Marooned off Key West

Palm Beach Post Staff Writer

Sunday, February 04, 2007

Sitting in plain view, in ankle-deep turquoise water just 3 miles away from the docks and mobs of tourists at Mallory Square, lies $30 million in treasure.

For 15 months, pirates and other assorted seafaring scalawags have tried to plunder it, but they have been rebuffed, sometimes at the point of a gun, by an unlikely swashbuckler: 63-year-old multimillionaire tycoon Peter Halmos of Palm Beach.

And today, after making peace with the U.S. government, Halmos is free to pluck his bounty from the sea.

Salvage operations are scheduled to begin Monday.

It won't be easy or cheap. This isn't gold doubloons or silver ingots aboard a sunken Spanish galleon. Instead, the treasure is the ship itself, the 158-foot Legacy, a world-class vessel fit for a corporate king until it almost became a deathtrap.

Blame it all on an act of God.

'There she is!'

Peter Halmos cruises up to Man of War Harbor just off Duval Street in a sleek Donzi speedboat, looking like a man who has spent many days at sea.

He is barefoot, wearing a floppy straw hat and yellow windbreaker, his sunglasses lopsided on his freckled face.

"Put your shoes in the basket," he says, and then pulls away from the dock. "Ready to rock?"

He pushes the throttle forward and takes his passengers, including his Madison Avenue public relations man, Robert Siegfried, into the clear waters that divide the Atlantic from the Gulf.

He pulls out his cellphone to alert Ed Collins, the captain of Legacy, that he's on the way, but can't get a signal.

"I've gotta get a new cellphone every week because I keep getting them wet," he grumbles.

A few minutes later, the Donzi pulls alongside a deck boat, where Captain Ed is at the wheel. The captain informs Halmos that the boat is securely anchored.

"That's what you told me the last time," Halmos says, and then busts into a high-pitched belly-laugh. After six years together — including 15 months marooned at sea — the two have become close enough to rib each other mercilessly.

Out of nowhere, about a mile in the distance, a lump in the water appears.

"There she is!" Halmos says.

And then he begins to tell the story of how Legacy, his baby, wound up nearly taking him to a watery grave.

A majestic mess

When Legacy was launched at an Italian shipyard in 1995, she was one of the five largest sailing ketches in the world, the sister ship to News Corp. chairman Rupert Murdoch's Morning Glory. With its twin 160-foot-high masts sporting 11,000 feet of fluttering sails, it was a sight to behold. Whether it was anchored at Lake Worth or docked at Chelsea Piers in lower Manhattan, crowds would gather to gawk.

Anyone lucky enough to be invited onboard would be treated to the finest: exquisite scenery, magnificent food, luxurious quarters, top-flight entertainment systems, Jacuzzis by moonlight, and a crew dedicated to fulfilling any wish.

Now she is a majestic mess, stuck in some of the most pristine and protected property under the federal government's control, the Great White Heron National Wildlife Refuge, 200,000 acres of raw nature where herons, gulls, ospreys and pelicans own the skies, and snapper, barracuda, rays and hammerhead sharks rule the warm water.

The lines that anchor Legacy to the grassy tidal flats serve as landing strips for the sea birds, who all face the same way — beaks to the wind.

Their droppings litter the sun-bleached teak deck of the vessel, demasted and listing, its dark blue hull scarred by an incredible journey that should have killed Halmos and his seven crew members.

"It's like a stab in the heart," Halmos says as he surveys the damage. "We kept Legacy so clean, you could do open heart surgery on the deck. I like things clean."

To prove his point, he reaches into his pocket and produces a small spray bottle of alcohol, which he uses on his hands.

"Drives my kids crazy," he says.

'Notify the next of kin'

On Oct. 15, 2005, Tropical Storm No. 22 was born off the Yucatan Peninsula. Less than two months earlier, Hurricane Katrina had slashed through the Florida Keys with 80 mph winds on its way to throttling Louisiana and Mississippi. Because Legacy was anchored in a hurricane hole, shallow water beside channel marker 15, just a mile off Key West, Katrina was a cupcake.

"Inside the ship, you couldn't even hear the wind," he says.

So when Tropical Storm 22 grew into a hurricane named Wilma, bashed into Cancun, then veered sharply toward Key West, Halmos and Captain Ed figured the safest place to be was exactly where they had weathered Katrina, in the shallows within eyesight of the Key West Coast Guard Station.

Even when Hurricane Wilma grew into a massive Category 5 behemoth, packing winds of 184 mph, they thought they could handle it. They lowered the sails, put out three massive anchors and sat tight.

The storm began hitting Legacy at midnight, Oct. 23. At first, it seemed like a repeat of Katrina. So Halmos went to sleep.

At about 1 a.m., he felt a lurch. He got out of bed and the boat lurched again, throwing him down the stairs.

He got upstairs to Captain Ed, who told him the anchors were loose. What neither man knew was that the anchors had snapped in half. They used Legacy's powerful diesel engines to stay in the shallows for 90 minutes.

