Although current Sears shareholders have lost almost their entire investment, tens of thousands of employees have lost their jobs, and creditors — including the U.S. government — and others are owed $11 billion, Lampert has still made nearly $1.4 billion to date from his Sears investment, a number that has never been calculated before.
But Lampert’s status as Sears chairman and CEO, on top of the hedge fund manager’s ownership of both debt and equity, is likely to give way to a torrent of litigation in bankruptcy that could change that calculation. Unsecured creditors are already going after Lampert and ESL, arguing in a November 6 bankruptcy court filing that insiders “may have siphoned value away from the company on favorable terms” at the expense of other creditors ever since the merger with Kmart in 2005. In the filing the creditors mention a litany of potential charges: fraudulent transfer, breach of fiduciary duty, equitable subordination, and debt recharacterization. For his part, Lampert was unapologetic from the start: “The notion of spending money on the business — I’m not opposed to it. I just want a return for it,” he told Fortune in 2006. Instead of investing in the stores, which were already run down, Sears started buying back shares. Between 2005 and 2008 it bought back $5 billion worth of stock — well over double what was spent on capital expenditures during the same time frame. “Had that cash been saved, Sears would’ve been saved,” says one hedge fund manager who has been short Sears stock for years. In 2000, Sears generated $1 billion in free cash flow. “It could have been saved,” notes Mark Cohen. But under Lampert, he says, “Sears was a slow-moving train wreck.”
It seems doubtful that was what Lampert had in mind when, in the 2006 Fortune interview, he was coy about his plans for Sears. “One of the unspoken secrets about business leaders is that they often have no idea about where they’re going to end up,” he said. “I know the right direction. Whether we end up at the destination — rebuilding Sears Holdings into a great company on many dimensions — I don’t know. But we’re headed in that direction.”
Cohen shakes his head at such comments. “Little Eddie, I don’t know what really makes him tick,” he says. “He’s either delusional, disingenuous, or dishonest — or some combination of the three.”
https://www.institutionalinvestor.com/article/b1c33fqdnhf21s/Eddie-Lampert-Shattered-Sears-Sullied-His-Reputation-and-Lost-Billions-of-Dollars-Or-Did-He