05/05/2003 at 01:00 AM EDT
Sashaying into a charity ball at New York City's Waldorf-Astoria hotel on April 14, Elizabeth Hurley flaunted more than just her signature décolletage—she also showed off her new beau, Indian businessman Arun Nayar. "He was happy and smiling," says an observer. "It was obvious that they were very much together."
The public outing suggested that things between Hurley, 37, and Nayar, 38, are getting serious. There's just one hitch: Nayar is still married. The heir to his family's multimillion-dollar textile company has been wed to Valentina Pedroni, 33, since '96. "I am hurt," Pedroni told reporters on April 19. The romance "comes as such a blow," adds her friend Rita Dhody. Although Nayar and the Italian-born Pedroni had been separated since last fall, "Val was expecting time to give their relationship a chance," Dhody says.
Hurley's camp says that the marriage was already kaput when the British beauty—who has a son, Damian, 1, with ex-beau Stephen Bing—entered the picture. "Elizabeth is horribly upset by people saying she's a marriage wrecker," says her sister Kate. Contrary to reports, Hurley pal Alessandro Tomé says that he—not Pedroni—introduced the new couple last December. At that point, "Arun had definitely split up with Valentina," says Tomé. "Arun did not leave his wife for her."