Grubstakers - Episode 105: Eddie Lampert (Sears/K-Mart)

Episode Date: October 8, 2019

"It wasn't only real estate that Lampert signed over to himself. In 2014, Sears sold Land's End, a clothing brand, to a consortium that was two-thirds controlled by ESL. Today, the brand has a rough market value of $314 million. In 2016, Sears sold Craftsman brand tools to Black & Decker for $900 million. The profits were used to pay off debt, including to Lampert. In 2017, Die Hard batteries were put up for sale. And this year, Lampert has made a $400 million bid for Kenmore appliances, the crown jewel of what remains at Sears, along with an $80 million bid for Sears Home Improvement stores. So the leadership of the Sears empire—Lampert—is gradually selling off bits and pieces of it, mostly to Lampert. The cash generated from those deals in large part serviced Sears's debt, the payments on which also went to Lampert. And now, having put Sears into bankruptcy, the top creditor—Lampert—stands to gain from the final fire sale." https://prospect.org/economy/sears-gutted-ceo/

I want to be held accountable for what I'm doing. This may sound like an exaggeration, but it was like the 9-11 of my career and certainly of making kombucha. Jesus is smart. This idea of income inequality, that always strikes me as a very, it's a deceptive term, income inequality. Well, let's flip it around. It comes from outcome inequality. In 5, 4, 3, 2... I got the loot, Steve! Hello, welcome to Grubstakers, the podcast about billionaires. My name is Sean P. McCarthy, and I'm here joined by...

Yogi Poel. Andy Palmer. Steve Jeffers. And so this week, we're talking about the billionaire Eddie Lampert. And you may or may not have heard of the name Eddie Lampert, but if you have ever walked past a Sears or Kmart having a going-out-of-business sale, then you are familiar with his work.

Because Eddie Lampert is the hedge fund financial engineer who drove those two staples of American retail into the ground. And they are currently going through a very complicated and horrendous bankruptcy with probably about 200 200 000 layoffs altogether throughout his tenure well did you know that uh sears actually saved my parents marriage really yeah yeah no i uh recorded it here i cannot live another day without air conditioning says

tomorrow's gonna be hotter hotter like yesterday yesterday yesterday you said you'd call sears i'll call today you call now i'll call. So what's the paper say about tomorrow? Another scorcher. All right. Cool, cool, cool, cool, cool, cool, cool, cool, cool. I didn't know you pitch-toned your parents' conversation, Andy. Oh, no, that's just how I talk. That's a birth defect.

Oh. You know, in the Walmart air conditioning commercial, the guy just slaps his wife and says shut up And that's actually why Walmart won the retail wars You can't be taking shit No some of the Roll back prices bitch Turns out some of the

I'll do it tomorrow You're not the boss of me I shop at Walmart Some of the prenatal vitamins in the 50s Left babies permanently voice modulated Right That's what the Johnson and Johnson scandal is all about Yeah Thalidomide vitamins in the 50s left babies permanently voice modulated. That's what the Johnson and Johnson scandal is all about.

Yeah. Thalidomide. I just can't believe Eddie Lampert took that priceless intellectual property and ran it into the ground. But they talk about, you know, of course, many people familiar about the, are familiar with the Sears catalog, or Kmart had these blue light sales, and the thing where they would go, attention Kmart shoppers, and they would put blue lights out for the things that would be on sale. So people would even hang out in the store waiting for things to go on sale.

Really? Yeah, and in the early 2000s, both of these companies, you know, ran into trouble, and Kmart was bought out of bankruptcy by Eddie Lampert. Sears wasn't bankrupt, but they were in trouble. And he also bought Sears. And he merged the two of them in 2005. And then the story since then is really just the joint revenues of Kmart and Sears have been down every single year since that merger in 2005. Wow.

Comparable store sales, which is comparing store sales, the same store from one year to the next, down every single year, 13 consecutive years. And, you know, it is just something where we'll kind of get through some of the more complicated financial shenanigans he got up to. But just at the basic thing. You might be familiar with the story that Sears is going bankrupt, but did you know that Eddie Lampert, in his time at Sears,

ordered the IT department to create their own social media app, private internal for Sears employees, and then he spent his time arguing with sales clerks on the social media app private internal for sears employees and then he spent his time arguing with sales clerks on the social media app i love that you create a network to talk to your subordinates and then you go i'm gonna fight with these subordinates on this network you say he did it anonymously yes so he he uh he set up an account anonymously but then the employees figured out that it was him. So they started faking conversations because bosses would then be monitoring their... Everyone wanted his fake social media to be like a success and a good idea.

So bosses would start monitoring communications. So all the employees would start having fake conversations on the social media. It was called Pebble. But yeah, no i like the your fucking work it must have been so hard for them to crack the code of the anonymous account big dick eddie but i just like the the imagination of your work setting up a fake workplace twitter and then you being the ten dollars an hour sales associate having to be like this fucking billionaire just called me a beta cuck.

He just creates like a lightly moderated sub. Just rip on sales associates. That was not the best Teenage Mutant Ninja Turtles movie. I love that he created a social media network. He told his IT crew like, hey, we can't use Facebook or Friendster. Get on our own network. Why did he make them do that?

