Sears, Kmart employees to bankruptcy judge: Don't let Sears 'be a pawn in Lampert's game'

A group of current and former employees of Sears Holdings exhorted a federal bankruptcy judge to meet with them and force the retailer to make concessions as it pursues a last-minute deal to save itself in shrunken form.

The employees, who have organized their campaign through an action group called Rise Up Retail, sent a letter to U.S. Bankruptcy Judge Robert Drain asking him to take steps to protect their interests.

Sears has closed more than 3,500 stores and cut about 250,000 jobs in roughly the last 15 years as sales cratered, leading to the company's Chapter 11 bankruptcy filing in October.

But the company, which also owns the Kmart chain, still has about 45,000 employees and 425 stores that would be transferred to Sears chairman and former CEO Eddie Lampert's hedge fund ESL Investments if Drain approves the proposed sale.

Drain began a hearing on Monday to consider the deal. Sears board member William Transier testified that Drain had privately urged the retailer and ESL to agree to a sale behind closed doors because of his "very strong" hope to save as many jobs as possible.

But a group of unsecured creditors and the U.S. government's pension insurer have asked Drain to reject the deal, saying it unfairly favors Lampert, the company's largest shareholder and biggest lender.

The employee group said the creditors' accusations, including allegations that Lampert schemed to "steal" key Sears assets through a complex series of financial transactions, "are compelling."

"For the sake of our jobs, our coworkers, our communities, and our families, we want Sears Holdings to succeed, not be a pawn in Lampert’s game," the employees wrote. "The reality, as we know from our lived experience, is that Lampert has been putting the company through the longest liquidation in retail history. If he regains control of Sears, he will merely continue that slow burn."

But they feel stuck. If Lampert's deal collapses, Sears will almost inevitably liquidate, leaving them all without jobs.

"We love our company and want to see it prosper again. We have deep concerns that if Eddie Lampert takes the helm again, the Sears and Kmart we know and love will be gone forever," the employees write. "We believe that with insight and accountability from the workforce, new Sears has the chance to succeed."

Lawyers, witnesses and others leave the U.S. District Court for the Southern District of New York after the Sears bankruptcy hearing finished for the day, Feb. 4, 2019.
Lawyers, witnesses and others leave the U.S. District Court for the Southern District of New York after the Sears bankruptcy hearing finished for the day, Feb. 4, 2019.

The workers asked the judge to meet with current and former workers "to listen to our ideas and concerns" and arrange severance for workers who lost their jobs before Sears filed for bankruptcy. They also asked the judge to force the new Sears to give employee and community advocates a seat on its board while also forcibly separating the role of CEO and chairman under the new company.

The employees and retirees writing were Michelle Hill, Lori Hoskins, Gabe Maguire, Bruce Miller, Leonardo Ortiz, Ondrea Patrick, Jose Perez, Victor Urquidez and Wendy Woolstenhulme.

Their outreach came after Sears board member Transier testified Monday that the deal to sell Sears to Lampert's ESL does not preclude future job cuts or store closures.

Sears declined to comment on the letter Tuesday.

ESL said in a statement that its bid "offers Sears the only long-term opportunity to save and create jobs, honor the extended warranties that were purchased by so many customers, generate new volume and grow."

"We intend for the new company to operate as many Sears and Kmart stores as reasonably possible, including new smaller stores that emphasize our stronger capabilities. Continuing to operate a meaningful network of stores is essential to achieving our goal of returning Sears to profitability," ESL said.

Matthew Mason, a commercial real-estate consultant for Conway MacKenzie and former real-estate counsel for Sears and Kmart, said there's a good chance that ESL will continue to close stores following the deal until eventually there are none left.

"It seems like it’s a series of complex financial transactions without a solid retail plan," he said in an interview.

Drain is expected to continue the sale hearing on Wednesday, and it could go into Thursday. Afterward, he will rule on whether Sears can be allowed to sell itself.

Sears bankruptcy attorney Ray Schrock said the company hopes to close the deal on Friday if it wins approval.

Follow USA TODAY reporter Nathan Bomey on Twitter @NathanBomey.

This article originally appeared on USA TODAY: Sears, Kmart employees to bankruptcy judge: Don't let Sears 'be a pawn in Lampert's game'

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