Creditors Say Eddie Lampert Killed Sears in a 'Shakespearean Tragedy'

https://www.bloomberg.com/amp/news/articles/2019-01-24/lampert-killed-sears-in-shakespearean-tragedy-creditors-say

Sears chairman Eddie Lampert and his hedge fund ESL caused the death of the once-mighty retailer that was “nothing short of tragic,” a committee of its creditors said, likening it to works penned by the Bard.

“The tortured story of Sears reads like a Shakespearean tragedy, playing out over five acts,” the unsecured lenders said in a proposed complaint filed Wednesday. The creditors’ committee argued in their complaint that ESL’s winning bid to salvage Sears is fundamentally flawed, would wrongly enrich ESL and should not be approved by the judge overseeing the retailer’s bankruptcy.

The committee wasted no time getting dramatic. It divided the filing’s table of contents into Acts I to V, plus an epilogue, with headings such as, “ESL Sets the Stage for Sears’s Demise with the Take Over and Stock Buybacks,” for Act One, and for Act Five: “The Long-Awaited Bankruptcy.”

Lampert never had a realistic plan to revive the company, the creditors said, calling his financial projections “delusional at best and fraudulent at worst.”

Transformation plan

A representative for ESL said in a statement that the fund has been a constant source of financing for Sears, which was undertaken to help the company’s continued operations and implement its transformation plan.

“We reject any assertion to the contrary and will vigorously contest any effort to assert claims against ESL, its principals or affiliates concerning these transactions," the representative said in the statement.

A representative for Sears declined to comment.

Each year, Lampert and ESL created financial projections that made it look like the troubled retailer was headed for a dramatic turnaround, which caused the company to miss revenue targets every year from 2010 to 2017 by an average of over $4 billion per year, according to the complaint. The creditors argued that Lampert stripped out assets and then lent to Sears knowing it was unlikely to ever recover and repay him, with the goal of positioning himself to take over Sears in an inevitable bankruptcy.

A hearing date on the proposed complaint, filed with a motion seeking to prosecute claims against Lampert and ESL, has yet to be determined, according to the document. The committee of unsecured creditors last week asked for permission to file the proposed complaint and for authority to prosecute its claims.

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12 replies (most recent on top)

@1uxp

Thanks. I know I've read that Chesapeake thing a number of times on here and could never find anything beyond Aubrey McClendon misusing company funds and that antitrust indictment.

S---er drove into a bridge support.

@1vmm

He’s not going to, because he can’t, because the sources don’t exist, because the events as he is describing them never happened. He’s been asked for sources on the story multiple times and has yet to provide any.

Aubrey McClendon was indicited by the DOJ for antitrust violations and committed s---c-de the day after. However, the allegations concerned him fixing bids for drilling rights. Allegedly the companies along with McClendon conspired to not bid on the drilling rights, and decided who would win later. The charges were dropped after his death. At no time were any charges of fraudulent conveyance levelled against anyone. There was no settlement between DOJ and the family after his death because the charges could not be tried and proven/not proven due to the death. Nor was Chesapeake itself ever alleged to have done anything wrong, so there was nothing to settle. All of the allegations concerned McClendon, acting outside the scope of his employment, (meaning that Chesapeake was not and cannot be made liable for those acts) colluding to rig a bidding process. Because of this, there was no corporate veil to be pierced. In any case, Chesapeake has never declared BK or stiffed creditors, so the case, even as he has falsely described it, is not in any way relevant to SHLD at this time. The only thing Chesapeake has ever done that relates to a payout of the magnitude described was a sale of land for 4.95 billion or so.

The only connection I can find between Chesapeake and Anadarko is that the CEO Chesapeake named after McClendon died came from Anadarko.

@fkn Can you post a link to the Chesapeake $5.2 billion settlement. I searched but all I can find is this:

Anadarko Petroleum Corp. agreed Thursday to pay a record $5.15 billion to settle pollution claims with a litigation trust of Tronox Inc., which emerged from bankruptcy in 2011 and has accused Anadarko subsidiary Kerr-McGee Corp. of dumping environmental liabilities on the company as part of a fraudulent transfer scheme.

@fkn Well, Eddie's going to need some really good criminal defense counsel. The sheer piles of breach he's done makes what McClendon did look like a preschooler stealing from Kmart

@fkn Well, Eddie's going to need some really good criminal defense counsel. What he's done makes what McClendon did look like a preschool kid stealing from Kmart

@aqv Well, in Chesapeake's case they never got to see Aubrey in a jumpsuit because he killed himself the day after he was indicted. They did get $5B from Chesapeake for fraudulent conveyance in the end though.

Chesapeake showed us they can pierce the corporate veil and go directly after ESL/Seritage AND send Eddie to prison. Going to be a rolicking good time. Can't wait to see Eddie in an orange jumpsuit.

@XhnMuda-xwl

After an objection filed by the trustee on the amount of fees being charged, the court had to put a cap on the amount Eddies' investment banker buddy Lazard can collect... $19.5 million.

Lawyers gotta get paid. Anybody else see the paralegal that billed SHC 174K for the month of Nov.?

This is great flowery writing, but it means nothing. The Judge is going to handwave away the objections and force them to be pursued in SDNY and the 2nd Circuit. That will take 4-8 years, depending on how many appeals can be brought up and how backed up the 2nd Circuit is. By the time that finishes, Eddie will have already closed and sold everything left. It probably all gets handwaved away in the end with a ruling that says Drain screwed up, but there isn’t an equitable remedy that can be imposed to fix things and thus the matter is closed.

These creditors also come off as id--ts for citing all this stuff, true though it may be. Most of them extended the loans in question in 2015 or later, meaning that they knew or should have known about Eddie’s shenanigans with the buybacks (nothing will come of this, it was quite common at the time and is so far back it probably won’t be allowed to be introduced), SHOS/LE (public transactions where eveyone knew what was going on) and lastly SRG (this hinges on what the “reasonable value of the properties was at the time they were sold. If ESL paid reasonable vaue then there isn’t a claim to pursue.) If the creditors didn’t do due diligence into SHC when the loans were extended and are just now discovering all these problems, then they are running the risk of being sued by their shareholders (and having their claims against SHC/ESL thrown out for the same reason), especially since this whole process with Eddie and SHC has played out in public, in a fairly high visibility manner.

"Oh what a tangled web we weave / When first we practice to deceive."

I didn't write that but I should haveth- Shakespeare

Docket 1765. Seriously great stuff.

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Creditors Say Eddie Lampert Killed Sears in a 'Shakespearean Tragedy'

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