Lampert, Past Board Members, Sued by Sears for Alleged Theft
In the ongoing drama that’s worthy of a midday network TV soap opera time slot, Sears filed a lawsuit late last week against its former CEO Eddie Lampert and a laundry list of former past board members, including Lampert’s old Yale roommate and current Treasury Secretary Steven Mnuchin. The suit alleges that Lampert and co. stole billions of dollars from the once-proud retailer, which filed for bankruptcy this past October.
Lampert, who saved the retailer from complete liquidation by buying it through an affiliate of his ESL Investments hedge fund, had a notably rocky run as the retailer’s CEO and largest shareholder. During the bankruptcy proceedings, Sears’ unsecured creditors repeatedly argued that Lampert was the cause of, and not the solution to, the retailer’s demise. They claim, in the suit, that Lampert and Sears’ other major shareholders “unduly benefited” from deals that occurred under the former CEO’s watch, including the spinoff of Lands’ End in 2014, and the breakoff of many of its best properties into Seritage Growth Properties, a real estate investment trust that Lampert created in 2015.
According to a CNBC report, it was those claims that laid the groundwork for the retailer’s unsecured creditors to legally pursue this suit against Lampert and others on behalf of Sears. And though Lampert had requested to be shielded from potential litigation as part of his deal to buy Sears out of bankruptcy, that request was denied.
Among the allegations, Sears said that Lampert rejected a $1.6 billion offer for the Lands’ End brand from a private equity firm and the Tommy Hilfiger investment group in favor of a spin off that would allow him to keep his stake in the brand. Additionally, with the Seritage deal, the company claims that the spinoff real estate investment firm that Lampert started was given ownership of some 266 of the retailer’s best properties in a deal that was not negotiated and undervalued those properties by at least $649 million.
“Altogether, Lampert caused more than $2 billion of assets to be transferred to himself and Sears’ other shareholders and beyond the reach of Sears’ creditors,” the lawsuit alleges.
Through a statement by an ESL Investments spokesperson, the accused denied what they called “baseless allegations and fanciful claims.”