Unsecured Creditors Seek To Have Court Recognize Lampert as...

... a "bad actor".

If they can convince the court to recognize Lampert (and Kamlani: President of ESL) as a bad actor they might be able to have the court "Re-characterize Lampert's Debt as Equity". (Docket 1765).

I have not heard this term before; so I looked it up. Lampert could be the Poster Boy of the manner in which it is described here:

https://www.lexisnexis.com/lexis-practice-advisor/the-journal/b/lpa/archive/2017/04/12/the-recharacterization-of-loan-agreements-under-applicable-bankruptcy-and-non-bankruptcy-law.aspx

To be considered a "Bad Actor: the person must be an insider and have taken one or more actions that could be considered to be "amoral". Actions do not need to be illegal; but rather simply amoral; for example an action that could be described as "self dealing".

If the debt is re-characterized as equity; basically Lampert would need to get a claim number (like BeetleJuice did) sending him at the end of the line behind other unsecured creditors. That would be about claim # 7800. (Instead of being at the head of all secured creditors).

My over simplified description as to how they paint Lampert / Kamlani is as:

A party who is an Insider
A party who had a long term goal of stripping assets from Sears Holdings to the detriment of other parties
A party that made capital infusions to Sears Holdings at aggregious interest rates primarily to provide additional time to complete asset stripping (Sears Canada; Sears Hometown; Lands End Seritage)...

I doubt having Lampert classified as a "bad actor" would be difficult; since his own board provided a statement in one or more SEC filings noting that the CEO could have conflicts that do not align with goals of their own shareholders.

Having a court / judge re-characterize Debt as Equity could be a bigger challenge than simply showing he is a "bad actor"; but how could this have applied to others in the past; and not apply to Lampert? I suspect all previous "bad actors" were angels when compared with actions taken by Lampert.

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This has been rehashed at length, here and elsewhere. These motions are going nowhere. The allegations within them are highly complex and are going to revolve around the highly technical issues related to those above and Eddie’s fiduciary duty to both SHC shareholders and ESL investors. .01% interest either way and he’s in trouble for self-dealing. These issues cannot be litigated in 2 weeks before the sale closes, and because of that the Judge is going to approve the sale. ESL and the UCC both are going to fight this tooth and nail as long as they can. Eddie has more on the line than the creditors do, and he probably has both the means and a reason to outlast them. This is not going to be wrapped up for probably 10-15 more years, by which point the attorneys will have made a ton, and the UCC will (still) be attempting to squeeze blood from a turnip. Witness “old” GM (pre-bailout) still going through the process a decade after they did something similiar (selling assets in whole) with no end in sight.

I’m still miffed as to why they think they’re going to get paid anything (more) in the event of liquidation. SHC ran the liquidators off prior to the auction, and then had to retain Abacus. There’s nothing in it for the liquidators (ESL is probably grossly overpaying, even without the credit bid being fsctored in), and consequently nothing in it for the UCC. Abacus is probably gone too, which means SHC will be doing it themselves. We’ve all seen how that goes. It’s going to boil down to when the loans were made. If they were made after 2/2016 (as >99% were), then the UCC is tilting at windmills and exposing themselves to liability for malfeasance. The ruling from Drain in overruling these objections is going to be along the lines of “they’re unsecured and knew that going in, and yet they still extended the loans.”

Was Lampert in his role as a member of Sears' Board and CEO placing its interests above Seritage's? Above ESL's? It's hard to wear two of these hats at the same time in the post Enron Era and not wind up in jail. That's why people keep in bringing up terms like self dealing and conflict of interest on these boards.

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Unsecured Creditors Seek To Have Court Recognize Lampert as...

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