Toronto Star

Sears workers still fighting for pensions

Court case Monday targets hedge fund

- Jennifer Wells

As you ponder the plight of 2,500 or so Oshawa autoworker­s, spare a moment too, as you go about your merry shopping this first weekend in December, for 12,000 former Sears employees.

Spare a moment, this first Christmas in the city without a Sears presence, to ponder the Armageddon in retail that erased not just Sears, but Eaton’s, from the shopping landscape. (Many have forgotten how the two were once entwined.)

Spare a moment for the Sears Canada pensioners who have taken a 30-percent haircut on their earned pension and who wonder why politician­s, preoccupie­d now with General Motors, haven’t done more to protect them.

Do not spare a moment for Eddie Lampert.

On Monday, in Ontario Superior Court, two motions will be heard seeking permission to bring further claims against Lampert, his hedge fund, ESL Investment­s Inc., and former directors. The claims target: a $509-million dividend paid by Sears Canada to shareholde­rs on Dec. 9, 2013. That would have made for a jolly Christmas for some.

There’s a great deal still going on in this case, from the court-appointed monitor’s motion that the half-a-billion dollars should be deemed a transfer under value (giving away assets, in other words, when bankruptcy looms) to the court-appointed litigation investigat­or’s motion to allow claims against Lampert et al., to proceed on the grounds that Sears Canada’s board of directors “failed to conduct even a minimum degree of due diligence before authorizin­g the 2013 Dividend, despite the fact that Sears Canada was facing obvious and severe financial difficulti­es at the time.”

That motion, filed in late November, holds that the dividend “crippled Sears Canada’s ability to remain in business as a going concern.” The court will additional­ly be asked to appoint former associate chief justice Douglas Cun-

ningham as litigation trustee.

So what we have here, as opposed to the General Motors trauma, is an unceasing attempt to determine when, where and by what means assets were hived up when, possibly, they should not have been. A great many rocks have been overturned.

In a responding filing in Superior Court, Lampert’s lawyers state that after the dividend was paid, Sears Canada had $513.8 million cash on hand, and criticize these causes of action for being “at best, dubious.” The litigation investigat­or, the factum states, “has not offered this Court a single reason why a claim can be commenced now, five years after the declaratio­n of the dividend.” In support of a contrary view of the financial health of Sears Canada, ESL and Lampert paid roughly $168.5 million (U.S) for an additional equity interest in Sears Canada in October 2014.

As to those former Sears directors, their tart response to the court calls the two motions “a misguided attempt to lay blame for Sears Canada’s demise at the feet of the wrong parties.” So here we are. My final encounter with Sears Canada dates to the winter of 2014, when the company, in an attempt to keep the chain alive, shuttered some stores, including the one at the Eaton Centre. The top-loading washing machine I purchased that day has proved a gem. Sears was exceptiona­l when it came to white goods, in my experience.

I mention this only because it brought back memories of the high-priced attempt by Sears to revive the Eaton’s brand. In December 1999, Sears acquired the Eaton’s name and 19 stores, 12 of which relaunched as Sears outlets.

The other seven were to continue carrying the Eaton’s banner in high-traffic downtown locales. Shoppers who visited the anchor store at Dundas and Yonge during the Christmas 2000 season may remember the 10-foot bears in crimson nutcracker uniforms standing sentry at the shop’s doorways. Or the way in which the winter woodland nutcracker theme played charmingly throughout the store. The store was suddenly very luxe, very New York. Sears couldn’t save Eaton’s. Sears couldn’t be high end. But it had a hold on the midmarket customer with the Sears brand. And loyal workers who devoted their careers to the company.

That’s not to discount the turmoil in the retail world, the assault of big box stores, the growth of on-line shopping. Eddie Lampert took control in 2005. Sure, he already had Kmart, but no one saw the hedge fund billionair­e as a hands-on retailer. The Canadian operations suffered a staged decline, filing for creditor protector in June 2017. This time last year shoppers were anticipati­ng the final liquidatio­n sales from the final stores remaining in the chain. By January of this year it was over.

Ten months later, Sears Holdings Corp. in the U.S. filed for bankruptcy. Stunning, really. A nineteeth-century giant, with 90,000 employees and retirees, potentiall­y headed for the dustbin. Senator Bernie Sanders tweeted this: “Once again, vulture capitalist­s have hollowed out a company to line their own pockets.”

Eddie Lampert stepped down as CEO of Sears Holdings. He remains chairman. In an interview with the New York Times after the bankruptcy filing he said that while he wasn’t “fine” with the outcome, he was “fine with the effort” he had put in to steering the chain.

Sears Canada pensioners would disagree. Monday’s court proceeding­s serve as a reminder that they haven’t given up yet.

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 ?? RENÉ JOHNSTON TORONTO STAR FILE PHOTO ?? The final Sears Canada stores closed in January of this year.
RENÉ JOHNSTON TORONTO STAR FILE PHOTO The final Sears Canada stores closed in January of this year.

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