Longtime Sears boss and investor Eddie Lampert orchestrated on "multiyear and multifaceted scheme" to strip the company of assets and capitalize on its decline, a group of retailers major creditors alleged.
Lampert, who remains chairman of Sears and was CEO until the company filed for Chapter 11 bankruptcy in October, presided over the closure of more than 3,500 stores and the loss of about 250,000 jobs, According to a scathing filing on Wednesday, unsecured creditors
The creditors are hoping to persuade a federal judge to force Sears to liquidate instead of accepting the latest offer by Lampert's hedge fund ESL Investments to keep a version of the company alive. 19659007] They took the unusual step of filing a 136-page history of what they called "Sears' tragic descent from giant to ghost."
Lampert "engaged in serial asset stripping" of the c ompany after taking control in 2005 following the company's tie-up with Kmart, the creditors said. "Lampert was hopelessly conflicted as he presided over Sears' descent into insolvency and into a persistent state of liquidity crisis." The Sears in White Plains, N.Y., is two blocks from the U.S. bankruptcy court ” width=”540″ data-mycapture-src=”” data-mycapture-sm-src=””/>
The Sears in White Plains, N.Y., is two blocks from the U.S. bankruptcy court (Photo: Ricky Flores / The Journal News)
The creditors – including major mall owners such as Simon Property Group – also accused current Sears leaders of having "capitulated" at Lampert by allowing him to "steal" the remaining assets in a bankruptcy auction.
It's not unusual for unsecured creditors to protest a bankruptcy restructuring plan, which typically leads to steep losses for them. But this one comes after years of criticism by independent experts of Lampert's dealings.
Sears declined to comment Thursday. Lampert has repeatedly defended his moves, saying everything he did, including the $ 2.4 billion he had for Sears, was ethical and that enabled thousands of people to stay employed.
ESL said it was a constant source of financing for Sears "and that" all transactions were done in good faith, on fair terms, beneficial to all Sears stakeholders and approved "by a board with a majority of members who were independent of Lampert.
" Over the past several months, we have We have cooperated fully with their review and remain confident that the processes we followed are unimpeachable, "ESL said. "We reject any assertion to the contrary and will vigorously contest any effort to assert claims against ESL, its principals or affiliates regarding these transactions." Lampert has argued that keeping Sears alive with his latest offer, which ESL valued at more than $ 5 trillion, is the best hope for keeping 45,000 workers on the job and about 400 stores open.
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USA TODAY reported in June that Lampert's ESL was receiving up to $ 220 million annually in payments on billions in debt extended to Sears in recent years – that Lampert had structured key deals to pu
The creditors blasted Lampert's leadership of the company, saying it was an "intricate scheme" that Lampert and ESL "worked hard to conceal" using potentially "fraudulent" financial projections over the course of years.
The accusations include that Lampert and ESL:
• Slashed spending on Sears stores to fund repurchases that benefited them. & Outlet Stores and Lands' End to their inappropriate enrichment.
• Designed a 2015 deal to spin off valuable stores to a real estate investment trust called Seritage Growth Properties, partially owned by ESL, for an "absurdly low" price even though Sears "was insolvent at the time."
• Scored valuable collateral by loans to Sears even though it was broke.
Follow USA TODAY reporter Nathan Bomey on Twitter @ NathanBomey .  Read or Share this story: https://www.usatoday.com/story/money/2019/01/24/sears-bankruptcy-eddie-lampert/2667949002/