Sears suing former chairman over loss of $2 billion in assets

Marco Green
April 21, 2019

Sears Holding Corp. has sued former chairman and CEO Eddie Lampert, and his hedge fund, ESL, accusing them of draining $2 billion from the company as it was headed into bankruptcy.

The lawsuit lays outs its charge in its introduction.

According to a CNBC report, the lawsuit claims that Lampert was the cause of Sears' downfall and that he and several of the retailer's largest shareholders benefitted from deals that took place while Lampert was running the company.

The complaint alleges that Lampert and other insiders at Sears Holding Corp had by 2011 begun planning to "strip" Sears of assets, as the retailer's performance was falling short and ESL investors were demanding money back.

The suit was filed by the Sears Holdings' team that was given the responsibility of disposing of Sears' assets.

ESL said it "vigorously" disputes the claims and calls them "baseless" and "fanciful" in a statement emailed to The Associated Press.

While Sears Holdings no longer owns the 400 stores still in operation, it's still dealing with creditors.

Sears, which operates Sears and 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.

Now known as Sears Holdings Corporation, the retailer also owns Kmart Corporation, the big box department store chain founded in 1899. In the case of Lands' End, Lampert and ESL allegedly pocketed at least $490 million from the April 2014 spinoff after rejecting a $1.6 billion offer from the Tommy Hilfiger investment group and Leonard Green & Partners.

"All transactions were done in good faith, on fair terms, beneficial to all Sears stakeholders and approved by the Sears Board of Directors, made up of a majority of independent directors, as well as the company's Related Party Transactions Committee, which was itself comprised of independent directors and advised by separate independent financial and legal advisors, " ESL said. The lawsuit was filed with the USA bankruptcy court in White Plains, New York. The approval of Lampert's new business means roughly 425 stores and 45,000 jobs will be preserved.

The court case filed Thursday seeks the repayment of "billions of dollars of value looted from Sears".

Other reports by Click Lancashire

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