Sears Sues Former CEO Eddie Lampert, Accusing Him Of Siphoning $2 Billion As Company Faced Bankruptcy
CHICAGO (CBS) -- Sears Holding Corp. has sued former chairman and CEO Eddie Lampert, and his hedge fund, ESL, accusing them of draining $2 billion from the company as it was headed into bankruptcy.
"As Sears was sliding into bankruptcy, Eddie Lampert—its long-time controlling shareholder, Chairman, and Chief Executive Officer—in concert with and assisted by other Defendants, transferred billions of dollars of the Company's assets to its shareholders for grossly inadequate consideration or no consideration at all," Sears attorneys wrote in a federal lawsuit filed in federal bankruptcy court in New York.
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.
Lampert's bid through his ESL hedge fund overcame opposition from a group of creditors, including mall owners and suppliers, that tried to block the sale and pushed hard for liquidation.
The lawsuit alleges Lampert and several other former board members, including Treasury Secretary Steve Mnuchin, were responsible for the company's bankruptcy, by stealing the company's assets, and preventing it from being able to pay off debts.
"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. "Had defendants not taken these illegal and improper 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 filing."
Sears, which operates Sears and Kmart, filed for Chapter 11 bankruptcy protection in October, amid years of massive losses and sales drops. Lampert saved the company by acquiring the assets in an auction in February though its unsecured creditors had maintained that Lampert was to blame for its downfall. They cited sales or spinoffs of key assets that they claimed lined Lampert's own pockets.
ESL says in a statement it "vigorously" disputes the claims and calls them "baseless" and "fanciful."
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