ESL Investments blasts Sears’ lawsuit
A suit against Edward Lampert is described as ‘fanciful’ and ‘flat wrong.’
Last week, Sears Holdings Corp. fired off a 109-page complaint against former CEO Edward Lampert, describing alleged illegal and improper actions that cost the company billions.
The lawsuit claims that Lampert and other defendants, including Steven Mnuchin – a current U.S. Secretary of the Treasury and former vice chairman of Lampert’s ESL Investments – “transferred billions of dollars of the company’s assets to its shareholders for grossly inadequate consideration or no consideration at all.” The suit was filed in the U.S. Bankruptcy Court for the Southern District of New York by Sears acting at the direction of the restructuring committee of the board of directors of Sears.
ESL Investments denied the claims. Here is the statement the company released to the press:
“ESL Investments, Inc. vigorously disputes the claims in the debtors’ complaint against ESL … which repeats baseless allegations and fanciful claims. As we have previously said, the debtors’ allegations are misleading or just flat wrong.”
The complaint points to five allegedly improper asset transfers, beginning in 2011 with Orchard Supply Hardware, Sears Hometown and Outlet Stores, and Sears Canada. Other transactions involved Lands’ End and Seritage, the real estate investment trust created in 2015.
ESL responded: “The complaint completely ignores that the company’s market value ranged between $2.5 billion and $5.0 billion during the period when these transactions took place, which demonstrates the company’s solvency and supports the solvency opinions the company received from a notable expert in conjunction with such transactions. In addition, the company received proceeds in excess of $3.0 billion from these transactions, all of which were applied to reduce debt and fund operations, and all of the referenced transactions treated every shareholder equally from an economic standpoint.
“ESL was a constant source of financing for Sears Holdings over many years, including through the extension of $2.4 billion in various secured financings to the company. These financings and other transactions involving Sears’ assets were undertaken to facilitate the company’s continued operations and implement its transformation plan. All transactions were done in good faith, on fair terms, beneficial to all Sears stakeholders and approved by the Sears Board of Directors, made up of a majority of independent directors, as well as the company’s Related Party Transactions Committee, which was itself comprised of independent directors and advised by separate independent financial and legal advisors.”
ESL’s statement continues: “We are confident that the processes we followed for each of these transactions are unimpeachable. We reject the debtors’ allegations and will vigorously contest their complaint concerning these transactions.”
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