Sears Accuses ex-CEO of Looting $2B in Assets

Darnell Taylor
April 21, 2019

The lawsuit, made public on Thursday, was filed by the restructuring team winding down Sears' bankruptcy estate and suing on behalf of creditors, many of whom blame Lampert for the retailer's downfall.

The lawsuit lays outs its charge in its introduction. It also accuses Lampert and other of trying take the most profitable Sears stores to spin off into Seritage Growth Properties. "As Lampert and the other defendants stripped Sears of billions of dollars of assets and encumbered its remaining property with new liens, Sears was suffering billions of dollars of losses annually, and had not generated positive cash flow from operations for years-much less cash flow sufficient to pay principal and interest on its billions of dollars of debt".

Mnuchin, a college roommate of Lampert's at Yale University, had been a director at Sears and ESL, and previously worked with Lampert at Goldman Sachs. Other defendants include Treasury Secretary Steven Mnuchin, who is a former investor and executive at ESL.

In a statement emailed to Chain Store Age, ESL Investments said it "vigorously disputes" the claims in the complaint, which repeats "baseless allegations and fanciful claims".

Sears, which also operates Kmart, filed for Chapter 11 bankruptcy protection in October amid years of massive losses and sales drops.

Among the assets Lampert and the other defendants allegedly unfairly benefited from are Orchard Supply Hardware Stores, Sears Hometown and Outlet Stores, Sears Canada, Lands' End and more than 250 stores spun off into a real estate investment trust spinoff.

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Long before Sears declared bankruptcy and was eventually sold at auction, some stakeholders were eyeing its chairman and CEO, Eddie Lampert, with an increasing amount of skepticism.

A dismantled sign sits leaning outside a Sears department store one day after it closed as part of multiple store closures by Sears Holdings Corp in the United States in Nanuet, New York, U.S., January 7, 2019.

The case is Sears Holdings Corp et al v Lampert et al, U.S. Bankruptcy Court, Southern District of New York, No. 19-ap-08250.

The lawsuit comes two months after a bankruptcy judge gave his blessing to Lampert's $5.2 billion plan to keep the company running, and save roughly 425 stores and 45,000 jobs. In the case, Sears Holdings is asking that these actions be deemed fraudulent and maintains that the creditors should be paid.

Lampert established Sears Holdings by merging Sears, Roebuck & Co and Kmart Holdings Corporation in 2006.

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