It sounds like it was like a PHP BB type thing. Yeah, it was kind of like a forum. It was more like a forum than Twitter, but everybody, I guess there was a 200 character limit and everybody was encouraged to use it. The fake idea was he can get anonymous feedback uh that you know people wouldn't say to their bosses but then what actually happens is oh

they figure out their bosses are reading and monitoring this right so they start manipulating their bosses um but it was banned because there's too many nazis on it so it happens yeah i didn't think when i took this $12 an hour stocking shelves at Sears job that I would have to pretend to participate in my boss's red pill game theory well I think they're flagship stores just down the way from where Steven and I live now

and yeah and so when I moved in I was like well I need a couple of things and so I thought I'd check it out because at the time all the news was that they were going out of business. I'm like, I'm going to get cheap stuff. And then I guess the flagship store was not getting the cheap stuff. Yeah, that makes sense. It was still full price.

Yeah, you walk in and the associates are like, sorry, I'll help you in one second. I'm finishing this argument with the owner. He says the Cowboys are gonna lose on sunday and i'm sick of this fucking idiot thinking just because he created this social media network he knows what's up um but so it is a fascinating story um and i wanted to point out there's this guy mark cohen was a former sears executive i believe he was running Sears Canada for a bit. And he's been a constant critic of Eddie Lampert. Like if you turn on CNBC, he's on there a fair bit. And Mark Cohen...

Just any time you turn on CNBC, he's in picture in picture talking shit about Eddie Lampert. But Mark Cohen, he points out something that I found very interesting, which is Sears was a public company. So you would assume that for 13 consecutive years of public company being run into the fucking ground, getting worse every single year, you would assume a public company would be like, we're going to fire the CEO. We're going to replace the leadership team. And Mark Cohen, he's quoted in Vanity Fair, he says this,

Eddie Lampert had a puppet board, board of directors, who have never pushed back in any way that anybody has seen, and why would they? They're all handpicked Eddie acolytes, and people have asked me for over a decade, how does he get away with this? It's a public company. Why isn't the board in action given the continued failure of the business? To which I say, the board is meaningless. there's no governance here whatsoever yeah the stock has been perpetually dropping from 2007 from a high of 134.51 uh to today where it is 26 cents wow he spent uh eddie lampert that's what a000% drop? So Eddie Lampert's one move.

I mean, he seems like a dipshit fail son rich kid. Sure. His one move is his hedge fund goes in and does shareholder buybacks. Right. And then he tried this again here with Sears. And we'll get into some of his other more innovative management techniques. But from 2005 to 2010, they spent $5.3 billion on shareholder buybacks. So that's juicing the stock price up to that $130 level.

And lots of people have pointed out that $5.3 billion could have been spent on investment in the store, advertising, hiring actual retail experts, which he did not do. But instead, in 2018, Eddie Lampert writes this blog post where he blames the collapse on the pension fund, which the total liabilities are in the range of $4 billion. So he's blaming this pension fund when the entire liabilities are less than what you fucking spent on shareholder buybacks. He also blamed it on the comeback of Family Guy not being as good as the original run. The entire liabilities are less than what you fucking spent on shareholder buybacks. He also blamed it on the comeback of Family Guy not being as good as the original run.

Reminds me of when a comedy club in Seattle wanted to cut costs. Instead of doing a better job at being a comedy club, they replaced their plastic cups with styrofoam cups. Because that's really where they were losing all the money. Plastic cups. Yeah, it's harder to throw it at Yogi when he's bombing on stage. Terry Taylor was the one that made that change. Yeah.

But so, and I guess before we start with the... King of Seattle comedy. Before we start with the general biography of Eddie Lampert... In a French Revolution sense. Before we start with the biography of Eddie Lampert, I do want to point out one thing which is you know so forbes has his net worth today at about 1.1 billion at the high it was in it was close to 3 billion so eddie lampert his net worth has suffered from what has happened to sears

but he's still gonna overall make money on this right where there's an institutional investor article which which kind of goes through, even though Sears has been just hammered, and he's put a ton of his money into Sears, you know, buying the stock, buying the debt, even though it's been hammered, according to institutional investor, Lampert has still made nearly $1.4 billion to date from his Sears investment. And this was based on their calculations. And what happened was, because as a Wow. investor added this all up and said, yeah, he's made $1.3 billion just because every year, even if the thing is in the fucking toilet, the hedge fund that owns it is collecting management fees. So it is like, I mean, it's a heads I win, tails you lose situation with hedge funds in this

financialized economy, where even when something is driven into bankruptcy, if they were collecting their fees, there's no way of clawing that back. They're just going to walk away with a profit. And who was paying these fees? Was it the people whose, I guess, hedge funds he was managing? Right. So, yeah, it was his hedge fund investors. And, of course, you know, the cost is passed on to the actual public shareholders of Sears.

And that's like pensions and that sort of thing. Yes, of course. And 401ks. And they also got into a very uh scheme they're being sued over where they were also pushing sears employees into sear stock even though they knew it was functionally worthless and they were stripping the assets out so just another extra way of fucking people over is getting the employees uh to uh dump some of their paychecks into your worthless stock so if wait, if he's making money, whether the business is good or bad, how is he fucking

up so hard? Like, it seems like, you know, most rich kids that inherit money or inherit businesses seem to make all of the wrong decisions, but somehow get away from it for no real reason. How is he making money off fucking up this badly? Well, we'll kind of go through the entire biography, but my general thesis, having done a bit of research, is he hit a lucky streak in the 1990s where he was a hedge fund guy who got in in the 90s

where there was that big stock market boom. Right. So he was a long investor. So if you were a long investor there, you make a lot of money. And then he has this track record. And from this track record, he goes,

no investors in my hedge fund can withdraw their money for five years. So as soon as you give them money, it's trapped in there for five years. Right, right. And I mean, what happened with Sears was a bunch of his investors were trapped in there. And then as soon as they could, they're like, we're getting the fuck out. But it was just the momentum was to the point where it was inevitable. And then he started doing all sorts of asset stripping stuff

