captioning funded by cbs and ford-- built for the road ahead. >> kroft: this is the largest bankruptcy in the world. what were the effects? >> the effects were the financial disaster that we are living our way through right now. >> kroft: and who got hurt? >> everybody got hurt. >> kroft: anton valukas was the man in charge of investigating the collapse of lehman brothers, the fourth largest investment bank in the world. he's never given an interview about his findings until now. isn't the government supposed to protect the investors? >> yes. >> kroft: aren't they charged with informing investors? >> yes. >> kroft: why don't they do it?

>> simon: so many christians have been leaving the holy land recently, the unthinkable could actually happen-- sacred cities like jerusalem and bethlehem with virtually no christians. we thought this was an important story of interest to millions all over the world. but michael oren, israel's ambassador to the united states, started objecting to it months ago while we were still reporting the story. i've never gotten a reaction before from a story that hasn't been broadcast yet. >> well, there's a first time for everything, bob. >> keteyian: an amateur diver and part-time treasure hunter made one of the largest discoveries of sunken treasury in history. >> oh, wow! >> get that one. >> we have more than 65,000 emeralds. >> keteyian: that you brought up from the bottom of the gulf. >> yes. >> that is an impressive pile there. >> and the amazing part is, every time we go down, we see a lot of them. >> keteyian: we set out to get to the bottom of the story, only

to discover, just like those pirate tales of old... >> holy cow. >> keteyian: ...there's trouble with treasure. >> i'm steve kroft. >> i'm lesley stahl. >> i'm morley safer. >> i'm bob simon. >> i'm lara logan. >> i'm scott pelley. those stories tonight on "60 minutes." if you made a list of countries from around the world... ...with the best math scores. ...the united states would be on that list. in 25th place. let's raise academic standards across the nation. let's get back to the head of the class. let's solve this. whose non-stop day starts with back pain... and a choice.

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the global economy. it was the largest bankruptcy in history; larger than general motors, washington mutual, enron, and worldcom combined. the federal bankruptcy court appointed anton valukas, a prominent chicago lawyer and former united states attorney, to conduct an investigation to determine what happened. included in the nine-volume, 2,200-page report was the finding that there was enough evidence for a prosecutor to bring a case against top lehman officials and one of the nation's top accounting firms for misleading government regulators and investors. that was two years ago and there have been no prosecutions. anton valukas has never given an interview about his report until now. this is the largest bankruptcy in the world. what were the effects? >> anton valukas: the effects were the financial disaster that we are living our way through right now. >> kroft: and who got hurt? >> valukas: everybody got hurt. the entire economy has suffered from the fall of lehman

brothers. >> kroft: so, the whole world? >> valukas: yes, the whole world. >> kroft: when lehman brothers collapsed, 26,000 employees lost their jobs and millions of investors lost all or almost all of their money, triggering a chain reaction that produced the worst financial crisis and economic downturn in 70 years. anton valukas's job was to provide the bankruptcy court with accurate, reliable information that the judges could use to resolve the claims of creditors picking over lehman's corpse. had you ever done anything like this before? >> valukas: i've never done anything like lehman brothers. i don't think anybody else has ever done anything like lehman brothers. >> kroft: so, your job... i mean, in some ways, your job was to assess blame? >> valukas: our job is to determine what actually happened, put the cards face-up on the table, and let everybody see what the facts truly are. >> kroft: valukas's team spent a year and a half interviewing hundreds of former employees, and pouring over 34 million documents.

they told of how lehman bought up huge amounts of real estate that it couldn't unload when the market went south; how it had borrowed $44 for every $1 it had in the bank to finance the deals; and how lehman executives manipulated balance sheets and financial reports when investors began losing confidence and competitors closed in. did these quarterly reports represent to investors a fair, accurate picture of the company's financial condition? did not. >> kroft: and isn't that against the law? >> valukas: it certainly, in our opinion, was against civil law, if you will. that there were colorable claims that this was a fraud, yes. >> kroft: by "colorable claims," valukus means there is sufficient evidence for the justice department or the securities and exchange commission to bring charges against top lehman executives, including c.e.o. richard fuld, for overseeing and certifying misleading financial statements, and against lehman's accountant, ernst and young, for failing to challenge lehman's numbers. >> valukas: they'd fudged the numbers. they would move what turned out to be approximately $50 billion

