The bankrupt estate of Sears Holding Corp. is suing its former chairman and new owner of the brand, Eddie Lampert, for allegedly stripping the iconic retailer of more than $2 billion worth of assets, contributing to the company's downfall. Lampert bought Sears to prevent its liquidation in February,
The 110-page complaint filed with the US Bankruptcy Court in New York, also names a slew of former Sears directors, including Lampert’s former college roommate U.S. Treasury Secretary Steve Mnuchin as well as several executives at the billionaire’s hedge fund, ESL Investment, who acquired the bankrupt retailer in a $5.2 billion deal earlier this year, as culprits in the looting.
The lawsuit claims the defendants wrongly transferred $2 billion worth of company assets “beyond the reach” of creditors in the years leading up to its bankruptcy last October. Lawyers for the estate claim a massive “cover up” later ensued to hide their asset “stripping.”
“Had defendants not taken these improper and illegal actions, Sears would have had billions of dollars more to pay its third-party creditors today and would not have endured the amount of disruption, expense, and job losses resulting from its recent bankruptcy,” lawyers for the estate said in a court filing.
One of the assets named in the suit includes the Lands’ End brand, which would have enriched Sears investors by $1.6 billion if Lampert hadn’t rejected a buyout offer from Tommy Hilfiger and Leonard Green & Partners.
Instead, he gave shareholders a $500 million dividend and spun off Lands’ End into its own company in 2014 for $1 billion, with ESL getting nearly half that sum for its own pockets, according to the suit.
However, a spokesperson for ESL Investments told FOX Business that the debtors’ “allegations are misleading or just flat wrong.”
“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.
In the suit, Sears’ Estate is asking that certain transactions be ruled fraudulent and creditors be compensated.
Since acquiring Sears in February from a bankruptcy court, many have questioned Lampert’s turnaround plan to return the famous chain store group to profitability. Many Sears employees have also voiced their concerns over Lampert’s plans to save their jobs.
Despite the ongoing lawsuits and concerns, Sears announced earlier this month that it plans to open three pint-sized test stores in May in an attempt to revitalized its brand and win customers back.