Sears accuses Eddie Lampert of looting the company
Sears fil🐎ed an explosive lawsuit against Eddie Lampert on Thursday, accusing the hedge-fund billionaire of looting the retailer’s prize assets even as he ran it into the ground.
In a 110-page suit that also names Treasury Secretary Steven Mnuchin — a former roommate of Lampert at Yale who was a Sears board member from 2005 to 2016 — the bankrupt retail icon said Lampert and his cronies concocted an elaborate “cover up” to hide their asset “stripping♔”💎 .
The big deception, according to Sears: Lampert said he had plans to re🍸turn the retailer to profitability — whe🅺n, in fact, no such plans existed.
In addition to Lampert and Mnuchin — who also worked together at Goldman Sachs years before Lampert’s hedge fund ESL took control of Sears and Kmart in 2005 — the suit named board member Thom🍎as Tisch and Fairholme Capital Management, the 🎐Florida hedge fund run by Bruce Berkowitz, who stepped down from the board last year as he accused Sears of “wrecking” his portfolio.
All of them were involved in spinniܫng off five major assets worth more than $2 billion, including Lands’ End and Sears Hometown and Outlet Stores, which is now off limits to Sears’ creditors, according to the suit.
Lands’ End in particular could have enriched Sears investors if Lampert hadn’t spurned a $1.6 billion buyout offer from Tommꦡy Hilfiger and Leon♏ard Green & Partners, according to the suit.
Instead, Lampert handed shareholders a $500 million dividend before spinning off Lan💛ds’ End for $1 billion, with his hedge fund alone getting nearly half that sum for itself.
♒“ESL Investments, Inc. vigorously disputes the claims,” Lampert’s hedge said in a statement, describing the suit as “fanciful.”
The lawsuit comes as Sears and ESL squabble over mounting professional fees in the bankruptcy — including the attorneys and financial advisors — who have billed $85 million through February, acc☂ording to court documents.
That total has likely blown past $100 million by now, since the company filed for bankruptcy protection on Oct. 15, according to industry experts.
White-shoe law firm Weil Gotshal & M💙anges submitted a bill this week for $40 million through Feb. 28, court filings show. Akin Gump, which represents the unsecured creditors, has billed the company ꦿfor $21.6 million for its services through February.
“One group that will benefit from the lawsuit is the lawyers,” noted distressed debt expert, Adam Stein Sapir.
“The complaint is a play to get L💦ampert to write a big check that he says he doesn’t owe Sears,” said Mark Cohen, a former chief executive of Sears Canada who’s now director of retail studies at Columbia Business School.
“At the end of the day, if it can’t pay its ban༺kruptcy-related costs, it can’t get out of Chapter 11 and Lampert can’t take possession of it,” Cohen said.