“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,” the members of Congress wrote in a letter to Mnuchin on Thursday. “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."
The department store chain filed for bankruptcy in October and subsequently handed over responsibility of its two pension plans to the Pension Benefit Guaranty Corp., which is overseen by Mnuchin, as well as the secretaries of commerce and labor. The pension plans, which were underfunded by about $1.4 billion, affect more than 90,000 Sears workers, according to the letter.
“You stated in your confirmation hearing that you would recuse yourself from any official PBGC actions related to Sears,” the letter said, “but the current status of your recusal requirements — and the exact types of decisions you are recused from — are unclear.”
Treasury representatives did not immediately respond to an email seeking comment.
Specifically, the congresswomen say they want to know how Mnuchin advised Lampert and other executives on a number of decisions, including billions of dollars worth of stock buybacks and real estate spin-offs that ultimately benefited Lampert and his hedge fund, ESL Investments. They also want to know whether Lampert or other board members have tried to communicate with Mnuchin about the company’s pension plans. The letter gave him three weeks to respond.
Mnuchin, who had been roommates with Lampert at Yale, served on the boards of both Sears and ESL Investments.
Sears, founded in 1893 as a mail-order business, had been the nation’s leading retailer until it fell into disarray. It hasn’t turned an annual profit since 2010 and has closed more than 1,200 stores since Lampert took over as chief executive in 2013. He stepped down from that post last year, when the company filed for bankruptcy.
The cozy ties between Sears and Lampert’s businesses have long raised concerns among shareholders. Lampert was not only Sears’s largest shareholder but also its largest lender and, in many cases, its landlord.
Last month’s lawsuit, filed in U.S. Bankruptcy Court, accuses Lampert of a “multiyear and multifaceted scheme” to transfer more than $2 billion of the company’s assets to himself, his hedge fund and other insiders. In 2017, Lampert and Sears’s board of directors paid $40 million to settle a lawsuit alleging that Lampert had tried to siphon off the company’s best real estate by selling it to his real estate investment trust, Seritage Growth Properties. Sears shareholders argued that the “highly conflicted transaction” would probably “plunge the company into insolvency.”
Mnuchin stepped down from Sears’ board in December 2016, after President Trump nominated him to lead the Treasury Department.