of assets from the united states to the united kingdom just before they printed their financial statements. and a week or so after the financial statements had been distributed to the public, the $50 billion would reappear here in the united states, back on the books in the united states. >> kroft: and then, the next financial statement, they would move it overseas again and file the report, and then move it back? >> valukas: right. >> kroft: it sounds like a shell game. >> valukas: it was a shell game. it was a gimmick. >> kroft: lehman misused an accounting trick called "repo 105" to temporarily remove the $50 billion from its ledgers to make it look as though it was reducing its dependency on borrowed money and was drawing down its debt. lehman never told investors or regulators about it. this is really deception to make the company look healthier than it was. >> valukas: yes. >> kroft: deliberate? >> valukas: yes. >> kroft: how are you so sure of that? >> valukas: because we read the e-mails in which we observed the people saying that they were doing it. we interviewed the witnesses who

wrote those e-mails, or some of those e-mails, and asked them why they were doing it, and they told us they were doing it for purposes of affecting the numbers. >> kroft: do you think that lehman executives knew that this was wrong? >> valukas: for some of them, certainly. there was concerns being expressed by... at high levels about whether this is appropriate, what happens if the street founds out about it. so, you know, there was a concern that there's a real question about whether we can do this, whether this was right or not. >> kroft: one of those people was matthew lee, who had been a senior executive at lehman and the accountant responsible for its global balance sheet. lee was one of the first to raise objections inside lehman about the accounting trick known as repo 105. >> matthew lee: it sounded like a rat poison, repo 105, when i first heard it. so i investigated what it was, and i didn't like what i saw. >> kroft: was there a point in which you saw the accounting principles employed by lehman brothers change? >> lee: november 30, 2007, was the end of our fiscal year. and i fully expected us, you know, to make a loss that year, like everyone else.

and when i saw we made money-- it was a record year, in fact-- i thought, "that doesn't sound right." you knew the markets were doing badly, so why wasn't lehman doing badly? and every time i found something and i went to my boss or whoever, no response. >> kroft: that was ten months before lehman brothers went bankrupt. lee's position required him to sign off on the accuracy of the firm's accounting practices every quarter. but in november of 2007, he declined to do it. by refusing to sign it, you were saying that you didn't believe the numbers. >> lee: correct. >> kroft: that this wasn't a fair and accurate representation of the financial condition of lehman brothers. >> lee: right. "something's up here. why can't people answer my questions?" you know, "why has repo 105 doubled? give me an answer." you know, nothing was said. >> kroft: lee continued to press people for more information, but nothing changed. and four months before lehman collapsed, he sent this letter to lehman's top executives. >> lee: "i've been telling you all year. i've been banging my head against the wall.

i'm now putting it in writing." >> kroft: says "it requires me to bring to the attention of management conduct and actions on the part of the firm that i consider to be possibly unethical and unlawful." >> lee: yeah. >> kroft: what were you talking about, specifically? >> lee: well, in that particular letter, i was general. there were so many specifics. i could have written laundry lists. >> kroft: what kind of a response did you get from this letter? >> lee: it's like throwing a grenade. i wanted to wake somebody up, at least to address the topics. >> kroft: it worked. six days after he sent that letter, matthew lee was downsized, let go after 14 years. but lehman executives couldn't ignore the letter, and asked their accountants from ernst and young to interview matthew lee. >> valukas: and in those interviews-- we have the notes, which are part of the report-- he says very specifically $50 billion, repo transactions, moving money off the balance sheet at quarter end. so our conclusion was ernst and young certainly knew it as of

that time, and did nothing with it. >> kroft: valukas says ernst and young was legally bound to make sure that lehman's audit committee and its board of directors knew about lee's allegations of the unethical and unlawful accounting practices. but they never did. did the audit committee know? >> valukas: no. >> kroft: did the board of directors know? >> valukas: no. >> kroft: did dick fuld know? >> valukas: did dick fuld know? well, he says no. >> kroft: the only place lehman's c.e.o., richard fuld, has publicly answered questions about his firm's bankruptcy has been in front of congress. >> richard fuld: i have absolutely no recollection whatsoever of hearing anything about or seeing documents related to repo 105 transactions while i was the c.e.o. of lehman. >> valukas: he said the same thing to me face-to-face. >> kroft: do you believe him? >> valukas: there was evidence which would show that that's not accurate. the president of lehman brothers told us that, in fact, he had conversations with dick fuld about this, and documents were

