Early in the game, E. Gadd mentions that he "should have gone to (Luigi) first". At the time, you probably think it's a throwaway line poking fun at Luigi's Butt Monkey status, but later you find out that Mario has been captured by King Boo again and the meaning becomes clear.
So E. Gadd sold King Boo's portrait. What happened to the person who bought it when King Boo got free?
I assumed Bowser got a hold of it. Considering that E. Gadd gave Bowser Jr. the paintbrush in Super Mario Sunshine, who's to say he didn't sell Bowser King Boo's painting.
Considering King Boo wanted to rule everyone and everything at the end of the game, thus including Bowser, I think it is safe to say Bowser and King Boo's partnership is long over.
E. Gadd is actually seeming more erratic, scatterbrained, and downright crazy than usual, to the point where he is throwing Luigi and others into dangerous environments with little concern for their safety. Using an untested methoid of transport that's hinted to have seriously messed up in the past into dark mansions unarmed with hundreds of hostile ghosts, not bothering to warn his assistants to return to the bunker when shit went down. It's entirly possible if not likely that E. Gadd has simply gotten so old he's going senile to the point where most of the threats to the world, Luigi, and his assistants don't really register anymore. For example, he's not really all that worried about the army of unusually tough and pissed off ghosts who may or may not be poised to conquer the world as much as he is worried that all the research he was doing on them may be damaged by this behavior.
Now combine with this the fact that he's a verifiable genius capable of creating AI, time travel, a device that captures and contains incorporeal spirits, and a giant paint brush that alters reality. What kind of hell is going to break loose next time he gets bored, assuming it isn't actually hell itself?