The rocks, you see, served as collateral for a loan issued by Merrill Lynch to Esmerian so he could acquire Fred Leighton, the company that blings out many a star on the red carpet and iced Catherine Zeta-Jones on her wedding day (fun fact: Esmerian tapped Martha Stewart's once-jailed, former stockbroker Peter Bacanovic to be CEO). But now Esmerian owes Merrill Lynch more than $180 million, and according to the bank, he stopped making payments in September. Filing for Chapter 11 prevents creditors from collecting on their debt; in doing so yesterday, Esmerian bought himself some more time to start paying his overdue bills, whether or not he deserves it.

Merrill Lynch had been pushing in courts the past few days for the auction to proceed. When a judge ruled yesterday that the auction would go forward, Esmerian filed for Chapter 11 as a last-ditch attempt. Esmerian's lawyer said it was something they wanted to avoid but needed to prevent an "out of control Wall Street investment bank from making a cash grab which will destroy a viable business." Merrill Lynch is asking for the auction to go forward no later than tomorrow. Christie's spent more than half a million dollars marketing the darn thing, so they want it to go forward, too, but in our humble opinion, it doesn't sound like they're being as pushy as the bank. Another hearing is scheduled for 11 a.m. this morning. Will the auction go forward? Will the jewels fetch their worth? Will Peter Bacanovic get in trouble again? Stay tuned.

Esmerian Files Chapter 11 for Fred Leighton [WWD]
On Again, Off Again, on Again Auction Is Not to Be ... Yet [NYT]