Creditors filed bankruptcy lawsuits late on Thursday for former Sears CEO's $ 5.2bn. They blamed Lampert for the problems that led to Sears' downfall.
Creditors, due to at least a total of $ 3.4 billion, acknowledged that Sears was harmed by the rise of big box rivals and online shopping. But they argued that the company's extinction "was precipitated by many years of abuse by Lampert, ESL and others against Sears and its creditors."
Lampert, through his hedge fund ESL, won an auction for 425 stores and other Sears assets earlier this week. US Bankruptcy Court Robert Drain will hold a hearing on February 4 to consider the bid and any objections to it.
"Sears's downfall is nothing short of tragic," the creditors wrote in the filing. They said the company in Lampert's direction "was involved in serial asset stripping and took Sears' best assets out of the company to protect them from claims from other creditors … in anticipation of these inevitable bankruptcy procedures. "
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The creditor committee ̵
"In fact, Lampert and ESL Sears succeeded as being a private portfolio company that existed solely to provide the greatest return on their investment, ruthlessly damaging Sears, its employees and its creditors," they wrote.
A number of loans made by ESL to Sears over the years made Lampert its largest creditor, as well as its chairman, primary shareholder, and – until the day of filing for bankruptcy – its CEO. However, unlike money for creditors, almost all ESL loans to Sears were backed by hard assets, such as real estate.
In response to the filing, Lampert's hedge fund said that "all transactions were made in good faith on reasonable terms for the benefit of all Sears stakeholders" to help the company reappear.
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The Fund said it has fully cooperated with the creditors' review of the transactions between it and Sears. ESL also said it is "sure that the processes we followed are irresistible."
"We reject any claim to the contrary and will strongly dispute any effort to claim claims against ESL, its directors or subsidiaries regarding these transactions"
Lampert has repeatedly stated that his bid is in the employees, creditors' and other stakeholders' interests and communities earned by Sears.
But the creditors emptied the bid as "nothing but the final fulfillment of a year-long scheme to deprive Sears and its creditors of assets and employees of the job while lining the Lampert and ESL's own pockets."
If Judge Drain agree with the creditors and block Lampert's bid, Sears and Kmart would shut down and their assets would be settled. The auction did not include any other bidder wishing to keep the company open.
So far, Drain has been open to suggestions that would help Sears stay alive. During a Friday hearing, Drain said "it would be very good" if there was a way to save the job at the approx. 45,000 remaining Sears employees by keeping the business going. However, Drain added that he would still consider creditors' claims.
Although Lampert and ESL are successful, there is no guarantee that Sears will stay healthy. It is common for a retailer to come out of business for bankruptcy.
The children's clothing retailer Gymboree, for example, was just filed for bankruptcy for the second time Wednesday and said it would close its flagship mark. RadioShack and American Apparel met similar fates.
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