Former Sears chairman and CEO Eddie Lampert has dismissed two prominent lawmakers’ accusations that he refused to make promised severance payments to laid-off workers prior to the company’s bankruptcy.
At the end of May, presidential candidate Sen. Elizabeth Warren and Rep. Alexandria Ocasio-Cortez delivered a joint letter to the billionaire executive, criticizing his efforts to avoid repaying Sears Holdings Corp. for $43 million in severance to thousands of workers. In his letter addressed to the two Democrats on Thursday, Lampert called the claims of betrayal “harsh” and based on “false” reports.
The businessman had agreed to cover the payments in February when he struck a $5.2 billion deal to buy the bankrupt Sears through Transform Holdco LLC — owned by Lampert’s hedge fund, ESL Investments Inc., and widely referred to as the “New Sears.”
“This is entirely an issue between Old and New Sears,” he wrote in the letter, which was shared on publishing platform Medium. “To our knowledge, the eligible employees whose employment was terminated by Old Sears prior to our acquisition have received all severance due to them.”
In the letter dated May 31, Warren and Ocasio-Cortez criticized Lampert for deceiving employees who lost their jobs following earlier assurances that they would be guaranteed an exit package if they were laid off after Sears’ bankruptcy filing on Oct. 15.
“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 response, Transform Holdco argued that the lawmakers’ letter mischaracterized the dispute. “In the asset purchase agreement, Transform agreed to reimburse old Sears for these severance payments in exchange for the receipt of certain assets. Old Sears has admitted that $55 million of those assets have not been transferred to Transform, although Transform believes the amount is larger. As a result, Transform is not obligated to reimburse old Sears for having made the severance payments.”
Lampert’s agreement had rescued the beleaguered retailer from liquidation, allowing it to continue operations at 425 stores and retain 45,000 jobs. However, he has since argued to the court that he should not be responsible for severance costs because Sears Holdings failed to fulfill certain aspects of the deal.
In court documents, Lampert alleged that Sears Holdings neither made the assured payments to vendors nor transferred certain promised assets to ESL Investments, 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,” the hedge fund’s lawyers said in the filing.
Lampert is already fighting a monthslong legal battle with unsecured creditors, who have accused him of illegally siphoning billions of dollars of assets as Sears spiraled into bankruptcy. His latest move in the Sears saga involved an agreement to buy the remaining shares of Sears Hometown and Outlet Stores Inc. not already owned through ESL. The move reunites Sears and Kmart with Sears Hometown, which was spun off from parent company Sears Holdings in 2012.
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