Fred Leighton Jewelry on Madison Avenue, New York.You Might Crack
Published: April 20, 2008
A few minutes after 6, when the auction had been set to start, the cellphone of François Curiel, the director of Christie’s jewelry department, rang. He listened, said thank you and hung up.
“There is no auction tonight,” he announced to a small group of international jewelry dealers gathered at Christie’s Rockefeller Center rooms.
ALSO caught up in the drama is Peter E. Bacanovic, the former Merrill Lynch broker who was sentenced to five months in prison for his role in the Martha Stewart stock case. In January, the month Merrill Lynch first filed suit against Mr. Esmerian in State Supreme Court in Manhattan, he hired Mr. Bacanovic as president of Fred Leighton. He assigned him, among other duties, the job of using his strong social connections to help open a Beverly Hills store.
Hundreds of discerning jewel lovers had descended on Christie’s to admire the glittering wares of Mr. Esmerian. But he was conspicuously absent.
Mr. Esmerian had used the jewelry as part of his collateral for $177 million in loans (now $187 million, with interest and costs) from Merrill Lynch, most of which went to finance the purchase of Fred Leighton. Mr. Esmerian’s contention — part of his legal maneuvers last week — was that his jewelry collection had been undervalued for the forced sale.
Mr. Esmerian was apoplectic about the planned auction being forced by Merrill Lynch. In an emotional interview on Tuesday, he shook his head in dismay as he thumbed through Christie’s lavishly illustrated catalog, pointing to beloved items of jewelry collected by him and by his late father, Raphael Esmerian, a gem dealer who emigrated from Paris in 1940.
How did Mr. Esmerian — an aesthete educated at Groton and Princeton who until last year controlled a jewelry collection estimated to be worth hundreds of millions of dollars — land in such a predicament? His lawyer Helen Davis Chaitman ascribed his woes to a clash of cultures between her client, an amiable philanthropist who has given millions to museums, she said, and Merrill Lynch bankers who issued and capriciously rescinded his credit.
Among other philanthropic work, Mr. Esmerian is chairman emeritus of the American Folk Art Museum, to which he pledged 400 works in 2000.
With the bank’s encouragement, Mr. Esmerian borrowed $110 million more in March 2006, in part to buy Fred Leighton, an estate jewelry company with stores on Madison Avenue and at the Bellagio in Las Vegas, which had raised the profile of estate jewelry in the United States.
IN acquiring Fred Leighton, Mr. Esmerian planned to sell museum-quality jewels from the family’s Special Collection in a retail setting, along with thousands of other pieces from his private stock. (Until then his business was mostly wholesale, consigning jewels to Cartier and other luxury stores around the world.)
After he made timely payments for more than a year, Mr. Esmerian said, the merriment expired abruptly in September 2007 when he called his bankers at Merrill Lynch to ask for two weeks’ leeway for half his monthly interest payments of $1.5 million. “They said, ‘Sorry, we can’t give you any more time to pay the interest,’ ” he said.
Ms. Chaitman places the blame for Merrill’s decision to force the sale of Mr. Esmerian’s jewels on the bank’s own internal woes related to the subprime mortgage crisis. The bank has taken some $30 billion in mortgage-related write-downs since last year; on Thursday it announced layoffs of 2,900 employees.
“In December we had reached agreement on negotiated terms for a forbearance that would have avoided court,” Mr. Halldin said, “but he refused to sign the documentation needed.”
(Ms. Chaitman responded that her client had been forthcoming with Merrill Lynch about his jewelry holdings and that money from some jewelry sales did not go into proper accounts because of a mistake by another bank.)
ANOTHER concern of Merrill’s, Mr. Halldin said, was Mr. Esmerian’s hiring of Mr. Bacanovic, a former stockbroker with a criminal record. The bank discussed its misgivings with Mr. Esmerian.
Fired from his job at Merrill and banned from the securities industry, Mr. Bacanovic had been struggling to find a new path after his release from prison in Las Vegas. “Unlike Martha Stewart, who came right out of jail and went back to running her company,” Ms. Chaitman said, “Peter did not have a platform to come back to.”
While Mr. Bacanovic is not a party to the litigation between Merrill Lynch and Mr. Esmerian, he is involved in pushing Fred Leighton forward, despite the continuing drama. He has changed the displays in the New York store, hired sales people, worked with a public relations team to publicize the brand and brought in his friends, Ms. Chaitman said.
“He has an enormous group of friends and supporters,” Ms. Chaitman said. “And he mixes in a circle of people who can become Fred Leighton customers.”
But in a surprise move, Mr. Esmerian’s lawyers filed for bankruptcy protection of his companies at 4:20. The sale was off again. “In my 40 years at Christie’s, this is the first time it happens,” Mr. Curiel, the auctioneer, said after he had announced the halt, calming his nerves with a white wine spritzer at the bar.
Merrill now seems to have given up on selling the jewelry. Both sides have taken a breath and seem resigned to working within the confines of bankruptcy court. “We think it’s positive that there will be close court supervision of all their activities,” Mr. Halldin said. In any case, the jewelry auction season has passed in New York, and the next one is not until December.
It seems that neither diamonds nor fine art are truly forever. Some of the paintings Mr. Esmerian gave to the American Folk Art Museum were outright gifts, and some were merely promised as gifts, with the understanding that they were being used as collateral on a loan from Sotheby’s.
Although a promise is only a promise, the museum was taken by surprise. “We didn’t know about Ralph’s problems,” said Susan Flamm, a spokeswoman.
“It wasn’t yanked,” Ms. Flamm said. “It was gently handled.”
From top; Evan Agostini/Getty Images; Hiroko Masuike for The New York Times; Lars Klove for The New York TimesBEDAZZLING Ralph O. Esmerian, center, encouraged actresses like Cameron Diaz, top, to wear his jewelry and hired Peter E. Bacanovic, above, as president of his estate jewelry concern, Fred Leighton. Now Mr. Esmerian is at the center of a battle over a big part of his collection.
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