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Monday
Nov222010

Jeweler To The Stars Arrested in Alleged $217 Million Fraud

Photo Courtesy - ABC News(NEW YORK) -- Jeweler Ralph Esmerian sold luxurious baubles to the stars, but Monday his dark gray pinstriped suit was offset by a simple pair of Peerless stainless steel bracelets, slapped onto his wrists by a federal Postal Inspector who arrested Esmerian for an alleged $217 million bankruptcy fraud.

Esmerian, a fourth-generation jeweler and the owner of the posh Fred Leighton jewelry business, allegedly borrowed $177 million from Merrill Lynch and $40 million from Acorn Capital Group, according to a complaint filed in Manhattan federal court Monday, and then "almost immediately" sold the jewelry he'd used as collateral for the loans, shipping the millions in proceeds to an offshore bank.

Esmerian, 70, used the loans to purchase Fred Leighton, a high-end line long associated with celebrities, in 2005, gilding his own family's established wholesale jewelry business. In just the past year stars sighted wearing Fred Leighton creations have included Sarah Jessica Parker, seen in Leighton jewelry at the 2010 Oscar ceremonies, as well as Jennifer Aniston, Meryl Streep, Nicole Kidman, and Tina Fey.

Though Esmerian had a reported $192 million in inventory, he soon failed to meet the obligations on the loans he'd used to purchase Leighton. By 2008, creditor Merrill Lynch had declared him in default and arranged a jewelry auction in an effort to recoup its money.

In 2008, on the eve of the scheduled Christie's auction of the collateralized jewelry, Esmerian filed an eleventh hour bankruptcy. Immediately afterwards, according to an affidavit filed with the complaint by Postal Inspector Eleanor Berry, he "repeatedly and systematically embezzled property belonging to Fred Leighton and other debtor entities."

According to the complaint, after getting the loans Esmerian began to sell off the jewelry he'd used for collateral and wired the money to Switzerland. The complaint, which also charged Esmerian with wire fraud and concealing assets, said he used the same jewelry to obtain more than one loan. Esmerian allegedly stole or double pledged at least $40 million in assets used to collateralize loans.

One piece of swag used to secure a loan, the Boucheron "Endymion Butterfly Brooch," was sold in secret for $2.45 million, federal authorities allege, with Esmerian pocketing the proceeds. When Merrill Lynch discovered what he'd done, authorities claim, Esmerian sold another set of jewels valued at $10 million for a fraction of their value in order to repurchase the brooch.

The exquisite items Esmerian allegedly embezzled from the Fred Leighton business itself and its lenders and creditors included a Lalique Art Nouveau brooch worth $1 million, the Boucheron diamond and ruby butterfly brooch, and assorted diamond, emerald, opal encrusted pendants, necklaces, rings, and earrings.

"Ralph Esmerian allegedly lied and looted to maintain his personal and financial status," said Preet Bharara, U.S. Attorney for the Southern District of New York, "by tricking his lenders, stealing from investors, and deceiving the bankruptcy court."

Postal Inspector Tom Boyle, contacted by ABC News regarding the arrest and complaint, referred all queries to the U.S. Attorney in Manhattan.

Esmerian's attorney, Patricia Pileggi, did not immediately respond to requests for comment.

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