May 13, 2019, New York – Last year in October, Sears Holdings Corp and affiliated debtors filed a Chapter 11 case in the U.S. Bankruptcy Court for the Southern District of New York in a case pending before Judge Robert Drain. Since that time, the company has been reducing its debt and its presence by closing its stores. After the bankruptcy was filed, Sears’ unsecured creditors began to claim that the Debtors’ former CEO & Chairman siphoned value away from Sears in a multitude of insider transactions.
During the last month in April, the Debtors also brought a suit against its former CEO alleging that as Sears was sliding into bankruptcy, its long-time controlling shareholder, chairman, and CEO Eddie Lampert in concert with and assisted by other defendants, transferred billions of dollars of the company’s assets to its shareholders for grossly inadequate consideration or no consideration at all. The complaint asserted that by far the largest share of the value siphoned from the company went to Lampert himself, ESL, the hedge fund that he controls, and various other insider defendants. The complaint alleged that these transfers were intended to hinder, delay, and defraud creditors and/or occurred when the company was insolvent and had insufficient capital to continue its operations and to repay its billions of dollars in debt.
The complaint brings claims for a variety of fraudulent transfers including actual and constructive fraudulent transfers under Section 548 of the Bankruptcy Code as well as fraudulent transfers under the New York Debtor and Creditor Law in addition to claims to recover illegal dividends and for breaches of fiduciary duties.