In the wake of the retailer’s bankruptcy, Sears Holdings Corp. has filed a lawsuit against former CEO Eddie Lampert, along with ESL Investments and former directors. The suit comes following Lampert’s February purchase of most of its assets for $5.2 billion, Reuters reported.
The company alleges that Lampert had financial plans made to look as if Sears would turn around despite massive losses. That, according to the newswire, purportedly made the transfer of assets like Sears Hometown Outlet and Land’s End possible for the benefit of Lampert.
The complaint stated, “Had defendants not taken these improper and illegal actions, 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.”
According to the report, the case’s other defendants include Seritage Growth Properties (the company that housed some of the retailer’s more profitable locations following a spin-off), Bruce Berkowitz along with his Fairholme Capital Management (a big Sears shareholder) and U.S. Treasury Secretary Steven Mnuchin, reportedly a former director at Sears and ESL and a college roommate of Lampert. Also named was ESL Investments President Kunal Kamlani.
ESL Investments, which was founded by Lampert, disputes the allegations. “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. As we have previously said, the debtors’ allegations are misleading or just flat wrong,” said an ESL spokesman, adding that ESL “was a constant source of financing” for Sears for many years.
Sears was once the largest department store chain in the country. However, it had not kept pace with competitors in recent years. At the time of its chapter 11 bankruptcy filing in October 2018, the retailer had 687 locations and 68,000 workers. BMO has estimated the retailer has about 480 locations open after analyzing all of Sears’ remaining real estate and 80 expected to close. The company also has roughly 430 locations available for other uses, with 170 vacant and 260 in the process of closing.
BMO analyst Brandon Cheatham said, according to CNBC earlier this month. “There are plenty of Sears/Kmart boxes surrounded by high quality demographics which would be appealing to a variety of retailers and other non-retail uses (i.e. hotels, residential, creative office, etc).”
In other Sears news, three Sears Home & Life stores are in the works and are said to open ahead of the busy shopping holiday of Memorial Day weekend.