Sears Holding Sues Former Chairman Lampert, Saying He ‘Looted’ Billions
Dealmaking Saddled Former Owner of Stores With Steep Rent Payments and Debt, Lawsuit Claims
BY JENNIFER WATERS (via CoStar Group)
Chairman Edward Lampert bought Sears assets out of bankruptcy through a newly formed company . Photo: iStock
In an unusual twist, Sears Holdings has sued its former longtime chairman Edward Lampert and others associated with the once-iconic retailer’s board, including U.S. Treasury Secretary Steven Mnuchin, alleging they pillaged billions of dollars from the company.
The lawsuit claims that more than $2 billion in assets were transferred to Lampert, his hedge fund ESL Investments and others through deals that included the spinoff of Lands’ End in 2014 and the sale of 266 choice Sears and Kmart stores to Seritage Growth Properties in 2015. Seritage is a real estate investment trust created and run by Lampert.
The lawsuit, filed in U.S. Bankruptcy Court in White Plains, New York, seeks repayment of “billions of dollars of value looted from Sears.”
The retailer emerged from bankruptcy in February after a judge approved Lampert’s $5.2 billion offer to purchase more than 400 Sears and Kmart stores through a new company called Transform Holdco. Unsecured creditors pursuing Sears Holdings have been fighting the decision ever since in bankruptcy court.
An ESL spokesman said the fund and Lampert “vigorously disputes the claims in the debtors’ complaint,” noting that they repeat “baseless allegations and fanciful claims.
“As we have previously said, the debtors’ allegations are misleading or just flat wrong,” according to ESL.
The lawsuit contends that Lampert and ESL executed deals as a means of capitalizing on the value of assets at the expense of Sears Holdings, which used proceeds to pay off debt and pay operating expenses.
The Seritage transaction, for example, “saddled Sears with hundreds of millions of dollars of rent and termination fees ultimately paid to Seritage and resulted in the ouster of Sears from many of its most-profitable locations,” the suit argues.
ESL contends that’s not true, saying that ESL “was a constant source of financing for Sears Holdings over many years, including through the extension of $2.4 billion in various secured financings to the company.”
Addressing issues related to bad-faith financial projections, ESL said that “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.”
Sears Holdings did not respond to requests for comment.
