Ensure that you have Lothar in your party. If you do not have him currently accessible, get to the Eirulan teleporter, then head north, passing the Tramway Entrance to the Inn, to the Outpost tramway entrance beyond. He will be standing by the south side of the tramway entrance. Ensure you have an open character slot, then ask him to join your party. Teleport back to Aman'lu.

Head west from the Aman'lu teleporter and walk down the ramp toward the Aman'lu Tavern. Enter and they'll encounter Roland sitting at the second table directly in front of them as they enter. Lothar does not need to be the active character. Speak to Roland and he'll accuse Lothar of stealing his gold cloak. Lothar properly protests that it wasn't he who took the cloak, but Roland is convinced that he did (obviously all Half-Giants look alike to him). Lothar promises to find and return the cloak, plus find the true thief and return with both. Select you'll help him do so to initiate the quest. Note that this quest can not be completed until after the completion of primary Chapter 3 in Act II (The Elen'lu Isles) and your party has returned to the south bridge in Aman'lu and spoken with Finala.

Teleport from the Aman'lu teleporter to the Southern Vai'lutra Forest (North) and follow the path south, using your mini-compass and the map (use the Tab Key) as aids, until your group encounters a short stone arch near the pathway. There's a Levreth Estate, Vai'kesh Forest, Stonebrook Valley Portal signpost pointing south a short distance ahead. Head for the signpost, but detour around the mound behind it and proceed southwest to the southermost entrance to A Watery Cavern. Enter and proceed west farther into the cavern until they come upon a snakelike bridge curving to the southwest, terminating in a mushroom bed, being cultivated by the Half_Giant Magrus. Head up along the bridge and speak with Magrus so that Lothar can have a conversation with him regarding the missing gold cloak. Magrus denies having stolen it, but is obviously lying and soon admits to the theft since Lothar can see it nearby. He then disappears, but leaves his house key behind, which your party retrieves. Given that he was tending his garden, one could logically assume, that his house must not be far away.

Exit the cave and head east back to the main path. Turn north and proceed back toward the Southern Vai'lutra Forest (North) teleporter. When they're about to recross the bridge, press the 'Tab' key and you'll see a star to the north on the larger map. Cross the bridge and follow the path as it curves west. Continue north until they pass a health shrine, and a path appears to the east. Follow the path east toward Magrus' cabin, indicated by the star on the larger map. As they pass through a brief narrow ravine, you'll see Magrus' cabin up ahead. Approach it and open the door with the Elven House Key and here we have Magrus with an orange question mark icon above his head. Speak to him (regardless of your active character, Lothar will do the talking). Lothar tells him that the return of the cloak is insufficient and that Magrus, the true thief, must return to Aman'lu and confess. Magrus decides that he'd rather kill Lothar and a fight breaks out.

Your party should do battle with him and once about 75% of Magrus' Hit Points are depleted, he yields and departs for Aman'lu, which completes this segment of the quest.

Your party should do the same, then head west into the Aman'lu Tavern, where you can immediately see Magrus standing next to the table Roland is seated at. Approach them and have any active character except Lothar speak to Roland, who will profusely apologize and offer a generous reward of some nice items, which Lothar eventually grudgingly accepts. He stipulates that Magrus must serve Roland for one year, but Roland appears to be uneasy with that arrangement. So Lothar then says that Roland may release him after a single month and after that timeframe has elapsed, whenever the release occurs, Lothar will consider the matter closed. This completes the quest.