Until last September, life was pretty sweet for Ralph Esmerian a fourth-generation, rare-jewels dealer who enjoyed a life of wealth, taste and art-collecting in the old-money enclave of Manhattan's Upper East Side. But "not even diamonds as big as the Ritz" can save Esmerian "from the jaws of Wall Street now", says The First Post.
Aiming to tap the wealth of Hollywood, he ventured into the brash new world of 21st-century finance, racking up a $177m debt with Merrill Lynch using his "Special Collection" as collateral. When the crunch began to bite, Esmerian fell behind with his repayments and found out how quickly "the smiles of Wall Street turn crocodile when debts go bad". They called in the jewels.
This wasn't any old collection, notes The Daily Deal. Among treasures Esmerian, 68, had amassed in a life devoted to collecting, were the French Crown jewels, the 141-carat Taj Mahal Emerald, and a classic Art Nouveau bracelet designed by Lalique. No wonder buyers who turned up at Christie's New York for the auction last week were salivating.
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They were in for a shock. At the 11th hour, the auction was pulled as it was about to get underway, says The New York Times. "Disgusting!" cried a prominent London dealer, who stormed out. It transpired that Esmerian had successfully filed for bankruptcy protection, arguing that Merrill which has written-down some $30bn in subprime debts was bent on a "fire sale" of his treasures that made a mockery of their real value. "It's like a magnificent Fifth Avenue Mansion being offered for the price of a Third Avenue condo." A judge will now decide who takes the spoils.
How did the Princeton-educated aesthete heading a business founded by his great-grandfather in Constantinople in 1871 get himself into this fix? His lawyer puts it down to a clash of cultures. "Ralph is not a hedge-fund person He's a man of such extraordinary kindness," she says. Prior to this, he was mainly known as an amiable philanthropist who put American folk art on the map he's chairman emeritus of the American Folk Art Museum in Manhattan, to which he pledged 400 works in 2000.
He ran his business on old-fashioned goodwill. "When he sells a million-dollar piece... the client might walk out of the store without paying for it. He understands people don't have money sitting in cookie jars," says his lawyer.
The seeds of Esmerian's downfall were sown when he broke the habit of a lifetime by venturing beyond the "genteel parlours of Fifth Avenue", says The First Post. Having already borrowed $57m from Merrill for "estate planning", he was encouraged to borrow $120m more to fund the purchase of Fred Leighton a "showy" jewellery chain with a big Las Vegas presence. The stars flocked to his cause: Cameron Diaz paraded his jewels; Dolly Parton appeared at the Oscars in them, boasting "these cost $1,200,000!"
The name of the man Esmerian hired to run his retail empire should have sounded an alarm: Peter Bacanovic, the "star-stroking" Merrill Lynch broker who went to jail with his friend Martha Stewart for diddling the stockmarket. "Even Merrill Lynch raised an eyebrow at that." Yet it sanctioned the opening of another branch in Beverley Hills last September, although within weeks it was demanding its pound of flesh. "Old money is snobbish, new money ruthless. But ruthless wins."
The new gold rush
Esmerian isn't the only American to be divested of his jewellery. Pawnbrokers and precious metal dealers across the States report a new gold rush as ordinary citizens rush to trade. "People are selling their broken pieces. And women are selling bracelets from old boyfriends they never wore because of bad memories," Cash Company Pawnbrokers told The Seattle Times.
Elsewhere, dentists are trading gold teeth. Some are motivated by a desire to cash-in on the high gold price, but a good many are hardship cases. "Most are selling out of need, not greed," says one dealer. "Most say they need to buy gas, or pay their rent. They're serious." There's no shortage of buyers. The bigger trend is "the surge of interest from people wanting to buy... because they're worried about the economy and the falling value of the dollar".
At the higher end of the market it's not too promising either bad news for Esmerian, as he tries to extract the best prices for his pieces. Earlier this month, Merrill Lynch cut the stock ratings for Tiffany to "sell", says National-jeweler.com. The slightly less bearish Oppenheimer's said: "We are concerned that a second-half rebound in the US luxury market will be tough."
And while gold continues to hold its value, the same may not be true of gems. Rare polished diamonds achieved all-time highs at sales in Geneva late last year. But Sotheby's failed to hammer off a flawless 72.22-carat "D" white diamond, estimated at $10-$12m, at its Asian sales earlier this month. Apparently, it was the third largest "pear-shaped" diamond ever auctioned. That may say it all about the shape of the market to come.
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