Human Capital

Sears Owner Seeks to Opt Out of Severance Payments

Eddie Lampert had promised to pay $43 million to former workers.
Sears Owner Seeks to Opt Out of Severance Payments

The former chairman and chief executive officer of Sears, Eddie Lampert, is threatening to renege on a promise to pay out $43 million to thousands of employees who lost their jobs as stores closed.

In January, Lampert, through his hedge fund ESL Investments, offered to buy the bankrupt company in a deal that included the $43 million in payouts to former workers, $166 million to pay suppliers, and $139 million to cover expenses tied to the bankruptcy.

“We believe our proposal will provide substantially more value to stakeholders than any other option, in particular a liquidation, and is the best path forward for Sears, its associates, and the many communities across the United States touched by Sears and Kmart stores,” ESL said in a statement at the time.

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ESL now says Sears Holdings did not give it all the assets in the buyout agreement, including store inventory and the headquarters of the company outside Chicago.

“Because of these shortfalls, [ESL] believes it has no obligation to assume $43 million in severance,” the companies said in a filing.

Sears Holdings, in its own motion, argued ESL is not due additional assets under terms of the sale. Creditors had objected to the severance payouts to workers who were laid off prior to the bankruptcy, so those payments were not made.

In a separate lawsuit, Sears Holdings said Lampert made agreements to loan the company money but stripped it of its most valuable assets during the years he was at the helm.

“We do have a number of disputes about the plan, but we will put those to the side right now,” an attorney for ESL said.

The Sears Holdings lawsuit, which claims $2 billion in assets were improperly stripped from the company, names treasury secretary Steve Mnuchin, a former investor and executive at ESL, as a defendant.