Update: Christie's Jewelry Auction Off as Ralph Esmerian Files for Bankruptcy Protection

Updated April 15, 11:30 p.m.

-- JCK-Jewelers Circular Keystone, 4/15/2008 10:06:00 AM

Ralph Esmerian stopped a court-ordered auction of his jewelry and gems Tuesday by filing a bankruptcy petition on behalf of Fred Leighton, which he controls, Bloomberg News reports.

In a legal maneuver late Tuesday afternoon, just hours before the scheduled auction at Christie's New York, Esmerian's Fred Leighton Holding Inc. and seven affiliated companies filed for bankruptcy protection, Bloomberg reports. The Chapter 11 petition lists between $100 million and $500 million in debts and liabilities and as many as 49 creditors.

The bankruptcy filing thwarted Merrill Lynch's effort to force the auction of an estimated $34 million worth of antique jewelry held by the firm as collateral on the debt. The auction was to have included a $15 million pink diamond ring (pictured) and a $6 million diamond-encrusted brooch once owned by the wife of Napoleon III.

The sale was being held to pay back part of a $178 million loan made by Merrill Lynch to the jeweler, according to media reports.

Esmerian, 68, contended that the auction was a fire sale and that the jewels would bring more money if they were sold privately, The New York Times reports.

Francois Curiel, director of Christie's International Jewelry Department, announced the cancellation at 6:05 p.m. to about 100 collectors and dealers assembled at the Rockefeller Center auction house, Bloomberg reports.

The canceled auction ended a week of high-stakes legal maneuvering between Esmerian and Merrill Lynch.

On Tuesday, Merrill Lynch won a ruling from New York state Appellate Court Judge Richard Andrias, to allow the sale to proceed, Bloomberg reports. Just minutes after the decision, lawyers for Esmerian said they would file a bankruptcy petition.

On Monday, Appellate Division of State Supreme Court agreed with Esmerian to stop the auction. Following that decision early Tuesday, a spokesperson for Christie's told JCK that it was trying to get the ruling changed so it can go on with the auction as scheduled.

Monday's decision to stop the auction overturned a decision a week earlier by Justice Helen E. Freedman of State Supreme Court in Manhattan who ordered the sale to proceed, The New York Times reports.

Lawyers for both sides will return to court on Wednesday for another hearing scheduled for 11 a.m., Bloomberg reports. At that time Merrill Lynch will ask that the auction be permitted to proceed Wednesday night.