Then, water began pouring through the air vents — 11 tons of it in all. They tried to plug the flow, but couldn't. The danger was not that Legacy would sink, but that the electrical systems would short and spark a fire.

They had to shut down the engines. With no ability to hold her in place, Legacy was sucked out to sea and thrown around "like a leaf in 25-foot waves," Halmos says. He thinks a tornado spawned by the hurricane hurled Legacy to and fro.

With the radios down, they tried phoning the Key West Coast Guard Station, but everyone there had packed up and fled to Orlando.

The Miami Coast Guard Station was unable to help. "You're on your own," they told Captain Ed. "But we'll be happy to notify your next of kin."

Inside the Legacy, Captain Ed still had a signal on his cellphone. He offered it to Halmos and the six other crew members in case anyone wanted to talk to their loved ones. But Halmos didn't call his wife, Vicki, in Palm Beach.

"I don't have any life insurance and my wife would have been screaming at me saying, 'See, you should have gotten some insurance.' "

In deep water, buffeted by 125 mph winds and massive waves, engines out, in pitch black night, Halmos and the crew stood in a circle in the ship's living room, held hands, and prayed. They all expected to perish. Their only other option was to break out the life raft. "That would have been suicide," he says.

After a terrifying hour, Legacy began hitting ground — rising up in the waves, smashing back to sea bottom, again and again.

"Finally, we came to rest," Halmos says.

At first light, with winds still at 60 mph, Halmos and the crew had no idea where they were. The giant masts had snapped and toppled.

To determine the depth of the water, Captain Ed taped a hammer to a pole and lowered it to the water, but the hammer fell off. And stuck upright.

The water was only a few inches deep.

They were saved.

$82 million payoff

Peter Halmos made his millions the hard way. He started a company from scratch based on a simple idea: that people would pay a fee for credit-card protection.

In 1969, at the age of 25, with $1,000, the Hungarian émigré with an MBA from the University of Florida, and his younger brother Steven launched SafeCard Services from the bedroom of Peter's Fort Lauderdale condo.

By 1992, it had 13 million customers, $22 million in earnings and $2 billion in market capitalization, according to Business Week magazine. Eventually, Halmos stepped down as CEO and chairman and became a consultant before leaving the company for good. With new management in place, SafeCard nose-dived. The Internal Revenue Service raided SafeCard in a tax fraud investigation, sparking a decade long fight between Halmos, the IRS, the Securities and Exchange Commission and his former company.

Eventually Halmos secured an apology from the IRS and $81,602,839 from SafeCard's new owner, CUC International Inc., according to an announcement by Halmos at the time.

The lawsuits cost him $45 million, according to Business Week.

To get an idea of how litigious Halmos is, and how complicated the multiple lawsuits were, you only have to go to the Web site of the law firm of Winston & Strawn in Chicago, where attorney Jeff Wagner boasts about his work with Halmos.

"In connection with his representation of Peter Halmos, Mr. Wagner managed approximately two dozen cases pending simultaneously in federal and state courts in 12 jurisdictions," the Web site says.

This jovial freckle-faced man in floppy hat and cockeyed sunglasses is a pit bull when he's crossed. If Halmos believes something isn't right, or fair, or just, he'll sue.

"Righting wrongs is what we do," he says.

So when the federal government threatened to charge him a $22 million fine for disturbing the marine preserve with his mega-yacht, Halmos put on his fighting gloves once again.

An aquatic village

"People say, 'How stupid is he?' " says Siegfried, the New York PR man. "What was he doing in a hurricane in the first place?"

But what else could he do? The closest port that could accommodate Legacy was in Savannah, Ga. "That's a long way in the ocean with a hurricane chasing you," Halmos says.

Nearly 400 vessels were destroyed or grounded in the Florida Keys by Hurricane Wilma, but only Legacy was stuck in a federal marine preserve. "It's an important habitat for marine life," explains Cheva Heck, communications manager for the Florida Keys National Marine Sanctuary. "We're charged with protecting natural resources, which in this case is sea grass. It serves as a nursery for fish and marine life."

The U.S. Coast Guard had other worries. There were 10,000 gallons of fuel, plus oil and other pollutants still aboard Legacy. "They came and said, 'Who's going to be responsible if there's a leak?' "

Halmos pledged to stay and protect the environment. What he didn't know was that he'd also have to fend off pirates and thieves.

Most boats were easily shooed away. But one kept coming, prompting Halmos to break out his rifle. "I had to tell the guy that if he's not out of here by the time I count to 10, I'm gonna blow his head off," Halmos says. "And I would have done it."

The boat moved away.

But as Halmos is recounting the story, another vessel approaches in broad daylight.

"See, what happens when people come out here, some come just to look, but when they do that, see, he's hitting bottom."

Captain Ed and another crew member quickly board an inflatable boat and race to the approaching vessel to warn it off. Its engines churn up the sea bottom as it turns away.

"There's absolutely no reason for anybody to be getting so close," Halmos says.

