admin Eddie Lampert CEO and investor orchestrated a “multiyear and multifaceted scheme” to strip the company of assets and capitalize on its decline, a group of the retailer’s major creditors alleged.
Lampert, who was the part of board members as a chairman of Sears longtime and CEO until the company filed for Chapter 11 bankruptcy in October, presided over the closure of more than 3,500 stores and the loss of about 250,000 jobs, as per the scathing filing Wednesday by unsecured creditors.
The creditors are hoping to persuade a federal judge to force Sears to liquidate rather than accepting the latest offer by Lampert’s hedge fund ESL Investments to keep a shrunken version of the company alive.
They took the unusual step of filing a 136-page history of what they called “Sears’ tragic descent from giant to ghost.”
Lampert “engaged in serial asset stripping” of the company after taking control in 2005 following the company’s tie-up with Kmart, the creditors stated. “Lampert was hopelessly conflicted as he presided over Sears’ descent into insolvency and into a persistent state of liquidity crisis.”
The creditors – a group that includes major mall owners such as Simon Property Group – also accused current Sears leaders of having “capitulated” to Lampert by allowing him to “steal the remaining assets” in a bankruptcy auction.
It’s not unusual for unsecured creditors to protest a bankruptcy restructuring plan, which typically leads to steep losses for them. But this one comes after years of criticism by independent experts of Lampert’s dealings.
Sears declined to comment Thursday. Lampert has repeatedly defended his moves, saying everything he did, including the $2.4 billion he lent to Sears, was ethical and that he enabled thousands of people to stay employed.
ESL told in a statement that it “vigorously disputes” the creditors’ accusations, calling them “misleading or just flat wrong.”
ESL stated it “has been a constant source of financing for Sears” and that “all transactions were done in good faith, on fair terms, beneficial to all Sears stakeholders and approved” by a board with a majority of members who were independent of Lampert.
“Over the past several months, we have provided countless pages of documents to the Creditors’ Committee and held numerous discussions with their advisors. We have cooperated fully with their review and remain confident that the processes we followed are unimpeachable,” ESL stated. “We reject any assertion to the contrary and will vigorously contest any effort to assert claims against ESL, its principals or affiliates concerning these transactions.”
The hedge fund said it had handed over “countless pages of documents” and “held numerous discussions” with the creditors’ advisers but said the group is focused on “a self-serving liquidation and litigation strategy.”
Lampert has argued that keeping Sears alive with his latest offer, which ESL valued at more than $5 billion, is the best hope for keeping 45,000 workers on the job and about 400 stores open.
As per the reports of USA TODAY in June that Lampert’s ESL was receiving up to $220 million annually in payments on billions in debt extended to Sears in recent years – that Lampert had structured key deals to put himself at the front of the line to collect key assets in the case of bankruptcy.
The creditors blasted Lampert’s leadership of the company, telling it was an “intricate scheme” that Lampert and ESL “worked hard to conceal” using potentially “fraudulent” financial projections over the course of years.
Source: USA Today
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