once he realized there was no way to save this business. But, yeah, I mean, I'm sure obviously it would be better for him if Sears had succeeded. But he's just such a fucking Ayn Rand dumbass who had no retail experience. And he was like, yeah, let's set up this Lord of the Flies environment, which we'll get to because it's one of the most fascinating um articles i've read on business uh strategy where he uh splits his sears divisions into 40 different uh little companies that all compete against each other yeah he does the joker break break a piece of wood and put it in the middle of a circle of people approach to corporate governance just fucking log on to pebble. Why is my boss

telling me why so serious? It's not about the money. It's about sending a message lighting just hundreds of millions of dollars on Sears stock on fire. We're going to allocate corporate costs for divisions based on the

non-aggression principle. But yeah, so his hedge fund, Eddie Lampert's hedge fund is called ESL. It's his initials. Oh, English as a second language? Yes. Eddie something or other Lampert. So the hedge fund was doing... That works?

Yes. The hedge fund was doing pretty well in terms of returns up until 2005 where he does this uh sears kmart deal and then since 2005 it has lost six percent annually on average every year which uh you put that and you put your money in there you're losing six percent and then the fees are getting charged to you well looking at the um stock right now like in 2005 it's up at 110 and then it drops in 2006 to about 80 but then it actually shoots up in 2007 again to uh like 134 and then it just precipitously drops sort of like that uh simpsons enron uh roller coaster of broken dreams. But for a contrary view, here's CNN in 2006. Eddie Lampert is the Steve Jobs

of the investing world. He thinks differently and acts differently with extraordinary results. He's the greatest investor of his generation, says fellow billionaire Richard Rainwater,

and Lampert has the numbers to prove it. I mean, yes, I guess if you're a short seller, he is the greatest investor of his generation. But that's the hedge fund thing is quite the amazing scam because you keep wondering how all these hedge fund guys make so much money. And it's really like it's taking people's 401ks that everyone is driven to invest in because it's the wise choice for your retirement and then essentially taking a management fee so that it doesn't matter whether or not you actually can make money off of it and then when it crashes

if it crashes you can just pack out because you've got the management fee and everyone who's money you're managing gets screwed over right and you know it's something we've talked about a lot. It's throwing darts at a dartboard where sometimes you will make a good lucky stock pick. But to do it consistently, as far as I've seen, the only way to consistently beat the S&P 500 is to engage in legal insider trading or what we talked about on the Dan Loeb episode, engage in activist investor tactics where you're just saying, you're just, let's say, doing a smash and grab with management being like, hey, lay off some people and do a big buyback and that'll juice the stock price and then we're going to exit our position.

So you can beat the S&P 500 doing that. It's just very clearly makes the economy into a very predatory operation that is very bad for the workers who exist under it. I don't see why that's bad, Sean. I don't see why me making money, smashing and grabbing is bad for the worker. I don't see what's going on there. Well, what's interesting is the constant argument for capitalism is that it's the most efficient type of economic system.

But in capitalism, and I'm obviously not the first one to say this, efficiency means ability. Being efficient in a capitalist system means making money. And so people aren't incentivized to be a better company in the way that it's portrayed by people on, let's say, CNBC. They're incentivized to make money in the easiest way possible, and very often that includes these very sleazy tactics of either destroying a company, putting the workers, or employing people, or just breaking the law. Yeah, that makes sense.

To make more money, you should fuck everyone over. Yeah. My favorite line in the End of Time commercial is when she goes, like it's the, right before her last line where she goes, I'll call,

you'll call, what is the fucking line? It's like, you'll call, call tomorrow. I cannot live another day without air conditioning. Says tomorrow's gonna be hotter.

Hotter? Like yesterday. Yesterday? Yesterday you said you'd call Sears. I'll call today. You call now. I'll call now. You call now. I'll call now.

That's the Elizabeth Holmes version. If you play the commercial backward, it's the call to Cthulhu. They start reciting the same ancient hymn that neither of them knew before the recording. Sorry, we accidentally opened the plane. I'm okay. I'm okay. I'm okay. I'm okay. I'm okay. I'm okay. I'm okay. I'm okay. I'm okay. I'm okay. I'm okay. I'm okay. I'm okay. I'm okay. I'm okay. I'm okay. I'm okay. I'm okay. I'm okay. I'm we accidentally opened the plane. Apologies to any of our listeners who were driven insane.

Oh my God, Andy just walked down the balcony and jumped off it. Sean, why are you hard? That's what happens when Sean loses his mind. He just gets a sustained erection. Nothing else is different. The tragic end of Grubstaker is when we opened a gateway to another horrific dimension. And Lovecraftian creatures came through and drove us insane.