shared with him which would reflect the repo 105 transactions and how they were being used. richard fuld's view on that was that he has no knowledge of it. you have other evidence that he did. a jury would have to decide who's telling the truth. >> kroft: but so far, there has been no jury to hear the evidence. despite valukas's findings, and the supporting documents and testimony to back them up, the securities and exchange commission has not brought any charges of any kind against former lehman executives. for the past few months, we've made numerous requests to interview the s.e.c.'s head of enforcement. all of those requests have been declined. the securities and exchange commission has not brought a case. >> valukas: no, they have not. >> kroft: does that bother you? >> valukas: i'm not permitted to be bothered by that. you know, my job was to set out the facts, lay it out. they have to make their own prosecutive decisions. >> kroft: there is one plausible explanation why the s.e.c. has not gone after top lehman executives. as it turns out, some of

lehman's most egregious accounting shenanigans took place right under the noses of government regulators. how closely was the s.e.c. monitoring lehman brothers during this time? >> valukas: they were on premises. they were talking to the lehman people daily. they officed there. >> kroft: it was not widely known at the time, but during the last six months of lehman's existence, teams of officials from the s.e.c. and the federal reserve took up residence inside the firm to monitor its precarious financial situation. they were inside the building when mathew lee wrote his letter to lehman executives alleging unlawful accounting practices, and they were there when the practices took place. valukas says the s.e.c. also knew that lehman was being less than truthful when it said it had enough assets to survive the crisis. but that and other damaging information was never disclosed to investors, who continued to pump billions of dollars into the firm. should it have been disclosed? >> valukas: absolutely. >> kroft: isn't the government,

the s.e.c. in this case, the... the people who were supposed to protect the investors? >> valukas: yes. >> kroft: aren't they charged with informing investors? >> valukas: yes. >> kroft: why didn't they do it? >> valukas: they may not have had the expertise necessary to understand the material they were receiving. they were getting the material. whether they understood it is another question. >> kroft: the very fact that government regulators were inside the company with access to its books and records would complicate any prosecution of lehman officials. until four months ago, david kotz was the s.e.c.'s inspector general. over the previous four years, he issued more than 100 reports about major deficiencies in the way the s.e.c. did its job. if the s.e.c. knew about some of these problems at lehman brothers and they weren't disclosed, doesn't that make it difficult for the s.e.c. enforcement division to come back and bring action against lehman brothers? they were there; they saw it. >> david kotz: yeah. i think that that's definitely an impediment to a potential case. and, certainly, if you go before a jury, the defense lawyers can make a big point about the fact

that, "you were there. you knew about it. why didn't you do anything at the time? now, you're coming after them." >> kroft: in fact, former lehman c.e.o. richard fuld seemed to be trying out that defense when he testified before congress in 2008. >> fuld: throughout 2008, the s.e.c. and the federal reserve conducted regular and, at times, daily oversight of our business and our balance sheet. they saw what we saw in real time. >> kroft: let's just assume, for a moment, that anton valukas' findings are true. i mean, isn't this just a free ticket for executives to say, "well, look, you know, lehman did so-and-so, and nothing happened to them." >> kotz: right, no, i think absolutely, that's a serious problem. i mean, obviously, there has been a tremendous financial crisis. the people who engaged in improper behavior need to be punished. i think it's critical for the s.e.c. to go after, not just companies, but also individuals, where they have the evidence to do so. >> kroft: when lehman's bankruptcy was finally settled, there were claims against it for $370 billion.

the creditors settled for about 20 cents on the dollar. former c.e.o. richard fuld now runs a consulting business in manhattan. he lost most of his fortune and is embroiled in a raft of litigation, but is still a wealthy man. most of his senior colleagues at lehman have landed on their feet. ernst and young, lehman's accounting firm, is now being sued by new york state for aiding and abetting a fraud. and matthew lee, the senior accountant who blew the whistle at lehman, is still looking for work, unconvinced that much has changed in the world of finance over the last four years. >> lee: you know, the entrepreneurs of wall street are continually getting more and more sophisticated. and they don't necessarily want regulators or auditors to fully understand what they're doing. >> kroft: do you believe the balance sheets of big wall street firms, if you read them now? >> lee: these numbers are so big and the financial instruments are so complex that, you know, nobody stands a chance, really,

of understanding. i'd have more fun investing in crap tables in las vegas than wall street firms. sponsored by:. >> glor: good evening. wal-mart says it's investigating whether top executives tried to counsel a bribery scandal to get spores built in mexico. the imf has doubled its cash reserved to $430 billion to fight europe's debt crisis, and gas prices dipped four cents in the past week to $3.86 a gallon. i'm jeff glor, cbs news. [ bell tolls ]

