Judges: ‘Ample Evidence’ Maine Treasure Hunter Schemed to Defraud Investors

Photo by Dana Smith for ‘Hook, Line, and Sinker’

Federal prosecutors have “ample evidence” that Maine treasure hunter Greg Brooks schemed to defraud investors of at least $8 million in a salvage operation off Cape Cod, a federal appeals court declared today as it ordered further evidence turned over to a grand jury.

The opinion from the First Circuit Court of Appeals in Boston includes the most detailed account yet of the federal investigation of Brooks and his former researcher, Ed Michaud of Framingham, Mass.—a tale told in “Hook, Line, and Sinker,” in our September issue. Brooks’ company, Sea Hunters, raised millions from investors to salvage what he claimed was $3 billion worth of platinum from the S.S. Port Nicholson, sunk by a Nazi U-boat in 1942. No criminal charges have been filed, but the opinion makes clear that Brooks is the target of an ongoing grand jury investigation.

Here are some key details from the court’s 26-page opinion (below):

• The feds think the Brooks and Michaud kicked off their alleged fraud in 2006, when Brooks paid Michaud to buy a copy of the reference book Lloyd’s War Losses. The book says the Port Nicholson sank with a cargo of automobile parts and military stores. Michaud, who is now a government witness, claimed that when he showed Brooks the info, Brooks commented that Michaud “needed to show more to get investors on board.”

• In 2008, Michaud admits, he altered an image from Lloyd’s War Losses, adding a line that said the Port Nicholson was also carrying 1,707,000 troy ounces of platinum. Michaud also “admitted to heavily redacting the remainder of the document and adding a forged ‘declassification’ stamp to conceal its origin,” the court’s opinion says. The altered document was later filed in court and given to some investors in Brooks’ company. (Brooks also showed it to CBS News in 2012.)

• Federal agents are looking into whether six pieces of metal that Brooks’ company presented to a federal court really came from the Port Nicholson. Salvagers need to present a piece of a vessel in court to make a salvage claim under admiralty law. Agents have interviewed two crew members who said that no material was recovered from the Port Nicholson during trips they took part in.

• In a key conversation recorded by a federal agent, Brooks denied ever knowing for sure that Michaud had forged documents. (The opinion calls Michaud “E.M.” and Brooks the “affiant,” the person who filed the appeal. Brooks described the appeals court case to me in June.)  Here’s the quote:

E.M.: You knew those documents were fake a long time ago, you know?

APPELLANT: Not 100 percent, I didn’t. … I’m telling you, we didn’t. I’ve stuck up for them because I do not—that’s why I stuck up for them because I had an idea, but I have no proof. The only proof I have is what you said this morning, right now.

E.M.: Well, we discussed it.

APPELLANT: What? Forging documents?

E.M.: No, we didn’t say it in those words.

APPELLANT: Exactly. We didn’t. You’re right.

Brooks and the feds interpret this conversation differently.

“I knew he was wired,” Brooks told me when I interviewed him in June. “He says, ‘You knew they was forged.’ I says, ‘What? I know they’re forged now, ’cause you just friggin’ told me.’”

An agent described it this way in an affidavit unsealed two weeks ago: “Brooks didn’t challenge Michaud’s frequent assertions that he (Michaud) altered the documents on his (Brooks’) behalf.”

As Judge Timothy B. Dyk wrote in his opinion, “Appellant indicated that appellant was aware of the existence of a criminal investigation, an awareness which apparently colored the ensuing exchange.”

• The appeals court decision strikes down Brooks’ attempt to keep several documents protected by attorney-client privilege. Both the appeals court and a district judge in Maine have ruled that a federal grand jury investigating the Port Nicholson can see the documents because of a criminal-fraud exception to attorney-client privilege. Although no criminal charges have been filed, both courts ruled that there was sufficient evidence that Brooks conspired with Michaud to allow the documents to go to the grand jury.