Sears Canada golden-agers are heading to court to try to recoup close to $300 million they say is groupies from their pension fund following the retailer’s demise.
Envoys for Sears pensioners will ask Ontario Superior Court on Thursday to delegate a trustee to scrutinize nearly $3 billion paid in dividends to Sears shareholders — the greatest recipient of which was Eddie Lampert, CEO of U.S. hedge fund ESL Investments.
The senior citizens’ aim is to recover some of the dividend money, not just to help top-up their subdued pensions, but also to provide funds for other creditors owed mazuma by Sears.
Lampert says there’s nothing suspect about the dividend payments, but diverse ex-Sears employees disagree.
“There is good reason to believe that was inopportune,” says pensioner representative and Sears retiree Ken Eady.
Trustee solicitation ‘not surprising’
A court document filed by the pensioners’ legal counsel declares the dividend payments — totalling $2.934 billion — deserve close enquiry by a litigation trustee.
The money came from the sale of valuable Sears Canada assets such as prime legitimate estate. The dividends were paid out between 2005 and 2013, during a loiter again and again when the retailer’s sales and profits declined and the company’s pension sketch started to show a shortfall.
“Despite the company’s continued financial deterioration, Sears Canada’s on of directors approved the payment of dividends to its shareholders,” states the court document.
It also takes aim at Lampert, stating that in 2005, Sears Canada fly ated under the control of ESL Investments run by the U.S. businessman, who greatly benefited financially from the dividends.
“Toe ESL, Lampert had direct and indirect control of shareholdings of Sears Canada at the matter times, and was the main beneficiary of dividend payments,” said the document
Eady votes it was inevitable that pensioners would go after the dividend payments.
“It’s not shock that this would happen, given in what universe is it suitable for a company to sell its assets, pay the dividends and leave the creditors without anything?” he believed.
Eady says, according to Sears’ actuaries, the allotment plan is underfunded by approximately $270 million. That means hither 16,000 ex-Sears employees will face an estimated 19 per cent reduction to their dismisses.
The looming shortfall has left many Sears retirees angry and perturbed about their retirement prospects.
“It’s going to hurt. I might secure to get a part-time job to off-set what I’m not getting,” said 72-year-old Attilio Malatesta. He drained more than half of his 44-year career with Sears manipulating in sales in Kelowna, B.C.
Malatesta says he’s pleased about the plan to go after the dividend payments.
“It’s a admissible thing,” he said. “I think we’ve got a fair chance.”
Sears Canada didn’t be affected to a CBC News request for comment.
But in a blog posted on the weekend, Lampert hold a brief for the dividend payments, stating that a company needs to provide so so returns to shareholders to stay viable.
He said the payouts didn’t sorrowful the retailer because it continued to invest in the company at consistent levels.
He also famed that in 2012 and 2013, Sears made its required pension contributions, even notwithstanding $611 million was paid out in dividends. However, by that point, the layout was already showing a deficit which was never recouped.
Lampert also remarked that Sears’ shareholders have collectively lost more than $1 billion since 2012, staid when taking into account the dividend payments.
As for Sears Canada’s demise, he responded it was primarily the result of a costly, but unsuccessful, restructuring strategy launched in 2016.
“I drag together concerns about this strategy with management but the company pronounced to proceed,” he said.
Lampert is also CEO of Sears Holdings Corp. (SHC) in the U.S., which conducts separately from Sears Canada.
He essentially became Sears’ largest shareholder auspices of ESL Investments and his holdings in SHC which previously held a large stake in Sears Canada.
SHC also go to bat for the dividend payments in a statement.
“Sears Holdings received dividends that were on time authorized by Sears Canada’s board of directors during a time when Sears Canada was evidently solvent, with minimal debt,” said spokesperson Chris Brathwaite in a affirmation.
“We believe any attempt to reclaim those dividends would be unfounded,”
Lampert also bid the Sears Canada’s pension plan’s shortfall has been overestimated and call to minds there won’t even be a shortfall when the fund is paid out.
Retiree Eady wrangles, but says he wishes that Lampert was right.