May 23, 2019

Senator Warren, Rep. Ocasio-Cortez Question Secretary Mnuchin's Involvement in Predatory Practices that Led to Sears Bankruptcy, Loss of Tens of Thousands of Jobs

Secretary Mnuchin served on the board of directors of Sears and as Vice Chairman of ESL Investments, the hedge fund owned by his close friend Eddie Lampert, that purchased Sears in 2005

Text of the Letter (PDF) | Explainer Video (YouTube)

Washington, DC - Today, U.S. Senator Elizabeth Warren (D-Mass.) and U.S. Representative Alexandria Ocasio-Cortez (D-N.Y.) sent a letter to Treasury Secretary Steven Mnuchin, questioning his involvement in dubious financial engineering and other managerial decisions that enriched investment company executives while decimating Sears' long-term growth and sustainability -- ultimately resulting in Sears' bankruptcy and the loss of tens of thousands of jobs.

Senator Warren and Rep. Ocasio-Cortez released a video to accompany their letter. Watch it here.

Secretary Mnuchin served on Sears' board of directors until December 2016 and is the former college roommate and close friend of Sears CEO Eddie Lampert, whose hedge fund, ESL Investments, purchased Sears in 2005. Secretary Mnuchin also served as Vice Chairman of ESL investments for a time.

In April 2019, the Sears Holding Corporation filed a lawsuit suing Mr. Lampert and former Sears board members (including Mr. Mnuchin) "for allegedly stripping Sears of billions of dollars as it collapsed into bankruptcy." The lawsuit accused Mnuchin and five other members of the Sears board of "assisting" Lampert in "transferring billions of dollars of the Company's assets to its shareholders" at the expense of the company as a whole. The lawsuit states that Lampert, Mnuchin, and the Sears board members ripped off Sears workers to enrich themselves and accelerated the company's collapse.

"In their recent lawsuit, Sears creditors accuse you and five other members of the Sears board of 'assisting' Lampert in 'transferring billions of dollars of the Company's assets to its shareholders' at the expense of the company as a whole," wrote the lawmakers. "In your current role as Treasury Secretary, you have had the opportunity to intervene on behalf of Sears and in favor of Lampert's interests."

"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. 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," they continued.

Mnuchin stated in his confirmation hearing that he would recuse himself from any official Pension Benefit Guaranty Corporation (PBGC) actions related to Sears, and his ethics agreement required him to do so for one year after his confirmation.  However, the current status of his recusal requirements -- and the exact types of decisions from which he is recused -- are unclear.

In light of the ongoing lawsuit, as well as the recent decision of the PBGC to take responsibility for Sears' two pension plans, Senator Warren and Representative Ocasio-Cortez wrote to request information about Mnuchin's role as a Sears board member and the exact parameters of Mnuchin's recusal from PBGC actions related to Sears.

They requested a response to their questions about Mnuchin's role and conduct in the Sears bankruptcy by June 13, 2019.