Former Sears Chairman and CEO Eddie Lampert has some powerful new opponents.
On Thursday, presidential candidate Sen. Elizabeth Warren and Rep. Alexandria Ocasio-Cortez sent a letter to the hedge fund billionaire lambasting his efforts to shirk repaying Sears Holdings for $43 million in severance payments to thousands of laid-off Sears workers.
Lampert agreed to cover the payments as part of the terms of the deal he struck in February to buy the bankrupt chain for $5.2 billion through Transform Holdco, LLC, a subsidiary of his hedge fund, ESL Investments Inc. In the agreement, he promised to continue operations at 425 stores and save the jobs of 45,000 employees. Since then, however, he has argued to the court that he should not be responsible for the severance costs because Sears Holdings didn’t fulfill certain aspects of the deal.
In their letter, Warren, D-Mass., and Ocasio-Cortez, D-N.Y., called out Lampert’s earlier assurances that workers that lost their jobs after Sears filed for bankruptcy on Oct. 15 would be guaranteed an exit package.
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“The failure to make those payments would amount to a broken promise on your part and a betrayal of hardworking Sears employees — some of whom have worked at the company for decades — who are relying on the severance that they have been promised to pay rent, care for children and put food on the table,” they wrote.
In a statement to FN, a spokesperson for Transform Holdco said that the lawmakers’ letter mischaracterizes the dispute, saying in part, “To be clear, employees of old Sears who lost their jobs during bankruptcy have already received their severance payments. The approval that Transform has sought from the Court is to be released from its conditional obligation to reimburse Old Sears for making those severance payments.”
Lampert recently filed court documents alleging that Sears Holdings failed to make payments to vendors and transfer certain promised assets to ESL, including part of the company’s Chicago headquarters and store inventory.
“Because of these shortfalls, [ESL] believes it has no obligation to assume $43 million in severance,” ESL’s lawyers argued in the filing.
Sears Holdings filed a lawsuit against Lampert last month accusing the executive of siphoning billions of dollars in assets from the struggling retailer for his own enrichment while allowing it to sink into bankrtupcy.
“Eddie Lampert … in concert with and assisted by other defendants, transferred billions of dollars of the company’s assets to its shareholders for grossly inadequate consideration or no consideration at all,” the lawsuit read. “This complaint is brought to make Sears whole for these thefts of its assets.”
In a statement to FN at the time, ESL wrote that it “vigorously disputes the claims in the debtors’ complaint,” reiterating that the allegations were “misleading or just flat wrong.”
This story has been updated with a statement from Transform Holdco and to reflect the company’s contention that the severance payments have already been paid.
