Former Fred Leighton Owner Gets Jail Time for Fraud

(IDEX Online News) – A U.S. federal judge on Friday sentenced Ralph Esmerian, the former owner of the high-end jewelry retailer Fred Leighton, to six years in prison for fraud. The sentence follows Esmerian, 71, guilty plea in April to wire fraud, bankruptcy fraud and concealing assets.

Manhattan federal Judge Denise Cote also ordered Esmerian to perform 1,800 hours of community service and forfeit $20 million.

Fred Leighton filed for Chapter 11 bankruptcy protection in April 2008, listing debts and liabilities of between $100 million and $500 million. The filing was made shortly after Esmerian lost a court battle to prevent the sale of jewelry items in an auction.

The fourth-generation jeweler bought Fred Leighton in 2005 using a $217 million loan from Merrill Lynch and others, using high-end jewelry as loan securities.

In 2006, Esmerian sold $5 million of the jewelry pledged as collateral and later double-pledged $6 million more to secure a new loan.

Esmerian allegedly wired money from the sold collateral to his personal bank account even after Fred Leighton filed for bankruptcy.

"Ralph Esmerian tried to game the financial system and the bankruptcy process for years to finance his businesses," Manhattan District Attorney Preet Bharara told Dow Jones Newswires. "As a result of his frauds, the lenders who trusted him have lost tens of millions of dollars."

In 2009, Kwiat Enterprises, LLC, along with two partners, has purchased the assets of bankrupt estate of Fred Leighton in a $25.8 million deal.