Sears sues former CEO Eddie Lampert, Secretary of the Treasury Mnuchin and others for "theft" of a billion dollars

Sears Thursday filed a lawsuit against its former CEO Eddie Lampert and a series of prominent members of his board of directors, including Yale's former roommate, Yale's treasury secretary, Steven Mnuchin, for allegedly stealing billions of dollars from the retailer in the past.

Sears Holdings filed for bankruptcy last October, after years of losses under Lampert, then chairman and chief executive officer and largest shareholder. Lampert saved the retailer from full liquidation by buying it through Transform Holdco, an affiliate of its hedge fund, ESL Investments.

But Sears 'unsecured creditors have repeatedly said that Lampert was the cause of Sears' downfall, not the solution. They believe Lampert, along with Sears' largest shareholders, have unduly benefited from transactions under its supervision, including the Lands & # 39; End split in 2014 and transactions with Seritage Growth Properties, a real estate investment trust created by Lampert through some Sears properties. one year later.

These allegations laid the groundwork for unsecured creditors to pursue their claims against Lampert and others on behalf of Sears. Lampert had asked to be relieved of his obligations as part of his deal to get Sears out of bankruptcy, but he had been denied protection.

"In total, Lampert has sold more than $ 2 billion of assets to itself and other Sears shareholders, and beyond the reach of Sears creditors," continued Thursday.

In addition, Sears employees repeatedly presented financial plans that reflected fanciful and bad faith predictions that the company would experience an immediate and dramatic turnaround. deep and growing losses to sudden profitability. "

The lawsuit includes many defendants, besides Lampert and Mnuchin, including two prominent directors: Bruce Berkowitz, hedge fund manager, major investor in Sears, and Kunal Kamlani, president of ESL.

"ESL Investments, Inc. is vigorously contesting claims in the debtors' lawsuit against ESL, Mr. Lampert and Mr. Kamlani, who repeat unfounded allegations and frivolous claims. As we have said before, debtors' allegations are misleading or simply false, "said an ESL spokesman.

Mnuchin, who resigned from the Sears board after being appointed head of the Treasury, was not immediately available for comment.

"Fairholme is reviewing the filings," said Berkowitz hedge fund spokesman Fairholme Capital Management.

Berkowitz proved successful at Lampert at the Sears executive last year, when a Fairholme lawyer told the bankruptcy court that Sears "was not really an ice cube melting, but a puddle of water".

He described the retailer's tumble as a "multi-year liquidation" that took place "without judicial oversight".