Sears sues Lampert, says former CEO drained $2B in assets from company

NEW YORK — Sears Holdings Corp. is suing its former chairman and largest shareholder Eddie Lampert, alleging the billionaire stripped the once iconic company of more than $2 billion in assets.

The lawsuit, which was filed late Wednesday with the U.S. Bankruptcy Court of the Southern District of New York, also names former Sears directors, including U.S. Treasury Secretary Steven Mnuchin as well as executives at Lampert’s hedge fund ESL.

Sears, which also operates Kmart, filed for Chapter 11 bankruptcy protection in October after years of massive losses and sales drops. Lampert saved the company by acquiring the assets in a court-approved auction through an affiliate of ESL in February. Unsecured creditors had tried to block the sale, maintaining that Lampert was to blame for the company’s downfall.

The 110-page lawsuit cited sales or spinoffs of key assets that were allegedly used to line Lampert’s own pockets and that of his hedge fund. That includes the spinoff of Lands’ End in 2014 and Lampert’s real estate investment trust Seritage Growth created four years ago to extract revenue from Sears’ properties.

“Altogether, Lampert caused more than $2 billion of assets to be transferred to himself and Sears’ other shareholders and beyond the reach of Sears’ creditors,” the suit stated.

ESL said it “vigorously” disputes the claims and calls them “baseless” and “fanciful” in a statement emailed to The Associated Press.

“The debtors’ allegations are misleading or just flat wrong,” ESL said, adding that Sears received proceeds of more than $3 billion from the transactions, all of which were applied to reduce debt and fund operations.

“ESL was a constant source of financing for Sears Holdings for many years,” it said.

Lampert, who merged Sears and Kmart in 2005, steered Sears into Chapter 11 bankruptcy protection in October. The company’s corporate parent had 687 stores and 68,000 employees at the time of the bankruptcy filing. At its peak in 2012, its stores numbered 4,000.

AP FILE PHOTO Eddie Lampert, shown in 2004 when he was Kmart chairman, is being sued by Sears, of which he recently was CEO. The lawsuit also names Treasury Secretary Steven Mnuchin.