Chicago Business Litigation Lawyer Blog
If the CEO of a bankrupt company buys shares in a spinoff company, is that evidence of sabotage, or just that they’re trying to make the best of a bad situation?
Edward Lampert, who was chairman and CEO of Sears Holding Corp. when it went bankrupt, is now being sued by the company for allegedly orchestrating shady dealings between himself, his hedge fund company (ESL) and Sears’ finances.
Having taken the reigns of the company when it was already in a financial downward spiral, Lampert allegedly made promises he couldn’t keep about turning the company’s finances around. Instead, he and his investors bought some of Sears’ largest and most valuable assets, then invested in the companies that spun off from Sears using those assets, essentially profiting off Sears’ bankruptcy.
Shareholders who received stock in the home improvement branch of Sears, known as Orchard Supply Hardware Stores Corp. allegedly received millions of dollars’ worth of stock, but without properly compensating Sears. Three of the shareholders who were on the board of Sears owned stock in the home improvement store that was collectively worth more than $100 million, according to the lawsuit.
When Sears Hometown and Outlet Stores was spun off into another company, those who owned stock in Sears were given the opportunity to buy shares of the new company. Continue reading ›