Sears To Pay $60M Fraud Fine

Sears, Roebuck & Co. has agreed to plead guilty in a scheme to defraud bankrupt credit card customers and will pay a $60 million fine, the U.S. Attorney's office announced Tuesday.

A Sears' subsidiary, Sears Bankruptcy Recovery Management Services Inc., faced a bankruptcy fraud charge for wrongfully pursuing customers whose credit card debts had been cleared by bankruptcy filings.

Sears, based in Hoffman Estates, Ill., already has paid more than $180 million in restitution to about 188,000 debtors and $40 million in civil fines to 50 state attorneys general in connection with the scheme.

The fine was believed to be the largest ever to be paid in a bankruptcy fraud case and one of the largest criminal fines in the nation, according to the U.S. attorney's office.

Companies have a right to renegotiate the debts of customers who have filed for bankruptcy court protection from their creditors. But such "reaffirmation agreements" must be approved by a bankruptcy judge.

A number of other retailers, including Federated Department Stores, which owns Macy's, Bloomingdale's and Stern's, have settled similar cases.

Sears, in a statement, said the anticipated fine will not impact its earnings. In the second quarter of 1997, Sears took a pre-tax charge of $475 million against its earnings to cover expenses related to this issue.