But I guess we should start. I guess we should start the biography of Eddie Lampert, and then we can talk about the pretty fascinating story of what he actually did to Sears. But it should be noted up top here. As we record this, there's a White Pl white plains new york bankruptcy court that's hearing over 4 000 claims for this sears bankruptcy so eddie lampert is trying to he bought uh some of the assets out of bankruptcy he's trying to launch sears again but actually a lot of the vendors are saying this is an insolvent company just liquidated so we get some money sure because you know of

course the people who gave product to Sears are saying, there's no way of making this business work. Just give us our money. You know, let's shut this shit down. And then, of course, you know, he fucked over severance pay for the workers, pensions for the workers, and we'll get to all that a bit more later. But the point is, you know,

as we go forward, Eddie Lampert's fortune will entirely be determined by a bankruptcy judge in upstate New York. So we'll see if he gets away with this. But I guess we can start the story all the way back in 1962. He's born in Roslyn, New York, is an affluent suburb of Long Island. His father is named Floyd Lampert. Lampert was a senior. He was a senior partner at this New York law firm,

Lampert and Lampert. His mother, Dolores Lampert. Solid name right there. But it's, so it's interesting where it's better than one Lampert. It's interesting where he grows up rich. There's only one of you,

right? I see my reflection There's two He's just got a sock puppet He was legendary For his ability to confuse the jury Represented himself Do you mean me or me What do you think Flappy Lambert

If the glass is not free, you must quit. His seven-week oral arguments were famous for having jurors begging for a mistrial. And his corporate criminal clients got away with it

through that. The court transcript was pretty confusing to read through. He won most of his cases by drinking a glass of water while Flappy Lampert made closing statements. But I guess I brought that up because in various profiles they talk about Eddie Lampert's, they say he can relate to Sears workers because he knows what it's like

to struggle and work hour for hour. And the closest thing that comes to that is when he's 14 years old, his father dies of a heart attack. And so I liked this quote. So he had to get a newspaper route? Yes. I like this quote his mother gives to the Wall Street Journal in 1991. She says, that was the end of camp or going away to europe like the other children so his dad dies and they have to cut back on their european vacations just like the other children um but yeah so he has to uh he has to get a job uh during summer vacations he worked in a warehouse packing boxes in high school because

his dad had died but it is also worth noting that his sister's wedding, his sister gets a wedding notice in the New York Times in 1990 which is also one of those things that really only happens to the minor aristocracy in the United States like no fucking

schlub is getting a new york times wedding announcement uh in 1990 but uh you know so he kind of portrays it as like very humble origins but it's clear he grew up with money unsurprisingly he gets into yale uh he gets into yale he graduates with an economics degree in 1984 he He's Phi Beta Kappa, so a fellow member, if I may say so. A little humble brag there. But he's also in the— No, that's just a brat. You're a member of that frat?

Phi Beta Kappa, yeah. If you get ex-GPA and write an essay, they put you into it. Asshole! That's not a frat. That's like a fucking country club. Yeah, that's just an honors sticker it's an honor society how many times you make dean's list sean most quarters how many times you suck the dean's list also most quarters man you know

getting getting honors recognition would be way more impressive if you did it in a real topic economics yeah yeah that's not a real topic. Economics. Yeah, that's not a real topic. It's not real science anyway. Yeah. I have an honors degree in putting my fingers in my ears and going, no, no, no, no, no, no. I'm not listening to any of the Hong Kong or other development models.

I'm ignoring how Japan developed with state-directed enterprises and South Korea. How many of y'all like externalities? That's Sean's essay. And they're like, this guy's really good at ignoring the facts. Just like, so I'm writing my essay about how every country the IMF went into got poorer afterwards. And then I just put a giant strike through it. And then it's like 100%.

This is a fucking Nobel a nobel prize winning economic sean you're gonna need to add a laugher curve to this um oh yes well so eddie lampert was five beta kappa at yale cool something he was that i was not was a member of the skull and bone society which we have which we have not talked about too much on this podcast, but I wanted to just make mention of the Alexandra Robbins book about the Skull and Bones Society. She wrote it in 2002, and she went through,

when you join the Skull and Bones, there's like a tomb at Yale where they conduct their little rituals. So apparently when you join the Skull and Bones, you have to get into a coffin while all the members watch you, and then you have to masturbate while you list your entire sexual history.

And that's just a totally normal thing that everyone running all the highest levels of business and government in this country did. George Bush, John Kerry. Steve Schwartzman at Blackstone. David Schwimmer. All right, I'll masturbate tomorrow. You will masturbate now.

Yeah, what was it? For our listeners, David Schwimmer is not in Skull and Coats. Also, apparently the skull of Geronimo is there. It's speculated that the person who stole it from Geronimo's grave was... Wait, this is real? Really? Yeah. What?

But wait, David Schwimmer is masturbating in the coffin, and then he's listing his sexual history, and one of the other members goes, so you cheated on her? And he goes, no, we were on a break. For our listeners, I just want to remind you that this show was almost called the Friends Recap Podcast. Where we would say that we're recapping every episode of Friends and then just do Billionaires. And I'd be the only one who would take it seriously where I would watch an episode. And I'm glad we didn't go with the name because I have to do a lot less work now. so uh and i'd be the only one who would take it seriously where i would watch an episode and i'm glad we didn't go with the name because i have to do a lot less work now we had a lot of good

gunter material but yes like andy was saying yes they have this yeah and it was alleged to be have been stolen by uh what's george hw bush and uh his father and george bush is uh george w bush's grandfather i forget his first name whoa whoa whoa yeah prescott bush uh the bushes are grave robbers no no they're upstanding citizens of america andy and no one has managed to break into skull and bones to like determine it on the outside and of course all the skull and bones assholes like none of them will say it like imagine being committed so committed to a club you were in in college that you keep that secret and take it to your grave like that's it it's it's the most disgusting thing where it's

just a college club but they treat it like it's this religious order which is what makes it so sinister right um also there's a youtube video where someone apparently um didn't break into the doors of skull and bones but like managed to jump over get over the roof and get into the courtyard oh really and uh the video has them going into this sort of basement area and there is uh actually a coffin there like this old coffin that's open, and there's a podium next to it. It's sitting on the dirt on the ground. Sure, sure.

