Warren, Ocasio-Cortez Demand Answers After Private Equity Firm Breaks Promise of Severance Pay to Laid Off Shopko Employees
Sun Capital Initially Committed to Compensating Thousands of Workers After Years of Looting Company's Assets
Washington, DC - United States Senator Elizabeth Warren (D-Mass.) and Representative Alexandria Ocasio-Cortez (D-N.Y.) today sent a letter to private equity firm Sun Capital expressing alarm about reports that the firm, after years of looting the discount retailer Shopko and then driving it into bankruptcy, plans to break its promise to make severance payments to thousands of dedicated Shopko employees.
Since Shopko was acquired in a leveraged buyout in 2005, Sun Capital saddled the company with debt, starved it of investment, and stripped it of assets, making profits for Sun Capital but ultimately leading to Shopko's demise. Earlier this year, after nearly 60 years in business, Shopko filed for bankruptcy, closing all of its 360 stores and costing approximately 14,000 workers their jobs. Despite the company initially promising workers that they would receive retention and severance packages when stores closed, workers reportedly did not receive the severance payments.
In their letter, Senator Warren and Representative Ocasio-Cortez outlined how Sun Capital's financial engineering drove Shopko to bankruptcy, and criticized the firm for reneging on its promise of severance payments to thousands of Shopko employees after years of looting the company's assets.
"Your company reaped millions of dollars in profits from your Shopko acquisition, but the decisions you made ultimately led to the company's liquidation," wrote the lawmakers. "This model of financial engineering is all too common in the private equity industry, and marks an especially shameful end to your disastrous management of the company."
The lawmakers asked Sun Capital to explain if it has any plans to pay promised severance to Shopko employees who lost their jobs and to provide information about the promises the company made to workers regarding retention and severance payments.
"(This) is an egregious betrayal of the people who dedicated their careers to Shopko and kept Shopko running until the very end of its destruction at Sun Capital's hands," the lawmakers continued. "The years of financial tricks and outright lies to workers are shameful and I strongly urge you to ensure that these workers receive every penny of the severance payments that they have earned."
The lawmakers requested a response to her inquiry by no later than July 30, 2019.
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