- Democrats Elizabeth Warren and Alexandria Ocasio-Cortez want Eddie Lampert to explain why he's asking a Sears bankruptcy judge to cancel a promise to pay up to $43 million in severance to former workers at Sears and Kmart stores.
- The hedge fund billionaire says Sears Holdings hasn't handed over all its assets in the $5.2 billion buyout deal, leaving him short on what was promised.
- Long-time Sears and Kmart workers were promised a week of severance for every year with their employer. A spokesperson for Lampert insisted Friday the billionaire is committed to paying severance to eligible workers laid off by retailer.
Eddie Lampert's recent legal maneuvering marks a betrayal of his promise to pay severance to tens of thousands of Sears workers laid off following his tenure as CEO of the bankrupt retailer, two lawmakers said in a letter to the billionaire.
When Lampertin a $5.2 billion deal earlier this year, the increased ante included a provision setting aside up to $43 million for severance for thousands of laid-off retail workers. But Lampert is asking a judge to relieve him of the obligation, arguing he didn't get what he paid for in buying the struggling department-store chain.
That request came despite his assurances earlier this year that employees of the Sears that emerged from bankruptcy would get the same severance benefits they'd been given before the retailer's chapter 11 bankruptcy filing, Sen Elizabeth Warren, D-Massachusetts, and Rep. Alexandria Ocasio-Cortez, D-New York, wrote Lampert on Thursday.
Lampert reiterated that commitment in a written response to concerns voiced by Warren, among the Democrats running for president, the lawmakers noted.
"New reports of your efforts to avoid paying millions of dollars in severance payments to laid-off workers indicate that you are betraying the commitment you made to Sen. Warren, to the bankruptcy court, and most importantly, to the tens of thousands of workers who have lost their jobs and face uncertain futures after your exploitative tenure at Sears," Warren and Ocasio-Cortez wrote.
They called on Lampert to explain his plans, including how many stores would be closed and how many more workers would be laid off, and gave him a June 14 deadline to reply.
A spokesperson for Lampert, however, dismissed as "false" reports that his company, Transform Holdco, was backing out of its agreement, and reiterated the company is committed to paying severance to eligible workers it took on in buying Sears.
"Employees of old Sears who lost their jobs during bankruptcy have already received their severance payments," a spokesperson stated in an email to CBS MoneyWatch. "No severance payments to terminated employees are 'at risk'."
Without its efforts, approximately 45,000 workers would have lost their jobs, the spokesperson added.
At issue are claims in a lawsuit filed by Lampert accusing a group of creditors of not having handed over "hundreds of millions of dollars of assets," leaving his Transform Holdco short on what had been promised and voiding financial obligations including the payouts to former employees. Transform Holdco has paid at least $128 million it was not obligated to cover, and is now owed $20 million, along with the Sears corporate headquarters in Illinois, Lampert contends.
"It's kind of a mess. If you're an employee waiting for your severance payment, you're probably going to have to wait longer," Sarah Foss, a legal analyst at Debtwire, told CBS MoneyWatch. Lampert's side is not saying nobody's liable for paying severance, but rather questioning which entity is responsible, she added.
"Transform believes that prompt resolution of these matters is important and necessary at this time to allow the bankruptcy court and creditors to consider the Defendants' proposed Chapter 11 plan," a spokesman emailed, citing its May 25 complaint against Sears Holdings, filed with the U.S. Bankruptcy Court for the Southern District of New York.
A group of creditors who opposed Lampert's bid for Sears is asking the bankruptcy court judge to make Lampert pay more than $200 million as part of his court-sanctioned deal for the retailer's assets. Lampert and Transform, they contend in their own legal claim, are trying to "litigate after-the-fact a better deal for itself than the deal for which it bargained."
Attorneys for those creditors did not return requests for comment. The creditors' group previously filed its own lawsuit accusing Lampert, ESL and others of bad-faith deals that allegedly shifted billions Lampert's way at the retailer's expense.
According to Debtwire's Foss, Lampert's latest legal claim is likely an attempt at gaining leverage ahead of settlement discussions. "This is their shot at making all of this litigation going away," she said.
In March, an undisclosed number of 90,000 Searsbenefits.
Sears offered itself for sale through the bankruptcy court after years with Lampert at its helm as the chief executive and largest shareholder.
Lampert's concession to former employees had followedto shame the billionaire into providing financial assistance to Sears and Kmart workers laid off without severance. A similar effort for tens of thousands of laid-off Toys R Us workers.
"Sears always promised us one week of severance pay for every year we were with the company. But after 21 years of service, I was laid off in January of 2019 and received just four weeks of severance pay," Brenda Urrutia, of El Centro, California, said in a statement issued Tuesday by the union-backed United for Respect. "It's not fair that Eddie Lampert and his friends are walking away with billions and now trying to cheat dedicated employees like me from what we were promised."