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the one place where christians are not suffering from violence is the holy land. but palestinian christians have been leaving in large numbers for years-- so many, the christian population there is down to less than 2%. and the prospect of holy sites like jerusalem and bethlehem without local christians is looming as a real possibility. this is what the holy land looks like today: bethlehem, where jesus was born; nazareth, where he grew up; jerusalem, where he died and where christians believe he was resurrected. nazareth is inside the state of israel. bethlehem is on the israeli- occupied west bank. the christian section of jerusalem is also under israeli control. we know the area well, know that it is arguably the most fought- over piece of real estate in the world, sacred to half of humanity. still, when we decided to do the story last year, we did not

realize it would become so controversial. ( bell tolling ) our story begins in bethlehem, where it all began. we went to st. catherine's in the church of the nativity. for local catholics, this is their parish church. the day we went, a confirmation was under way. father marwan dides, a franciscan, led one child after another up to the altar, watched by proud parents. the church was so crowded, it was difficult to believe that christians now make up only 18% of what was, for centuries, an overwhelmingly christian town. >> father marwan dides: we are the living stones of the holy land. from here, it all started. and it had to continue. it's a must. it must continue. if there is no people, no christians here, it will never continue.

>> simon: here in jerusalem, the numbers are even bleaker than in bethlehem. >> theophilos iii: inside here, famous church. >> simon: theophilos iii, the patriarch of the greek orthodox, has lived through the decline. his church, the church of the holy sepulchre, is the most sacred site in christendom. he took us up to the roof. you've got to know a patriarch to get here. >> theophilos: come in. you are inside the holy sepulchre. inside the holy sepulchre. just inside here is the tomb. >> simon: that is, the tomb which covers the site of the resurrection. when you first came here in 1964, what was the percentage of christians in the old city? >> theophilos: there were around 30,000 of christians living in the old city. >> simon: and now, how many are there? >> theophilos: very few. >> simon: so few-- some 11,000 christians out of a population of almost 800,000, just 1.5%. religious leaders are afraid jerusalem could become a museum,

a spiritual theme park-- a great place for tourists and pilgrims, but not for the arab christians whose roots date back to the church's very beginnings. >> mitri raheb: christianity started here. the only thing that palestine was able to export so successfully was christianity. >> simon: mitri raheb is a palestinian, a christian, and a lutheran minister from bethlehem. he runs schools, cultural centers, and health clinics. >> raheb: christianity has actually on the back a stamp saying, "made in palestine." >> simon: palestinian christians, once a powerful minority, are becoming the invisible people, squeezed between a growing muslim majority and burgeoning israeli settlements. israel has occupied the west bank for 45 years. >> raheb: if you see what's happening in the west bank, you will find that the west bank is becoming more and more like a

piece of swiss cheese, where israel gets the cheese-- that is the land, the water resources, the archaeological sites-- and the palestinians are pushed in the holes behind the walls. >> simon: israel built the wall over the last ten years, which completely separates israel from the occupied west bank. the wall was built to stop palestinian terrorists from getting into israel. and it's worked-- terrorism has gone down 90%. at the same time, the wall completely surrounds bethlehem, turning the little town where christ was born into what its residents call an "open-air prison." do you remember the day they put up the wall? >> christie anastas: yeah. actually, it was in 2003 and i was about 14 years old. i went to school one day, and came back and found the wall surrounding the house. >> simon: christie anastas lives with her mother claire, her father, brother and sister in

this house which is surrounded on three sides by the wall. how do you live with this? >> christie anastas: well, it's not easy, actually, but you get used to it, because you have to. >> simon: the anastas family lives on the third floor. this is the view from the kitchen... from the master bedroom and bathroom. the children's room has a good view of this israeli guard tower. the family runs a souvenir shop on the ground floor, sells christian artifacts on what used to be the busiest commercial street in town. now, it's a dead end. members of your family have already left? >> claire anastas: yes. >> simon: and they have asked you to leave, too? >> claire anastas: yes. >> simon: what do you say to them? >> claire anastas: i tell them we have to stay. we need to stay and struggle and fight. this is our cross. >> simon: for all palestinians, just leaving bethlehem is a struggle. getting to jerusalem, only seven miles away, whether it's to pray, go to a doctor, visit

