AOC, Warren Press Mnuchin on Potential Illegal Involvement in Sears’ Bankruptcy
“We are deeply concerned by the financial engineering and potentially illegal activity that took place at Sears Holding Corporation while you (Mnuchin) served on the company’s board.”
Presidential candidate Elizabeth Warren (D-Mass.) and Representative Alexandria Ocasio-Cortez (D-N.Y.) are pressing Treasury Secretary Steven Mnuchin for answers regarding his involvement in the bankruptcy of Sears, Roebuck and Company. Mnuchin served on Sears’ board of directors until President Trump nominated him for the Cabinet in December 2016, and he is named as a defendant in a suit filed by a committee of the defunct retailer’s creditors.
Mnuchin’s Sears Involvement
The lawsuit alleges that Sears’ former CEO, Eddie Lampert, improperly stripped the company of its assets for personal gain. Mnuchin was Lampert’s roommate at Yale University, and Warren and Ocasio-Cortez believe the treasury secretary’s involvement with Sears is “a walking example of what happens when rich and powerful people put other rich and powerful people into power.”
“We are deeply concerned by the financial engineering and potentially illegal activity that took place at Sears Holding Corporation while you served on the company’s board,” Warren and Ocasio-Cortez wrote in a letter to Mnuchin on Thursday, May 23. “In addition, we are concerned that, as Treasury Secretary, you are in position to take actions that benefit Sears’ shareholders and owners at the expense of workers and taxpayers.”
Former CEO Lampert and his hedge fund ESL simultaneously served as Sears’ biggest shareholders, creditors and landlords. The lawmaker’s letter and the recently filed lawsuit allege that Lambert siphoned off billions by selling Sears’ stores and real estate to himself before selling it back to Sears at a higher price.
Lampert and Sears’ board of directors paid a $40 million settlement in 2017 to resolve allegations they had tried to profit from the company’s best real estate by selling it to Lampert’s real estate investment trust, Seritage Growth Properties. Lampert tried to go forward with the move despite Sears shareholders arguing that the “highly conflicted transaction” would probably “plunge the company into insolvency.”
“As Sears was sliding into bankruptcy, Eddie Lampert…in concert with and assisted by other defendants, transferred billions of dollars of the company’s assets…for grossly inadequate consideration or no consideration at all,” according to the most recent federal lawsuit, which was filed Thursday May 23. “This complaint is brought to make Sears whole for these thefts of its assets.”
Mnuchin’s Sears Recusal Not Enough
Sears closed more than 3500 stores, and thousands of workers lost their jobs after Lampert became CEO in 2013. Mnuchin now oversees the federal oversight organization responsible for guaranteeing the pension plans, which are underfunded by about $1.4 billion, of more than 90,000 workers from the bankrupt company. While Mnuchin promised to recuse himself from decisions regarding Sears’ pensions, Warren and Ocasio-Cortez’s letter states “the current status of your recusal requirements — and the exact types of decisions you are recused from — are unclear.”
Warren and Ocasio-Cortez’s letter demands answers from Mnuchin on how he advised Lampert during his time on the board of directors and have given him three weeks to respond. The women also requested information on any possible communication between Mnuchin and the board of directors regarding the transferred pension plans.
Mnuchin was previously known as the “foreclosure king” for his time as CEO and chairman of mortgage lender OneWest, which displaced 36,000 homeowners from their homes in the years after the subprime mortgage crisis. According to a memo obtained by investigative reporter David Dayen, OneWest, “rushed delinquent homeowners out of their homes by violating notice and waiting period statutes, illegally backdated key documents, and effectively gamed foreclosure auctions.”