims were later proven to be junk.

The affidavits filed with the complaint were signed by Raymond Cardillo as Secretary-Treasurer of SEA, Ltd.:

“The Plaintiffs have found such abandoned vessel through the expenditure of considerable money, time, experience and effort and have present control of the abandoned vessel.”

Cardillo described each of the four vessels as “wrecked and abandoned,” and “presently located within this District in peril under an undetermined amount of sand. “ He also claimed in a later affidavit that he was familiar with each shipwreck “at least to the extent of her size, type, construction material and apparent condition.”  Each claim named the defendant vessel as “unidentified” but followed with “believed to be…” All of his representations were declared to be true and correct under the penalty of perjury. Stewart was aware of the content of these claims. Each case gave geographic coordinates which, taken together, covered the entire coast of Ocean City to the Delaware line. Four years later in a fraud suit, Cardillo denied knowing anything about these shipwrecks.

The State of Maryland entered the admiralty actions on April 9 of 1981. But before they did, they received a report from one of their “agents” who had gotten an inside look at SEA and a close up of Donald Stewart. He said that Stewart seemed to be suffering from paranoid schizophrenia and his operation was laced with deception and fraud. Stewart’s fantasies were already familiar to the State’s historical consultants.

The State of Maryland asserted that “If the Defendant property in fact consists of the remains the Plaintiffs believe them to be, it is the property of the State of Maryland.” The State had the ability to easily conform the truthfulness of the shipwreck identities.

There was more controversy brewing inside SEA, Ltd. The investors from the very beginning became dissatisfied with corporate management and stockholder representation. The move to revamp the corporate structure was led by Rick Cook. His efforts were successful and with the new structure he became president of SEA, Ltd., in April of 1981. One of his main concerns was to raise additional funds from the current list of investors, many of whom were his friends.

During the summer of 1981, I had growing suspicions about Stewart. He was always changing his targets, including going into Delaware. He paid little attention to La Galga. I wrote my researcher in Spain about the Santa Rosalea and a shipwreck called the Principe de Asturias which Stewart said wrecked in Delaware in 1717. I received her report in late September of 1981 which proved that neither ship had wrecked. I presented Cook with her findings and said that Stewart needed to be confronted. Rather than do so, Cook resigned as president of SEA.

I left SEA, Ltd. in the fall of 1981. I knew then that SEA was doomed. Very few could accept the fact that Stewart was a con man. Treasure fever was rampant among many of the SEA, Ltd investors and Rick Cook was the most infected.  I now began laying the groundwork for a lawsuit against Stewart for fraud but some members of the SEA board asked me to wait.

Unraveling Stewart’s fraud turned out to be quite easy. On the San Lorenzo, I had the help of the National Park Service who gave me documents that Stewart had provided them. I made periodic reports to the board of SEA but they were in disbelief. Stewart seemed very harmless and then there were his credentials from the USS Constellation in Baltimore. He was the author of many shipwreck articles and he was the president of Atlantic Ship Historical Society. The board members had a very difficult time in believing what I had to say. The board also wanted to see the admiralty actions through to judgment, hoping that a victory for SEA would salvage the corporation. Stewart was forced to resign after he refused to show the SEA board his research to support the existence of the shipwrecks. The corporation dissolved. Stewart duplicated the SEA, Ltd. fraud in Delaware two years later.

On December 21, 1983, the federal court issued its ruling saying that the State of Maryland owned the shipwrecks. The ruling contained many unsupported findings of fact:

“Plaintiffs and the State of Maryland agree, and the court so finds, that the defendant vessels and their cargo are situated off the shore of Ocean City, Maryland. …the remains of the defendant vessels and their cargo can only be characterized as objects or materials of historical or archaeological value…The defendant vessels and their cargo, when they are successfully recovered, promise to provide the public with an invaluable opportunity to learn about the culture of people who explored or travelled to the shores of the United States two centuries ago.”

In January 1984, Donald Stewart and his Atlantic Ship Historical Society were sued for fraud by eleven investors of SEA, Ltd. in the Circuit Court for Worcester County, Maryland. Many didn’t join because of the expense of litigation. Nearly everyone else wanted to see Stewart forced into court.  I was the lead plaintiff. Demands were made for his “research.” All he did was compound his fraud by producing more manufactured documents. He ultimately settled out of court. During the discovery process it was revealed that Stewart kept up communications with Rick Cook. It was in 1984 that Cook founded his treasure hunting corporation, Alpha Quest. Cook did not join in the suit against Stewart as he was still a believer. Cook and Stewart hoped that if Cook could find a shipwreck off of Ocean City that it would undermine the lawsuit against Stewart. In the fraud suit, Cook was deposed about what he knew but had numerous memory lapses about Stewart’s misrepresentations.

Cook’s Alpha Quest was a salvage company whose stated purpose was to find the San Lorenzo, the Santa Rosalea, the Santa Clara, and the Royal George. There was another ship he called the Santa Maria. This one did not come from Stewart. Cook told me he believed that the hotel of the same name at 15th St. in Ocean city was named after a shipwreck. The State of Maryland disavowed any knowledge of these shipwrecks in 1986. The following year, Cook claimed to have found La Galga in the same area that Stewart had designated on his phony map he showed to me in 1980. Cook’s mind was still contaminated with Stewart’s lies and dreams of gold and silver.

There were remains of a wreck at Cook’s site but this site had already been explored by myself and others including the Commonwealth of Virginia. Cook needed proof that this site was La Galga. He knew that determining the boundary line between Maryland and Virginia in 1750 was critical to proving his discovery of La Galga. But he ignored the plat I had found recorded in the Accomack County Courthouse in Virginia that was prepared for the federal government in 1943 when the government acquired Assateague through condemnation proceedings. This document illustrated the boundary changes going back to 1687. The 1687 boundary was very close to the line described by the Acting Governor of Virginia in 1750 that the line ended about latitude thirty-eight degrees. This line was well south of his interpretation of the boundary line of 1750. He was unaware that the boundary line as set today wasn’t done until 1883. This plat proved that what he found nearly two miles north was not La Galga. Our group located her buried in the Chincoteague National Wildlife Refuge in 1983 which Cook was well aware of before his own claims of discovery four years later.

In 1990, Cook filed the Alpha Quest Annual Report with the Maryland Historic Trust for his operations in Maryland. The report was prepared by his archaeologist, James Reedy, Jr. and in the section described as “Documentary and Archival Research” Reedy reported that they had no specific documentation on the named vessels sought by Alpha Quest. The report said that Cook’s research was based on “shipwreck legends” and “Eastern Shore folklore” and that his work began in 1980. The report failed to mention that Cook had been an investor with SEA, Ltd. and that Donald Stewart was the source for the San Lorenzo, Santa Clara, Santa Rosalea, and the Royal George and that these shipwrecks had been the subject of admiralty court actions in federal court filed three years before. The report also did not mention that Cook had contracted a fatal disease called “Treasure Fever”— a direct result of his association with Donald Stewart. That contagion would later spread into a landmark salvage case of international consequence.

In the fraud suit, Stewart raised in his defense the ruling made by the federal court that the shipwrecks did exist and were carrying gold and other riches. The plaintiff’s were collaterally estopped from raising this argument. It was circular logic and he almost got away with it.

Was the SEA, Ltd. court just another innocent victim of Donald Stewart, the con man? And how about the State of Maryland who was put on notice in the beginning of who he was?

Coming next: VOID: Subaqueous Exploration and Archaeology



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