family members, or work, means going through this israeli checkpoint. that can take hours. but before palestinians can get even this far, they need a permit from the israelis, which can take weeks or months to obtain and is frequently denied. >> michael oren: we regret any inconvenience caused by the security precautions. but it's their inconvenience, it's our survival. >> simon: michael oren, who used to be israel's director of inter-religious affairs, is israel's ambassador to the united states. >> oren: we have to protect our... our country. but sometimes, you have to do what you have to do in order to survive. >> simon: for palestinian christians, the survival of their culture is in danger. in towns like bethlehem, which used to be distinctively christian, muslims now are a clear and growing majority. the veil is replacing the cross. but inside israel, in christian towns like nazareth, arabs are

israeli citizens and, according to ambassador oren, they're thriving. the reason christians are leaving the west bank, he says, is islamic extremism. >> oren: i think that the major problem in the west bank, as in elsewhere in the middle east, is that the christian communities are living under duress. >> simon: and this duress is coming from muslims, not from the israel occupation. >> oren: i believe that the major duress is coming from that. >> zahi khouri: great selling point. easy to sell to the american public. >> simon: zahi khouri is a palestinian businessman. he owns the west bank coca-cola franchise. >> khouri: i'll tell you i don't know of anybody, and... and i probably have 12,000 customers here. i've never heard that... that someone is leaving because of islamic persecution. >> simon: ari shavit, one of israel's most respected columnists, believes christians have become collateral damage. >> ari shavit: i think this is a

land that has seen, in the last century, a terrible struggle between political judaism and political islam in different variations. >> simon: and the christians are being squeezed in the middle between the jews and the muslims? >> shavit: absolutely. >> simon: should israel be concerned about that? >> shavit: i think we should all be concerned about it. political judaism and political islam are rocky. they are harsh. and the friction, the clash between them is very violent. >> simon: in 2009, this group of christian activists did something unprecedented. they published a document called "kairos" criticizing islamic extremism and advocating non- violent resistance to the israeli occupation, which they called a "sin against god." it was endorsed by the leaders of 13 christian denominations, including greek orthodox, roman

catholic, lutheran, and anglican. >> oren: these are denominations who have been exceedingly critical of the state of israel, and sometimes to the point of going beyond legitimate criticism, and so... >> simon: what does that mean to go beyond legitimate criticism? >> oren: well, i think accusing of us of crimes that would be very, i think, historically associated with anti-semitism. and it was actually so inflammatory, bob, that we didn't... many of us didn't even bother responding to it. >> raheb: they are fearful of this document because they are afraid this might influence the christian world. >> simon: reverend raheb, who helped write the document, says it's anything but anti-semitic. >> raheb: this document is... doesn't ask for violent. it doesn't ask for revenge. the most powerful thing in this document actually is that asking for hope and love and faith. >> simon: do you think the israeli government ever thinks of the fact that, if christians

aren't being treated well here, and america is an overwhelmingly christian country, that this could have consequences? >> shavit: israel is not persecuting christians as christians. the christians in the holy land suffer from israeli policies that are a result of the overall tragic situation. and this, of course, has... has consequences for everybody. >> simon: for israel, there could be serious economic consequences. according to israeli government figures, tourism is a multi- billion dollar business there. most tourists are christian. many of them are american. that's one reason why israelis are very sensitive about their image in the united states. and that could be why ambassador oren phoned jeff fager, the head of cbs news and executive

producer of "60 minutes," while we were still reporting the story, long before tonight's broadcast. he said he had information our story was "a hatchet job." >> oren: it seemed to me outrageous, completely incomprehensible that at a time when these communities... christian communities throughout the middle east are being oppressed and massacred, when churches are being burnt, when one of the great stories in history is unfolding? i think it's... i think you got me a little bit mystified. >> simon: and it was a reason to call the president of... chairman of cbs news? >> oren: bob, i'm the ambassador of the state of israel. i do that very, very infrequently as ambassador. it's just... that's an extraordinary move for me to complain about something. when i heard that you were going to do a story about christians in the holy land and my assum... and... and had, i believe, information about the nature of it, and it's been confirmed by this interview today... >> simon: nothing's been

