Sears Holdings Corp sued longtime Chairman Eddie Lampert, his hedge fund ESL Investments, and former directors including Treasury Secretary Steven Mnuchin, accusing them of allowing the retailer to be looted of billions of dollars before its October 2018 bankruptcy.
The lawsuit, made public on Thursday, was filed by the restructuring team winding down what remains of the pre-bankruptcy Sears following Lampert’s $5.2 billion purchase in February of most of its assets.
Sears accused Lampert of ordering the creation of bogus financial plans showing the retailer would turn itself around even as it racked up huge losses, enabling the transfer of five major assets including Land’s End and Sears Hometown Outlet for his benefit.
“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 complaint said.
Other defendants include Bruce Berkowitz and his Fairholme Capital Management, which had been a large Sears shareholder, and Seritage Growth Properties, which housed 266 of Sears’ more profitable stores after being spun off.
Mnuchin, a college roommate of Lampert’s at Yale University, had been a Sears director and ESL executive.
Representatives for Lampert and ESL, Berkowitz and Fairholme, Seritage and the Treasury Department did not immediately respond to requests for comment. The post-bankruptcy Sears did not immediately respond to a similar request.
The reorganized company was expected to have about 425 Sears and Kmart stores, down from roughly 3,500 when those companies merged in 2005.