Sears Holdings Corp. has filed a lawsuit against its longtime former Chairman Eddie Lampert, Treasury Secretary Steven Mnuchin and others, accusing them of siphoning billions of dollars from the retailer ahead of its bankruptcy.
What are the details?
The struggling company filed for Chapter 11 bankruptcy last fall, at which point Lampert stepped down as CEO. He created Sears Holdings Corp. in 2005, through the merger of Sears, Roebuck & Co. and Kmart Holdings Corp.
With Lampert at the helm, the firm went into a death spiral, riddled with billions in debt and plagued with devastated losses in both sales and share price. The lawsuit — filed by Sears' restructuring team on behalf of creditors — alleges Lampert and other insiders conspired to "strip" Sears of assets, Reuters reported, using schemes including bogus financial plans, "fraudulent transfers," and deflated real estate values as part of lopsided spinoff agreements.
Sears Holdings claims its most valuable assets were hijacked as the wheels fell off, including its major brands and best real estate, in order to pay off bills with no plan for keeping the company solvent.
According to the Daily Mail, the complaint reads, "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."
The company is seeking the repayment of "billions of dollars of value looted from Sears."
How is Mnuchin involved?
Mr. Mnuchin was previously a director at Sears, but his links to Lampert go way back. 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. (which is also named as a defendant in the suit).
Lampert — a billionaire who is also the corporation's biggest shareholder and biggest lender — purchased most of Sears' assets for $5.2 billion after a February bankruptcy auction.
In a statement on behalf of ELS and Lampert, the hedge fund called the allegations made in the lawsuit "misleading or just flat wrong," and insisted all the decisions questioned were made in the best interest of shareholders, according to Reuters.