Lawsuit alleges property was fraudulently transferred

From the Chicago Tribune

Sears Holdings Corp. has filed a lawsuit against its former chairman and CEO, Edward Lampert, and his hedge fund, claiming they wrongly siphoned $2 billion in assets from the company as it headed for bankruptcy.

“Had defendants not taken these illegal and improper 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,” lawyers for company wrote in a court filing.

The lawsuit was filed by the team winding down what remains of Sears’ business after Lampert purchased the majority of its remaining assets in a bankruptcy auction earlier this year. The complaint, filed in the U.S. Bankruptcy Court in New York Wednesday, seeks to recover the property that was allegedly fraudulently transferred.

The lawsuit also names former Sears directors and ESL executives and directors including U.S. Treasury Secretary Steven Mnuchin, a former investor and executive at ESL, and Kunal Kamlani, president of ESL and a former Sears director, as defendants, as well as Sears shareholder Fairholme Capital Management and its founder Bruce Berkowitz.

Representatives for Lampert and ESL could not immediately be reached for comment.

Among the assets Lampert and the other defendants allegedly unfairly benefited from are Orchard Supply Hardware Stores, Sears Hometown and Outlet Stores, Sears Canada, Lands’ End and more than 250 stores spun off into a real estate investment trust spinoff.

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