Retailer Sears filed a lawsuit against a group of its former high-level board members last Thursday. This group included former CEO Eddie Lampert and former Treasury Secretary Steven Mnuchin. These past board members are alleged to have stolen billions of dollars from the retailer.
Last October, Sears Holdings was forced to file for bankruptcy after years of losses when Lampert was at the helm as its CEO, chairman, and majority shareholder. The retailer managed to avoid full liquidation after Lampert purchased it. This purchase was made through Transform Holdco, which is an affiliate of his hedge fund, ESL Investments.
Unsecured Creditors of Sears are of the opinion that Lampert is the reason for the retailer’s meteoric fall. Their belief is that Lampert, in addition to some of Sears’ largest shareholders, were the beneficiaries of illicit deals that took place under Lampert’s authority. Among other allegations, it is believed that he rejected an offer of $1.6 billion for Sears’ Lands’ End from the Tommy Hilfiger investment group and Leonard Green & Partners. This was to allow for a spinoff that ensured his stake in the brand remain intact. Many of Lands’ End’s properties were carved out into Seritage Growth Properties, which is a real estate investment trust that Lampert created a year after the spinoff.
These beliefs led the creditors to pursue their claims against the former CEO on Sears’ behalf. The lawsuit alleges that Lampert’s actions resulted in over two billion dollars being transferred to himself, in addition to other large Sears shareholders, meaning that the funds were then beyond the reach of Sears’ creditors.
The suit further alleges that Lampert hid is stripping of Sears’ assets by instructing employees to produce false financial plans and predictions. Steven Mnuchin, who left the Sears board after a head Treasury nomination was not available for a comment. In addition to Lampert and Mnuchin, the suit named other defendants such as ESL president Kunal Kamlani and hedge fund manager Bruce Berkowitz.