Kmart a charity case, according to St. Jude

It’s not just lawyers, landlords and financial types who are after billionaire Eddie Lampert in the Sears bankruptcy case. Now, St. Jude Children’s Research Hospital wants to know where its cash went.

The venerable charity claims in court papers that Kmart — which Lampert dragged into bankruptcy along with Sears in autumn — collected more than $700,000 in donations last fall, but that it still hasn’t seen the money.

St. Jude has a decades-long relationship with Kmart, which has raised funds for the hospital by giving it a percentage of sales on certain merchandise. In fact, Kmart was St. Jude’s top fund-raiser for the past seven years and is the only partner to have collected $100 million, Kmart said in a release last year.

Nevertheless, St. Jude hasn’t seen an estimated $739,000 that Kmart had collected for a “Thanks and Giving” fund-raising drive over a five-week period leading up to Sears’ Chapter 11 filing on Oct. 15, according to court papers.

“To date, St. Jude has not received a final accounting” from Sears, according to the hospital’s Jan. 25 filing, adding that “in-store donations, including the ornament and wrapping paper sales proceeds, are the property of St. Jude and not property of the debtor’s estates.”

At a US Bankruptcy Court hearing in White Plains, NY, on Wednesday, St. Jude was among dozens of organizations objecting to the sale of Sears to ESL Investments — the hedge fund controlled by Lampert, who is the retailer’s chairman as well as its largest shareholder and creditor.

“What’s not nice here is that Sears collected the donations [and] used the money as working capital,” said bankruptcy lawyer Kenneth Rosen, who represents several vendors in the case. “And now, many months after the start of the bankruptcy, it’s seeking to pay St. Jude’s as part of the sale to ESL.” A Sears spokesman declined to comment. “In a perfect world, this would have been handled in e-mails and phone calls and not landed in the docket,” said real estate lawyer Joshua Stein, who is not involved in the case.