Sears sues Lampert, claiming he looted company and drove it into bankruptcy

Bloomberg

Bloomberg

The lawsuit was filed by the restructuring team tasked with winding down Sears' bankruptcy estate.

The lawsuit lays outs its charge in its introduction.

Sears' unsecured creditors claim that Lampert caused the company's downfall.

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

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The complaint goes on to say that "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". Mnuchin was a college roommate of Lampert's at Yale University and approved some or all of the transactions.

The lawsuit alleges Lampert and several other former board members, including Treasury Secretary Steve Mnuchin, were responsible for the company's bankruptcy, by stealing the company's assets, and preventing it from being able to pay off debts.

The 110-page lawsuit cited sales or spinoffs of key assets that were allegedly used to line Lampert's own pockets and that of his hedge fund.

These financings and other transactions involving Sears' assets were undertaken to facilitate the company's continued operations and implement its transformation plan.

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Sears filed for Chapter 11 protection in October after a prolonged decline under Lampert marked by large losses, scant investment and lost market share to retailers such as Walmart Inc, Home Depot Inc and Amazon.com Inc. "It further alleges that Seritage's [the real estate investment trust Lampert created last year] deal with Sears to give it ownership of 266 of Sears' best retail stores was not negotiated and undervalued the properties by at least $649 million". It also operates 360 Kmart stores. The company is seeking to recover the property it claims was fraudulently transferred.

ESL called the allegations "misleading or just flat wrong" in a statement sent to the Chicago Tribune.

The lawsuit, which was filed late Wednesday with the U.S. Bankruptcy Court of the Southern District of NY, also names former Sears directors, including Treasury Secretary Steven Mnuchin, as well as executives at Lampert's hedge fund ESL.

The court case filed Thursday seeks the repayment of "billions of dollars of value looted from Sears".

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Lampert established Sears Holdings by merging Sears, Roebuck & Co and Kmart Holdings Corporation in 2006.

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