confirmed by the interview, mr. ambassador, because you don't know what's going to be put on air. >> oren: okay, i don't. true. >> simon: mr. ambassador, i've been doing this a long time. ( laughs ) and i've received lots of reactions from just about everyone i've done stories about. but i've never gotten a reaction before from a story that hasn't been broadcast yet. >> oren: well, there's a first time for everything, bob. >> simon: this land has seen just about everything over the centuries. the ritual in the church of the holy sepulchre the day before easter hasn't changed in more than a millennium. we went into the church with patriarch theophilos and watched thousands jostling to get as close as they could to the tomb from which they believe christ was risen. pilgrims have been coming here since 1106 a.d. to wash themselves in the holy fire, to

celebrate the founding miracle of christianity. they will certainly continue to do so. but how many will be coming from the neighborhood? that's not a religious question anymore; it's political. >> go to 60minutesovertime.com to see what some of the last villages jesus ever visited look like today. sponsored by pfizer. hi, i'm phil mickelson. i've been fortunate to win on golf's biggest stages. but when joint pain and stiffness from psoriatic arthritis hit, even the smallest things became difficult. i finally understood what serious joint pain is like. i talked to my rheumatologist and he prescribed enbrel. enbrel can help relieve pain, stiffness, and stop joint damage. because enbrel, etanercept, suppresses your immune system, it may lower your ability to fight infections. serious, sometimes fatal events including infections, tuberculosis, lymphoma, other cancers, and nervous system and blood disorders have occurred. before starting enbrel, your doctor should test you for tuberculosis

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>> kroft: tonight, cbs news correspondent armen keteyian on assignment for "60 minutes." >> keteyian: last year, we got wind of a story that seemed, on the surface, too good to be true. an amateur diver and part-time treasure hunter had made one of the largest discoveries of sunken treasure in history, a

sea bed covered in raw emeralds off the coast of key west, florida. we were able to track him down at his home in pennsylvania. he's an unassuming real estate investor by the name of jay miscovich. he poured out a laundry basket full of emeralds before our eyes, and said he believed they were worth hundreds of millions of dollars and likely came from an ancient shipwreck. what's more, he said, wall street investors were backing him and the smithsonian was buzzing. we set out to get to the bottom of the story, only to discover, just like those pirate tales of old, there's trouble, lots of trouble with treasure. our search began on dry land-- on madison avenue, to be exact-- at one of new york city's high- end jewelry stores... look at that. ...where jay miscovich showed off a sample of his find. >> jay miscovich: we've brought up over 80 pounds, so far. this, you are seeing probably 30 pounds of it here.

>> greg kwiat: that is an impressive pile. >> ed peterson: holy cow. >> keteyian: any question on the authenticity of... of these stones, at all? >> peterson: no. no, this is the real mccoy. >> keteyian: gemologist ed peterson and owner greg kwiat could hardly believe their eyes. >> kwiat: i think this piece could go to the oscars. >> keteyian: is it possible to put a price on something like that? >> kwiat: we're only halfway through the first case. ( laughter ) the question will be what the provenance is. if it is something exciting or... or sexy, it could add a lot of value to the stone, it could double or triple the value of the emeralds themselves. >> keteyian: the provenance, the origin, that miscovich had hoped for was emeralds from an ancient shipwreck, adding potentially tens of millions of dollars to the value. but he had no proof, so gem specialists couldn't put an age or price on the gems. >> miscovich: you know, i don't claim to be a gemologist. i mean, i knew... what i knew about emeralds is they were green and they... the good ones came from colombia. that's about all i knew. >> keteyian: to help, we enlisted tom moses here at the

gemological institute of america. >> tom moses: what this tells us, it's another piece of the puzzle that indicates that the emeralds originate from colombia. >> keteyian: exactly what miscovich wanted to hear because, for centuries, spanish, dutch, even pirate ships, had ferried colombian emeralds across these waters off the coast of key west. so that's where we headed next, to this haven for drifters and dreamers. a lot of people come here to escape, to lead a double life, so to speak. what... what brought you here from latrobe, pennsylvania? >> miscovich: the adventure, you know, the adventure and the... the sea, the ocean, and... and the lure of the treasure. >> keteyian: for years, miscovich says he went back and forth from pennsylvania, pouring profits from real estate deals into dive after empty dive. >> miscovich: it... it's a total obsession. i've put my life savings into treasure salvage. >> keteyian: but by late 2009, the housing market was crashing, and he was caught holding seven

properties he couldn't sell. nearly broke, he borrowed money from friends and kept feeding his obsession. you never really stopped believing that you are going to find something... >> miscovich: yep, absolutely. >> keteyian: ...that is going to change your life? >> miscovich: absolutely. >> keteyian: as unbelievable as it sounds, he says, it happened in this bar. this is the bar? >> miscovich: it's the one that changed my life, right here. >> keteyian: he says he met up with a down-on-his-luck diver he'd been friends with for years. his friend claimed he'd found a piece of ancient pink pottery while diving out in the gulf, but didn't have the money to explore further. he offered to sell miscovich a nautical map to the site. so what does he say to you that convinces you that this map has any authenticity to it? >> miscovich: well, he just said, basically, "i found this on the site." when he showed me this encrusted-- that's not clean, we didn't clean it-- this encrusted piece of pottery, i immediately got very excited.

