What types of video will he be using it for? There are many features that are available, and it will help narrow it down if we know his interests (in addition to Scuba) with regards to video.
For Scuba, my suggestion in that price range is to look at the Panasonic PV-GS320. In my opinion, it will give the best video quality for that price, and there are underwater housings available for it. It runs right around that $400 mark (It's $379 at B & H right now).
If you can't find the GS-320 under $400, then the Canon ZR800 is a good buy. It's less expensive, and has some good features, but the video quality will not be as good as that of the GS320.
Just to give you another more expensive option, the Sony HC96 will give top notch video quality, excellent feature set and runs about $500 right now.
All of these camcorders have housings available for them.