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

Cornelia Mascio
Aprile 21, 2019

"This complaint is brought to make Sears whole for these thefts of its assets".

Mnuchin, a college roommate of Lampert's at Yale University, had been a Sears director and ESL executive.

According to a CNBC report, the lawsuit claims that Lampert was the cause of Sears' downfall and that he and several of the retailer's largest shareholders benefitted from deals that took place while Lampert was running the company.

Lawyers for Sears allege in the suit that "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" if the assets hadn't been taken from the company.

Sears filed for Chapter 11 protection in October after a prolonged decline under Lampert's leadership.

"ESL Investments Inc. vigorously disputes the claims in the debtors' complaint against ESL, Mr. Lampert and Mr. Kamlani, which repeats baseless allegations and fanciful claims". A Sears sign is displayed at a store on October 15, 2018 in the Brooklyn borough of New York City.

In the suit, Sears Holdings claims that Lambert "unmistakably meant to hinder, delay and defraud creditors and/or occurred when the Company was insolvent and had insufficient capital to continue its operations and to repay its billions of dollars in debt".

"ESL was a constant source of financing for Sears Holdings for many years", it said.

The complaint said Lampert ordered the creation of bogus financial plans projecting a Sears turnaround, and used them to help transfer five major assets worth more than $2 billion, including Land's End and Sears Hometown Outlet. It also operates 360 Kmart stores. It alleges that the spinoff was structured to benefit shareholders like Lampert and left Sears stuck with hundreds of millions of dollars in rent and fees from the stores they attempted to re-lease, due to a deliberate undervaluing of the real estate in question.

The Illinois-based company - which formerly owned Sears and Kmart - filed a lawsuit on Wednesday in the U.S. Bankruptcy Court in the Southern District of NY.

Lampert established Sears Holdings by merging Sears, Roebuck & Co and Kmart Holdings Corporation in 2006. The company is seeking to recover the property it claims was fraudulently transferred.

The court case filed Thursday seeks the repayment of "billions of dollars of value looted from Sears".

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