because knowing this is absolutely 100% a colonial era piece of pottery. miscovich says he paid his friend $500 for the map. we wanted to confirm the story. but miscovich refused to give us the man's name or whereabouts, saying he paid him $50,000 more after finding the emeralds, in exchange for signing away all rights to the treasure. why have the circumstances surrounding the man who sold you the map been such a sensitive and secret part of the story? >> miscovich: i wouldn't say it is a secret part of the story. i mean, we signed... i had attorneys prepare legal agreements. i felt he should be compensated after i made the big find, but it may not even be even the wreck that he was diving on. so, we are not sure, but it did put us out there that day. >> keteyian: on that day, miscovich and his longtime dive partner, steve elchlepp, followed the map and g.p.s. coordinates to the site of the supposed wreck.

they say they didn't detect anything below right there, but while searching about a mile and a half away, they got a hit on their metal detector and dove in to investigate. >> miscovich: there was a pile of beer cans down there. we saw seven beer cans. >> keteyian: then, he saw something else. >> miscovich: i thought it was glass. and then, i picked it up, and i realized how large and how roundish these things were. and i'm looking at them and thinking, "that couldn't be." and then, i'm looking and looking, and said, "that had to be." so i just signaled to steve. i said, "let's go up." >> keteyian: they later shot this video at the site. >> steve elchlepp: oh, wow. >> miscovich: look at that one. >> keteyian: they thought they'd made an historic find. >> miscovich: just breathtaking, look at that. >> elchlepp: that is unreal. >> miscovich: look at the size of that >> keteyian: over the next two years, they used emeralds like this to convince a handful of investors to put up hundreds of thousands of dollars to fund some 20 trips to the site, where they say they've retrieved emeralds of every shape, size and quality.

>> miscovich: we have more than 65,000 emeralds on the surface already. >> keteyian: that you've brought up from the bottom of the gulf. >> miscovich: yes. and the amazing part is, every time we go down, we see a lot of them. i mean, there's still a huge amount down there. >> keteyian: few people know more about the laws of sunken treasure than key west attorney david horan. miscovich sought him out for help. you must have heard some wild stories over the years-- "hey, i found this, i found that." >> david horan: by the way, this may be one of the wildest. >> keteyian: really? >> horan: oh, yeah. oh, yeah. "i found a whole bunch of emeralds and amethyst and quartz crystals all over the bottom." yeah, right. >> keteyian: so, as he's... as he's telling you the story, you're thinking what? >> horan: i've got to see this. >> keteyian: that's what we were thinking, too. we needed to see the site for ourselves. how many people know the exact coordinates? >> miscovich: three know the exact coordinates. >> keteyian: so, three in the entire world.

>> miscovich: three people in the entire world have the coordinates. >> keteyian: we headed four and a half hours into the gulf, to an expanse of open water, a graveyard of ships sunk by hurricanes and pirates. wow. we are in the middle of ever- loving nowhere. within minutes, they plunged in. our camera crew was right behind, diving 60 feet below into the murky water. there, sitting proper on the silty bottom, was what we had been promised, glittering specks of green. wow. holy cow. soon, our hands were full of rough emeralds, with some amethyst mixed in. >> duncan mathewson: i've never seen so many emeralds coming from such a small part of the ocean floor before in my life. >> keteyian: marine archeologist duncan mathewson specializes in shipwrecks of the florida keys. he is helping miscovich try to solve this mystery-- how such an enormous collection of emeralds

