Sears is suing former boss and new owner Eddie Lampert. Here’s why

Sears is suing former boss and new owner Eddie Lampert. Here’s why

"As Sears was sliding into bankruptcy, Eddie concert with and assisted by other defendants, transferred billions of dollars of the company's assets. for grossly inadequate consideration or no consideration at all", the federal lawsuit states.

Sears Holdings Corporation finally sued former chairman Eddie Lampert, his hedge fund ESL Investments and others investors like Treasury Secretary Steve Mnuchin, claiming these persons stole billions of dollars in assets from the iconic retailer leading to its bankruptcy in 2018.

The lawsuit lays outs its charge in its introduction.

After the purchase of Sears Holding, the company has had to face the aftermath of unpaid creditors, who claim that Lampert used the company's failures to his advantage. The two were college roommates at Yale University, worked together at Goldman Sachs, and Mnuchin was also a one-time director at Lampert's hedge fund, ESL Investments, Inc.

Lampert purchased most of Sears' assets in February, including the DieHard and Kenmore brands, after a bankruptcy action.

Mr. Mnuchin was previously a director at Sears, but his links to Lampert go way back.

Others sued include ESL President Kunal Kamlani; Heritage Growth Properties, which took over 266 of Sears' best stores in 2015, Bruce Berkowitz and his Fairholme Capital Management, which was a large Sears shareholder.

ESL issued a statement "vigorously" disputing the claims made in the lawsuit.

A dismantled sign sits leaning outside a Sears department store one day after it closed as part of multiple store closures by Sears Holdings Corp in the United States in Nanuet, New York, U.S., January 7, 2019.

Sears, which operates Sears and Kmart, filed for Chapter 11 bankruptcy protection in October, amid years of massive losses and sales drops. 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. "These financings and other transactions involving Sears' assets were undertaken to facilitate the company's continued operations and implement its transformation plan". The company is seeking to recover the property it claims was fraudulently transferred. The approval of Lampert's new business means roughly 425 stores and 45,000 jobs will be preserved.

The case is Sears Holdings Corp et al v Lampert et al, U.S. Bankruptcy Court, Southern District of New York, No. 19-ap-08250.

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