Sears sues Lampert, claiming he looted company and drove it into bankruptcy

Bloomberg

Lampert has defended his actions as CEO, saying he was forced to sell assets in a vain attempt to pull Sears out of what he called its "death spiral". "This complaint is brought to make Sears whole for these thefts of its assets".

Mr. Mnuchin was previously a director at Sears, but his links to Lampert go way back. The complaint was filed on behalf of creditors who claim that Lampert destroyed billions of dollars of Sears' value, driving the company into bankruptcy.

The lawsuit also names former Sears directors and ESL executives and directors including U.S. Treasury Secretary Steven Mnuchin, a former investor and executive at ESL, and Kunal Kamlani, president of ESL and a former Sears director, as defendants, as well as Sears shareholder Fairholme Capital Management and its founder Bruce Berkowitz.

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

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 filed for bankruptcy in October 2018.

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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.

While Sears Holdings no longer owns the 400 stores still in operation, it's still dealing with creditors. They cited sales or spinoffs of key assets that they claimed lined Lampert's own pockets.

The complaint accuses Lampert of creating false financial plans projecting a turnaround for the company in order to facilitate the transfer of major assets worth more than $2 billion, including Lands' End and Sears Hometown Outlet. The much-despised Lampert has resigned as CEO but remains chairman of Sears Holdings. ESL said that it provided Sears with $2.4 billion in secured financing, and all transactions with Sears "were done in good faith, on fair terms, beneficial to all Sears stakeholders", and that they were approved by Sears' board and a committee overseeing transactions involving potential conflicts of interest.

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

Thursday's lawsuit seeks a declaration that the alleged looting constituted "fraudulent transfers" that should be undone or, more likely, justified damages.

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