ended up out here. >> mathewson: this is backwards. normally, you find a part of a ship and its wreckage, and then you look for its cargo. this time, you are finding cargo, and now we've got to try to find the rest part of the ship. >> keteyian: they've found other ship wreckage-- musket balls, cannon balls, and part of an old ship hull. but also, some of the emeralds are scattered near the metal beams of a merchant ship that sunk during world war ii. we went so far as to dig out a copy of that ship's manifest at the national archives, but emeralds weren't listed as official cargo. >> keteyian: you have emeralds next to beer cans, next to musket balls, next to cannon balls, next to steel beams. >> miscovich: right. >> keteyian: what does that say to you? >> miscovich: well, that's not unusual in the florida straits, in the florida keys, and on the whole coast of florida. we have, many times, found two and three wrecks even on top of each other. >> keteyian: but still no real answers, right? >> miscovich: no. we know that we have remnants of a colonial-era ancient wreck. but what we also have is several

other possibilities. the coast guard's constantly chasing drug runners through here. did they... were they smuggling drugs and emeralds into the country? and did they jettison them when the coast guard was chasing them and throw them overboard 20 years ago? >> horan: we don't have a clue as to whose wreck it was and how it got there. >> miscovich: holy cow. >> keteyian: it was only after diving the site himself that david horan agreed to represent miscovich. >> horan: mark that. when we get title, i want that one. ( laughs ) there's just an unbelievable amount of emeralds. >> keteyian: did jay understand legally what he had found, what the implications of what he had found? >> horan: he didn't understand the implications as to title. possession was, in his mind, 99.9% of the law. >> keteyian: but the law is not that simple. >> miscovich: we got some amazing stuff today. >> keteyian: it's not finder's keepers, although miscovich could have quietly sold his treasure on the black market.

instead, he hired horan, who then convinced the federal court in key west to give miscovich temporary custody of everything he finds, but it could be years before the court awards full ownership. until then, miscovich can't legally sell a single stone. >> horan: he's emerald rich and cash poor. >> keteyian: jay said a lot of people have told him, "you should've just taken the emeralds and essentially run, cashed in, cashed out." >> horan: he had that option and he didn't do it. and could he be faulted for it? i'm not sure anybody really wants to get into the fight that you get into. it's the trouble with treasure, that's what it is. and there's a lot of trouble that comes with finding treasure. >> keteyian: for jay miscovich, his biggest trouble came in january, when a company that was looking to market his emeralds sent a few dozen to europe for special testing, only to discover that some of the gems had been treated with a jeweler's polish or epoxy,

routinely used to enhance the brightness of emeralds-- polish that has only been in use for the past 50 years or so. this epoxy or polish begs the question, did you put it on the emeralds? >> miscovich: no, absolutely not. >> keteyian: any idea how it got there? >> miscovich: no, no. and the other thing is, it's amazing of the many experts we've called just in the last couple of weeks. they all say it's almost unheard of to put... to treat raw emeralds. >> keteyian: he says he wants to test more of the emeralds, but his investors are drying up. today, he finds himself nearly $10 million in debt to his original investors and lawyers, conceivably more than the emeralds will be worth... >> miscovich: this is where i live, right here. >> keteyian: ...which is why he's living like a pauper in his dive partner's spare room. >> miscovich: i sleep in the kids' bunk bed here, the extra bunk bed. ( laughs ) my feet hang out the bottom of it. >> keteyian: adding to his

troubles, other treasure hunters are challenging the find, accusing him of everything from stealing the emeralds to buying and planting them. a lot of people have been suspicious of this find and of you from the start, that you're running some kind of scam here. >> miscovich: right. >> keteyian: what do you say to that? >> miscovich: those allegations are absolutely frivolous, they're ridiculous. >> keteyian: do you believe, given what you know now, that these emeralds could've still come from an ancient wreck? >> miscovich: i think it's less likely. it's more romantic if we could ascertain that it was a pirate ship, a great sailing ship, which is what we thought we had. but because of the huge number, the value is still going to be extremely significant. i'm hoping, in the next dive season in the next six months, we solve this mystery. i hope we do. >> now it's cbs sports update

presented by follow the wings. i'm bill macatee. at the valero texas open in san antonio, john huff has his first pga tour victory sun 2006. in the nhl playoff, the philadelphia flyers defeated the pittsburgh penguins 5-1. the flyers advance to the eastern conference semifinals. for more sports news and information, go to cbssports.com. follow the wings. ♪ ♪ ♪ don't stop doing what you do ♪ have i paid my dues just to be with you... ♪ ♪ do do do do-do do do ♪ do do do do-do do do ♪ do do do do-do do

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>> kroft: i'm steve kroft. we'll be back next week with another edition of "60 minutes." captioning funded by cbs, and ford-- built for the road ahead.

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