Sears Holdings Corp. is suing its former chairman and largest shareholder Eddie Lampert, alleging the billionaire stripped the once iconic company of more than $2 billion in assets. The lawsuit, which was filed late Wednesday with the US Bankruptcy Court of the Southern District of New York, also names former Sears directors, including US Treasury Secretary Steven Mnuchin as well as executives at Lampert's hedge fund ESL. Sears, which also operates Kmart, filed for Chapter 11 bankruptcy protection in October amid years of massive losses and sales drops. Lampert saved the company by acquiring the assets in a court-approved auction through an affiliate of ESL in February. Unsecured creditors had tried to block the sale, reports the AP, maintaining that Lampert was to blame for the company's downfall.
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. That includes the spinoff of Lands' End in 2014 and Lampert's real estate investment trust Seritage Growth created four years ago to extract revenue from Sears' properties. "Altogether, Lampert caused more than $2 billion of assets to be transferred to himself and Sears' other shareholders and beyond the reach of Sears' creditors," the suit states. ESL calls the claims "baseless" and "fanciful" in a statement. "The debtors' allegations are misleading or just flat wrong," ESL said, adding that Sears received proceeds of more than $3 billion from the transactions, which were applied to reduce debt and fund operations. "ESL was a constant source of financing for Sears Holdings for many years," it said.
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