So I don't know if that's the active one that they jerk off in, but it is potentially the coffin that John Kerry and George W. Bush and George H. W. Bush and George Prescott Bush jerked off in. No, wait, is it jerking off to completion, or is it just jerking off

while mentioning your sexual conquest? Because neither is appropriate. Well, yeah, apparently they jerking off to completion, or is it just jerking off while mentioning your sexual conquest? Because neither is appropriate. Well, they, yeah, apparently they take women now, too. If there's any listeners, the sequel we need to that YouTube video is somebody jumping over the fence and then bringing a blue light into it. Just see if there's a constant. I think it's black light. Yeah, maybe it is a black light. all right but uh oh and um yes in addition to the skull of geronimo apparently they're supposed to have a

set of silverware belonging to adolf hitler really and so these other things that they show new initiates but you know also uh lanny davis who um you said that here's here's it's a it's a senior. It's a group of seniors. And this guy, Lanny Davis, apparently said, if the society had a good year, this is what the ideal group would consist of. A football captain, captain, chairman of the Yale Daily News, a conspicuous radical with and poof, a swimming captain, a notorious drunk with a 94 average, a filmmaker, a political columnist, a religious group meter leader, a chairman of the lit, a swimming captain a notorious drunk with a 94 average a filmmaker a political columnist a religious group meter leader a chairman of the lit a foreigner a ladies man with two motorcycles an ex-service man a negro if there are enough to go around a guy nobody else in the group has heard of ever that's and that's the end of the quote

see i mean yeah it is something where like it's clearly just like a weird college club. And I mean, it's debatable how sinister. I mean, I think it is. You say whiff and what was that? Yeah, whiff and poof. That's, you know how the elite colleges have like dumbass acapella groups? Right. Oh, yeah.

Yeah. This is apparently the yale one oh and then i guess the one at harvard is the one for uh laundering child sex traffickers allegedly i'm pretty sure they do that at yale too they do it at yale too yeah but yeah i mean it is something where you know it's debatable how sinister it is but what's very clear is it's a networking opportunity for the high society where joining skull and bones is like punching your own ticket into goldman sachs which is what happens with eddie lampert uh where you're in this fucking little jack off club with the other rich kids and it's like hey would you like

to um be uh admitted into the uh face hugger on the American economy that is Goldman Sachs. And Eddie Lampert is one of the many eggs it has laid where Goldman Sachs just sucks the life out of the U.S. government and populace writ large. And then these little eggs pop up and start their own hedge funds or private equity firms after leaving Goldman Sachs. They burst out of the chest of Sears.

They've also been accused of having the skull of Martin Van Buren and Pancho Villa. I think... Why they got so many skulls, son? They're skull and bones. You gotta wipe your dick off with something after you jack off in the coffin. Seriously, like, if anyone...

Someone, one of our listeners needs to break into skull and bones and document it. I don't think it's morally wrong. Any of these actions, if they come back to us, I do not. They should allegedly break into Skull and Bones, allegedly, and document everything that's in there and expose them for whatever the fuck they are. Yeah. And if somebody goes to stop you, just say you're an Article 4 free inhabitant. Just say under the Articles of Confederation, only a written magistrate, a local elective sheriff is the only person who has any authority over you.

All right. Well, so what I wanted to mention here is according to this Vanity Fair profile, Steve Mnuchin was Eddie Lampert'spert's roommate at yale oh really current u.s treasury secretary yes uh unsurprisingly steve mnuchin would be on the board of sears up until 2016 where he left to join the trump administration um and so just jumping ships according to vanity fair uh the summer after eddie lampert's junior year he got a highly coveted goldman sachs internship it probably hadn't hurt his chances that mnuchin's father, Robert, was one of the firm's senior partners in charge of the equity division. And so what happens is after graduation from Yale, again, 1984, BA Economics, Lampert ends up in the risk arbitrage division department at goldman uh sacks uh he's reporting directly to a guy named robert freeman um at the time for future treasury secretary

robert rubin uh was one of the co-heads of goldman sacks um but this guy robert friedman was arrested as part of the even bosky michael milken insider trading uh thing in the in the 1980s we've talked about it a fair bit but i just wanted to read this vanity fair thing um at goldman sachs uh eddie lampert was reporting directly to robert freeman the partner partner in charge of the firm's business of buying selling stocks involved in takeover transactions uh in february 1987 friedman was let off the freeman was let off the trading floor at Goldman by a U.S. marshal and arrested outside of the firm's Broad Street headquarters on charges of insider trading. Eddie Lampert got a deposition in the case but was never implicated in any wrongdoing.

And what I wanted to go through, I mean, not spend too much time here because I think we've talked about it, but this is the head, the leader of Goldman Sachs' arbitrage division, which is trading on mergers and acquisitions. We've mentioned it a lot. If you know what's going to happen before a merger and acquisition gets denounced or if you have the inside tip that it's about to get derailed and nobody else knows, you can make a lot of fucking money. Yeah, of course.

So it's the leader of this mergers and acquisitions department where um arbitrage department where eddie lampert is working the very leader is charged and later pleads guilty to insider trading and so i mean this is the environment he grows up under where the actual leadership is engaged in criminal insider trading behavior. Paul Giamatti was in Skull and Bones. Really? Makes sense. Seriously? Do I have to name my sexual exploits if I haven't had any?

How long do you need me to jerk off in here? I have spent my entire life jacking off in coffins. Guys, I can't finish unless you yell at me. Give me the skull. I need to finish.

But, you know, look, my point here is it is interesting. I've seen the Robert Friedman. He pleads guilty to a count of insider trading. He does like four months in prison. And there have been these articles that pop up, which are very clearly paid for by lobbying firms. Right. There are PR firms.

