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*spoiler*
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Make sure you read the ransom scroll in the cupboard in the room with the hostage. Then the character with the silver pantaloons will appear in front of the Copper Coronet in the slums. I forget his name but he should be the only guy there who looks like a Human Noble. Without talking to him, have a fairly highlevel theif pickpocket him (quicksave in case of failure), once you have your prize, go back and release the hostage.
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