THE FLT DEPARTED WITH FULL FUEL TANKS. DURING CRUISE FLT AT 1,200 FT, 3 HRS 11 MINUTES LATER, THE PLT REPORTED THAT THE ENG BEGAN TO MISS. ATTEMPTS TO CORRECT WERE UNSUCCESSFUL. THE CONDITION CONTINUED & THE ACFT BEGAN TO SHAKE VIOLENTLY AND OILY SMOKE ENTERED THE COCKPIT. THE PLT DITCHED THE ACFT AND IT SANK IN 2,500 FT OF WATER. BOTH OCCUPANTS EXITED WITH NO INJURIES BUT THE PAX REPORTEDLY LOST HIS LIFEJACKET DURING THE EGRESSION. THE ACFT WAS NOT RECOVERED. THE ACFT WAS EQUIPPED, AS REQUIRED, WITH A 4-PERSON LIFERAFT & MANUALLY OPERATED EMERGENCY POSITION INDICATING RADIO BEACON, BOTH OF WHICH WERE POSITIONED IN THE BAGGAGE COMPARTMENT BUT WERE NOT RECOVERED BEFORE THE ACFT SANK. THE PAX WAS NOT REQUIRED TO BE MEDICALLY CERTIFICATED. ACCORDING TO A LAWYER REPRESENTING HIS ESTATE, HE HAD UNDERGONE A CARDIAC TRIPLE BYPASS IN NOV 89, & WAS TAKING MEDICATION FOR HIGH BLOOD PRESSURE & DIABETES.