There's one in the New York Times, one in, I think, Daily Beast, where it says, you know, they say Rudy Giuliani's criminality didn't start with Donald Trump. It was when he prosecuted this innocent Goldman Sachs banker. But it is something where not only did he plead guilty, which you have the best lawyers in the world, if you're not guilty, you can fight that. You're not some poor kid stuck on a gun charge or whatever the case may be.

But not only did he plead guilty, according to the James B. Stewart book, Den of Thieves, which goes through the whole scandal very well, with Freeman's plea, his plea agreement, he described, according to the book, a world in which Goldman Sachs, he had routine, which while working at Goldman Sachs, he had routinely gained market information denied other investors. You know, he talks about talking to people involved in this merger for Beatrice. He had talked to Henry Kravis of KKR. He had learned Richard Nye was selling his Beatrice stock because Goldman Sachs handled Nye's trading. So, you know, he knows somebody's handling, somebody's selling a stock because another department is handling the trading of that stock. He had called another person and reported problems in the Beatrice deal. So just going on. Even if it weren't criminal, the free swapping of confidential

information unavailable to other investors was scandalous, showing the hazards of allowing a large investment bank to engage in arbitrage trading. Nonetheless, unlike another firm, which voluntarily volunteered to get out of arbitrage after concluding that it represented an inherent conflict of interest, Goldman Sachs' arbitrage department remains one of Wall Street's most active and lucrative. And I guess I was just going through that digression there to show that the head of Goldman Sachs' arbitrage, now the prop trading desk, was engaged in endemic illegal insider trading, and there is an inherent conflict of interest where you're getting all these information from clients. Of course, you have incentive to trade on that information. Of course, yeah. And I guess that was kind of a long way to go,

but my point is this guy was Eddie Lampert's boss at Goldman Sachs, so if he's a piece of shit, who the fuck did he learn how to be a Wall Street guy from? His boss. Oh, random anecdote is apparently Tom Steyer, the other billionaire running for Democrat president. He worked at Goldman with Eddie Lampert and apparently hated him and was gleeful in shorting Sears stock according to I think it was Vanity Fair.

But yes, so regardless after this experience, Eddie Lampert he leaves Goldman Sachs from Vanity Fair. During the summer of 1987, he met Texas billionaire investor Richard Rainwater on Nantucket. Over lunch, Rainwater told Lampert,

there is life after Goldman. And, uh... I just love that there's a guy who's letting Goldman Sachs people know that there's life after this. Like, it's that difficult to be living after Goldman. You have to devote

so many years of your life to just embarking on ridiculous Debt-filled schemes with Goldman There's life at Goldman Yeah, there's probably a whole There's probably a cottage industry of people Yeah, yeah Whose job it is to be like a life coach

For ex-Goldman people Listen, you're going to screw over a lot of people Not just here at Goldman But in other places too But my point is Here in 1988, this guy Richard Rainwater, he gives Eddie Lampert $28 million in seed money. But he also taketh away. Yes. So in 1988, Eddie Lampert starts ESL, the hedge fund.

He has $28 million in seed money from Rainwater, Richard Rainwater. They get into a fight like two years later, and he has to get other sources of investment. But through Richard Rainwater, he meets David Geffen. And in 1992, David Geffen gives Eddie Lampert $200 million to invest. Which really doesn't prove anything except that david geffen got to fuck eddie lambert the fucking kiana reeves route to uh starting a hedge fund or tom cruise all i know is did they fuck their way to the top well that's the rumor yeah who'd kiana have to fuck david geffen oh Oh, really? That's the rumor, yes. Oh, and Tom Cruise? Yes.

Both fuck David Geffen? Yes, because he was a Hollywood power player and he would fuck stars to make their careers. And again, there's... Supernovas. Yes. Pre-star. Allegedly. Yeah.

If that's the one we get sued for, it's just not true at all. Well, thank you, Keanu, for the Matrix and what you did for it. People say he was emotionally disconnected in that movie, but they don't know what he had to go through to get there. But so, you know, regardless, in 1992, he gets $200 million from Davidid geffen and he makes some

you know i'll acknowledge smart investments in the 1990s he invests in ibm where their stock is kind of depressed because they're getting you know beat around by microsoft uh he invests in american express this is both in the early 90s but i think like really how he makes his money is he's getting into the hedge fund game right in the early 90s uh during the you know the stock market boom so and his strategy is hold long positions so if you're a hold long positions guy during a long running stock market boom you're gonna make a lot of money uh so he kind of uses this track record throughout the 90s to say for his hedge fund clients if you invest with me you

can't take your money out for five years and you can have no input whatsoever into what i'm doing with your money you know is the david geffen 200 million also the five years thing or is that pre him starting that that is uh part of the five years thing yeah and like david geffen even in 2000 in 2006 david geffen gives a quote to i I think, CNN saying something like, if I hadn't taken some of my money out, I would be even richer investing with Eddie Lampert. Which is like right as the bottom is falling out. So, you know, way to lead

other poor suckers in there into the fucking death trap that is Eddie Lampert's fund, Mr. Geffen. So at this point, is Lampert a billionaire? Or is he like a multi-millionaire at this point? Because it seems like this $200 million Geffen. So at this point, is Lampert a billionaire? Or is he like a multimillionaire at this point? Because it seems like this $200 million Geffen deal is what gets Wall Street to go, okay, let's put our money with Lampert.

