Major shareholder Eddie Lampert says the billions in dividend payouts were justified
Sears Canada pensioners are heading to court to try to recoup close to $300 million they say is missing from their pension fund following the retailer's demise.
Representatives for Sears pensioners will ask Ontario Superior Court on Thursday to appoint a trustee to scrutinize nearly $3 billion paid in dividends to Sears shareholders — the biggest recipient of which was Eddie Lampert, CEO of U.S. hedge fund ESL Investments.
Lampert says there's nothing suspect about the dividend payments, but many ex-Sears employees disagree.
"There is good reason to believe that was inappropriate," says pensioner representative and Sears retiree Ken Eady.
A court document filed by the pensioners' legal counsel claims the dividend payments — totalling $2.934 billion — deserve close examination by a litigation trustee.
The money came from the sale of valuable Sears Canada assets such as prime real estate. The dividends were paid out between 2005 and 2013, during a time when the retailer's sales and profits declined and the company's pension plan started to show a shortfall.
"Despite the company's continued financial deterioration, Sears Canada's board 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 came under the control of ESL Investments run by the U.S. businessman, who greatly benefited financially from the dividends.
"It's not surprising that this would happen, given in what universe is it correct for a company to sell its assets, pay the dividends and leave the creditors without anything?" he said.
Eady says, according to Sears' actuaries, the pension plan is underfunded by approximately $270 million. That means about 16,000 ex-Sears employees will face an estimated 19 per cent reduction to their pensions.
The looming shortfall has left many Sears retirees angry and distraught about their retirement prospects.