Sears eyes $175 million settlement to resolve former-CEO lawsuit

By Sarah Lizee

Olympia, Wash., Aug. 11 – Sears Holdings Corp. is seeking approval of a $175 million settlement with the former chief executive officer of the company and certain other individuals, according to court documents filed with the U.S. District Court for the Southern District of New York.

In April 2018, Sears filed a lawsuit against Edward Scott “Eddie” Lampert, ESL Investments, Inc. and several ESL affiliates, including shareholders, lenders and directors.

Sears claimed that Lampert, its long-time controlling shareholder, chairman and CEO, along with other individuals, transferred billions of dollars of the company’s assets to its shareholders for “grossly inadequate consideration or no consideration at all.”

The company said the transfers were designed to hinder, delay and default creditors and/or were made when Sears was insolvent and lacked the capital needed to continue its operations and to repay its billions of dollars in debt.

Sears said that Lampert and the other insider defendants allegedly knew from 2014 through Sears’ bankruptcy filing in 2018 that the company was insolvent and that it “had no plan to return to profitability.”

According to the settlement, $175 million will be paid to the debtors and then distributed to creditors. The amount will consist of a roughly $125.63 million director & officer insurance payment, a $41.88 million original action defendants payment, and a $7.5 million public shareholder payment.

Sears is a retailer based in Hoffman Estates, Ill. The company filed bankruptcy on Oct. 15, 2018 under Chapter 11 case number 18-23538.

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