He's a multimillionaire by the mid-90s. According to Vanity Fair, he becomes a billionaire when in the late 90s, he invests in AutoZone and AutoNation. So according to Vanity Fair, he he acquires 30 of the company orchestrated a series of aggressive stock buybacks that had the effect of driving up auto zones earning per share by reducing the shares outstanding so he goes into auto zone he gets uh the old ceo fired and then he does a stock buyback to drive up the price and uh so he got the zone yeah he got earnings per share is like one of the main stats.

Oh, really? Main stats that Wall Street analysts look at when companies report their earnings. So a pretty easy way... God damn it. So a pretty easy way to juice your stats is to just buy back your own shares because it reduces the denominator.

Right, right. What are we even doing anymore? Yeah, AutoZone, what does it mean when my car makes that noise? Is there a problem with the radiator? AutoZone problems. Cool. I just realized that if I

get the Stephen Hawking version of Lou of lou kerrig's disease i'm not gonna have one of those computer things i'm just gonna i'm just gonna have drops i cannot live another day with you have it you can choose them with your eye yeah yeah you can choose what drop to do if your eye communicates how you feel. I'm just in my chair drooling going, another scorcher, another scorcher, another scorcher. Cool, cool. Andy's on his deathbed and his family's like,

you lost everything, but what did it cost? Another scorcher, another scorcher. I can tell you that every job has its opposite. I can tell you. I love having the support of real billionaires. But so, you know, regardless, and AutoZone actually does pretty well with the recession in 2008 because people start getting their cars repaired instead of buying new ones, you know. But so, you know, he makes these, you know, I'll admit good investments and he has this reputation. So what happens is in 2003, he buys Kmart out of bankruptcy.

In 2005, he merges it with sears but we would be remiss if we didn't mention that on january 10th 2003 he's kidnapped um it's a weird story where he's leaving his um grenwich connecticut office building he's shoved into the back seat of a rented grenwich yeah grenwich connecticut uh he's shoved into the back seat of a rented after that's something we, Greenwich, Connecticut. He's shoved into the backseat of a rented... I think that's something we're going to head out to Greenwich Village. He's shoved in the backseat of a Ford Expedition SUV. He's driven to a day's end, 55 miles away in Hamden, Connecticut.

Four young men... This is from Vanity Fair. Four young men held him hostage for the next 28 hours in a $49 a night motel room. And then kind of what happens is there's four people involved in this and some of the kidnappers are dumb where they use his credit card to, I think, order pizza. Nice.

So that, oh yeah, that two of the kidnappers used Lampert's credit card to go on an $800 shopping spree for electronics equipment. At Sears? Yes. And so this is, of yeah, two of the kidnappers used Lampert's credit card to go on an $800 shopping spree for electronics equipment. At Sears? Yes. And so this is, of course, stupid because now the police know where they are or they have some idea. And so they wanted to get a $5 million payoff out of him. But Vanity Fair actually managed to contact one of the ringleader of this.

In 2004, a guy named ronaldo rose i should have put it into crypto oh i guess they didn't have crypto back then yeah gift cards yes uh ronaldo rose he was the ringleader he was sentenced to 15 years in prison in 2004 he was released in 2016 he went back to uh jamaica his native jamaica uh he says it was like four local men. They just looked up Lampert on the internet and found that he was rich is what he says. But there's also like reports that one of them told Lampert that an auto zone board member wanted them to kill him or something. Really?

So it's, it's kind of an unresolved thing. Sorry. I mean, get in the car yeah i hate when you uh bring your lampert in for a minor repair and the auto zone mechanic is like you're gonna have to cut its throat in a motel they're charging so much more for that shit um but it is something where eddie lampert has not talked about this kidnapping we don't really know the details of it. But the ringleader, Rinaldo Rose, he told the Vanity Fair, he says that after they had abducted Lampert, Lampert freaked out,

and one of the guys started punching him in the head, so I had to yell at them, listen, you both calm down, keep quiet, and you're going to be all right. I made Lampert a promise. Listen, you don't give us no problem, and we'll let you go. And he did, so he never freaked out after initially. But I like this quote from Vanity Fair. It still haunts Rose today that he might not have gone to prison had he killed Lampert and the other kidnappers. So it was like, okay, get rid of everybody.

But with one of the kidnappers and Lampert, it was like family almost. He argued against all of that, against killing Lampert. I still think we should have just got rid of everybody. But I don't know. I did have to consider that Lampert never gave any problems. So I kind of had to keep my word on that. And he recalls some exchange where Eddie Lampert was talking to them about how Kmart was like tied up with the mafia and they used it as a piggy bank

oh really yeah Lampert was talking actually talking to the kidnappers about I don't know if I should invest in Kmart it might be tied up with the mob this guy's making small talk with his fucking kidnappers you're in a motel room for 28 hours with these people you're gonna talk to them eventually that's all it took to get him

to talk about Kmart's mob ties and you know so in the end this leader the rose says the main i'm just gonna talk about shark week while everyone's watching the tv the main reason rose says that uh he decided to let lampert go was that his partners were so inept by using lampert's credit card against rose's instructions his partners had crime had alerted police to their whereabouts. Rose says they released Lampert not to get the ransom money, but to call off what was by then a hopeless caper. So, you know, they end up doing prison terms,

not getting their $5 million ransom. But, you know, I can think of about 200,000 former Sears employees who wish that transaction went a little differently. Previous to this kidnapping, in 2001, he marries Kinga Lambert. His name is Kinga. There's really not that much information about her. She's had breast cancer at one point,

and so she's on a board of BCRF, Breast Cancer RF, I don't know. Research Foundation. Research Foundation is what it is. And it's interesting because she's really got an Instagram and that's it but she's only got 1751 followers and the

BCRF like here's what I'm saying. She's a part of a non-profit breast cancer organization and she's married to a billionaire and she has barely more Instagram followers than me, a fat idiot. So I don't understand.

