The hedge fund investor and former Sears boss who bought the chain’s assets out of Chapter 11 bankruptcy is now trying to back out of an agreement to pay for the severance of the retailer’s laid-off employees.
Former Sears CEO, chairman and shareholder Eddie Lampert is requesting that a federal bankruptcy judge release him from his obligation to compensate former Sears workers, who he had agreed to pay up to $43 million.
The agreement applied to workers who lost their jobs from the day Sears filed for bankruptcy in October through February, when Sears assets were sold to Lampert in a last-minute deal. The company closed hundreds of stores during that period.
In a court filing, Lampert’s representatives accused Sears Holdings of failing to deliver “hundreds of millions of dollars of assets” it had promised as part of the deal to save the company from total liquidation. Those assets were earmarked to make the severance payments.
Lampert previously led Sears Holdings but resigned as CEO when the company filed for bankruptcy and then purchased the company’s assets through a new vehicle called Transform Holdco.
Through Transform Holdco, a subsidiary of his hedge fund ESL Investments, Lampert accused Sears Holdings of:
• Not handing over ownership of Sears headquarters’ building in Illinois.
• Failing to deliver promised receivables and prepaid inventory.
• Purposely delaying payments to key vendors.
• Attempting to shift certain liabilities to Transform Holdco.
The accusations reflect the latest twist in a saga that has taken an unexpected turn since Sears struck the last-minute deal in February to sell most of its assets to Lampert.
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Sears lawsuit: Former Sears company sues ex-CEO Lampert, Treasury’s Steven Mnuchin over ‘asset stripping’
Since then, the “Old Sears,” as some have called it, has sued Lampert’s ESL, accusing its former boss of engaging in a scheme to strip the company of assets over time.
Lampert has repeatedly defended himself, saying he invested his own fortune in an attempt to rescue Sears and helped keep thousands of employees at work.
ESL said recently that it “vigorously disputes” the Sears Holdings lawsuit, calling them “baseless allegations and fanciful claims” that “are misleading or just flat wrong.”
The downsized retailer now has roughly 400 stores, including Kmart.
Sears closed more than 3,500 stores and cut about 250,000 jobs in roughly the last 15 years as sales cratered, leading to the company’s Chapter 11 bankruptcy filing in October.
Lampert’s new Sears entity said in a court filing that it “believes that prompt resolution of these matters is important and necessary at this time to allow” for the resolution of the retailer’s Chapter 11 case.
A lawyer for Sears Holdings was not immediately available for comment Monday afternoon.
Follow USA TODAY reporter Nathan Bomey on Twitter @NathanBomey.