Because of the pirates, thieves and curious tourists, Halmos has set up his own "aquatic village," about a mile away from Legacy, to keep an eye on his prize.

It consists of five houseboats, lashed together, and anchored, along with a fleet of smaller boats and tenders. A massive 75-foot multilevel houseboat is his home. From afar, it looks like a set from the Kevin Costner movie Waterworld.

His wife, Vicki, rarely visits.

"I don't think she's a water person," Siegfried, the PR man, says.

Freeing Legacy

The main agency handling Legacy is the National Oceanic & Atmospheric Administration, which issues permits and has to sign off on any plan to free the ship.

Negotiations have been difficult. Halmos knew that traditional salvaging methods, involving huge barges and cranes, would tear up the fragile ecosystem. So he found a company in Crestwood, Mo., with a unique plan: build a 1,000-foot-long, 50-foot-wide structure around Legacy, fill it with water, and float her out.

"Like a giant swimming pool," Halmos says.

Halmos says at one point NOAA was going to fine him $22 million, and untold millions more for cleanup. He believes it was an attempt by the government to set a precedent and eliminate the "act of God" exemption that boaters receive when their vessels are hurled around in hurricanes and other beasts of nature.

Finally, after more than a year of negotiations, Halmos and NOAA reached agreement at 11 p.m. on Dec. 31, 2006.

"We have got it worked out with Peter," says NOAA special counsel Craig O'Connor, who worked on the deal.

Heck, from the marine sanctuary, is on the same page. "We have authorized the recovery plan. We're excited about moving forward with getting the vessel off the sea grass flats."

She says the damaged grass under Legacy will be replanted. "Any additional injuries that occur during removal will be evaluated to see if restoration is required."

She says Halmos is responsible for those repairs, but not for the damage that occurred when Legacy was pushed sideways for a mile, carving out a wedge into the preserve, which is clearly visible in aerial photographs taken by Vanity Fair for a recent story on Legacy.

As to the Fas-Dam technique of floating Legacy in a kind of swimming pool out of the mess, Heck says, "To my knowledge, it's never been used in the sanctuary. We're actually very interested in seeing the technique."

Both NOAA and the Coast Guard will be there, watching closely as Legacy is freed.

Heck declined to discuss Halmos' claim that the government was trying to eliminate the act of God exemption.

Going home again

Herb Wiseman, senior project manager for Fas-Dam, is almost finished moving equipment to the Keys to prepare for the salvage operation, which could take several weeks, even months.

"With any salvage operation, you're subject to old man weather," says Wiseman.

When Legacy is finally freed, Halmos will put her within a much larger ship and sail her back to Italy, where repairs will take up to three years. The masts alone will cost $6 million to replace. He expects the total salvage and repair bill to be $16 million, exactly what it cost to build the ship.

"But the replacement value is $30 million," Halmos says.

Insurance will cover most of the expense.

But Halmos doesn't appear to be ready to move back to his Palm Beach mansion. "Been there, done that," he says. His two grown sons, Nick and Greg, are on their own. And his wife is busy producing plays through the Vicki and Peter Halmos Family Fund for Theatre Arts.

Halmos is thinking about purchasing an interest in the houseboat company that supplied his living quarters. He has purchased solar panels and plans to investigate hydro and wind power technologies to make his aquatic village self-sufficient and pollution free. He could, conceivably, live there forever like Aquaman or Robinson Crusoe. He could call it the People's Republic of Peter Halmos.

Even so, he pines for what once was.

"I miss nights on the Legacy, the way it would rock side to side, almost like a cradle," Halmos says.

Siegfried misses the food. "We had 12 choices for breakfast," he says. Now the only luxury is a fancy espresso machine, which Halmos uses to make cappuccino. Most of the time, they fetch takeout from Key West dives.

Siegfried wonders what will happen to Halmos when Captain Ed goes home to his wife and 7-year-old daughter in West Palm Beach. But Captain Ed isn't worried about Halmos.

"It's the happiest I've seen him," he says. "He's a waterman. He doesn't care about his billions or whatever. Give him a boat, with steps on the back, and he'll be gone for five hours looking for shells."

Halmos, the corporate shark, is now the old man and the sea.

As he pulls the Donzi up to his aquatic village after a trip to Key West to pick up some takeout ribs and grouper, he spots one of his new friends.

"That's Lurch," he says, pointing at a great white heron standing in the shallows.

"I caught a fish at Legacy. A snapper. I got him on deck and he just looked at me. Really, he looked at me, like, 'What are you doing?' I unhooked him and threw him back. Now when I go fishing I go somewhere else.

"I know it sounds like a guy who's been on an island too long talking to coconut heads, but there's a connectivity here. I just find it peaceful. You don't have the hassles. Just smell the air."

He pauses for a moment to take in the sky after the sun has dipped below the horizon, creating another spectacular sunset.

"I do consider this an act of God," he says. "Not the storm, but pushing us to an aquatic paradise within a few minutes of Key West, I consider that an act of God."


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