Sears Sues Lampert, Mnuchin Et Al; Claim They Looted Company

Daniel Fowler
April 21, 2019

Sears Holding also contends that Lampert had no intention of returning the company to "profitability" and engaged in "bad-faith predications" of a "dramatic turn-around".

The 110-page complaint filed with the US Bankruptcy Court in NY, 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.

In addition to Lampert and ESL, the suit names a number of other defendants, including Treasury Secretary Steven Mnuchin, a former board member and investor at ESL.

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.

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. A Sears sign is displayed at a store on October 15, 2018 in the Brooklyn borough of New York City.

The asset transfers "were part of a single, years-long strategy of stripping out Sears' most valuable assets for the benefit of Lampert, the ESL defendants, and Sears' other shareholders, to the great detriment of the company and its creditors", the complaint alleges.

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It was filed with the US bankruptcy court in White Plains, New York less than an hour after Sears filed a proposal to create a liquidating trust that could pursue lawsuits over the Land's End and Seritage transactions.

Lampert purchased most of Sears' assets in February, including the DieHard and Kenmore brands, after a bankruptcy action.

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

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. The main bankruptcy case is In re Sears Holdings Corp in the same court, No. 18-bk-23538.

ESL said in a statement that it "vigorously disputes" the lawsuit.

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.

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