All of her followers are on Pebble. I mean, it's one of those things where there's some random model that tweeted out that she was at a breast cancer event with Kinga and the comma underneath is one guy being like, oh, is that the person that's married to that fraudster? I support the cause, but not the person.

So I don't know why Kinga is bad at breast cancer research foundation awareness. But all I know is this points to me, since he's still married and the David Geffen connection, he eats the butt. I wonder if it was her foundation that painted that Israeli jet fighter pink for breast cancer awareness. But so he gets, Eddie Lampert gets out of this kidnapping and then he concludes the Kmart deal. He buys Kmart out of bankruptcy in 2003. And then he's doing a bunch of, you know, standard Wall Street juice the returns tactics where he cuts all capital expenditures. There's an article from the time about all of the different Kmart execs pitching him on things like, what if we invest $2 million in making the lighting at the stores more pleasant?

And he just says, no, no. Just says no to every single investment. And again, $5.3 billion in shareholder buybacks between 2005, 2010. So he's just cutting all capital expenditures doing buybacks and for a short period of time this looks like it's working because you can juice your short-term numbers but of course the long-term numbers explode yeah this is funny because in his world right now they're talking about how one dollar of capex capital expenditures is worth so much more now than it was around when he would have been starting.

So the long-term returns would have been $1 or $4 more now. Interesting. How is that possible? Productivity increases, all that good stuff. Gotcha. Yeah, he also manages to trick, this is before he owns Sears, he manages to trick Sears and Home Depot into buying a bunch of Kmart's real estate for way inflated prices, which more just shows that the management at both Sears and Home Depot were also idiots. But that gives the stock price a juice, too.

And then he buys Sears in 2005 and merges the two companies. And just according to Mark Cohen the um former executive we quoted earlier he tells vanity fair quote lampert uh after then after the 2008 financial crisis lampert stopped appearing to support the business in any conventional way and started to invest free cash flow in derivatives he hived off sears robux three consequential brands Kenmore craftsman and diehard into a Caribbean based wholly owned subsidiary of ESL his hedge fund so the company was paying royalty royalties to Eddie Lampert's hedge fund for the use

of its own trademarks and you know there's ongoing lawsuits we won't get too far into I'm looking up the uh um pink iaf jet to see if it was paid for by the uh idf uh paid for by uh ms lampert's charity uh but the point is you know there's a lot of different complicated financial transactions we won't go too far into the weeds then. But he starts asset stripping Sears after the 08 financial crisis and then having it pay royalties to his own hedge fund and just taking all of the value out of the company and trying to insulate it from the inevitable bankruptcy

so that he gets to hold on to it after it gets wiped out. And we'll see if he's successful in this. But what I wanted to do here was read a bit from, again, one of the funniest business stories I've ever read, which is a Bloomberg Businessweek piece by Mina Kims called, quote, At Sears, Eddie Lampert's Warring Divisions Model Adds to the Troubles. This was written in 2013. So he's having some problems. Obviously, he's not investing in Sears Kmart, the new combined company. So in 2008, he comes up with the Ayn Rand model. And it should be noted, he has a reputation for giving new employees Ayn Rand's book, Atlas Shrugged on audiobook uh he also owns a yacht named the

fountainhead after the ayn rand novel which he purchased for i believe 130 million dollars in 2011 so you know he's a real acolyte of this this stuff but the article in bloomberg business week it begins with every year the uh 30 different division heads of the companies within sears kmart have to teleconference into eddie lampert and beg him for money and uh you know make make their point that um that they need money but uh so just quoting from the article here uh plagued by the realities uh facing many retail stores sears also faces a unique problem lampert many of its troubles can be traced to an organizational model the chairman implemented five years ago an idea he has said will save the company lampert runs sears like a hedge hedge fund

portfolio with dozens of autonomous businesses competing for his attention and money uh he created the model because he inspected the expected the invisible hand of the market to drive better results. If the company's leaders were told to act selfishly, he argued, they would run their divisions in a rational manner, boosting overall in performance. And then I like how this story continues. Lampert created the model because he wanted deeper data, which he could use to analyze the company's assets it wires it's why he hired paul de podesta the harvard educated statistician immortalized in michael lewis by michael lewis in his book moneyball also involved in pizzagate yes so he hires the moneyball guy

he hires the moneyball guy But then if that were not enough He also hires Stephen Levitt The co-author of Freakonomics As a consultant So it was something where Just continuing from this Well Lampert often clashed with retail veterans Lampert got along better with businessmen

From finance and technology So he's paying the money ball statistician veterans, Lampert got along better with businessmen from finance and technology. So he's paying the moneyball statistician, he's paying the Freakonomics co-author, but he's ignoring all retail veterans who have any experience running a retail company. And I mean, it's so funny to me because it's like that story about how they ran the Vietnam War by bringing in all these harvard grads who put these like statistical models of vietnamese people murdered together and they were like yeah if we just murder this many people then eventually the population will not be able to replace and win the war yeah they had the infamous kill quotas which uh led to let's say, the more flexible designation of what constitutes a fighter.

Yeah, the KD ratios for all of the units. Right. Yeah, and they would, I mean, it basically led to, they would have kills, or open fire zones, I think they were called, where in that area they could just kill anyone because it was designated a hostile territory, which is an act of genocide. Yes. But the point here is that he gets the fucking moneyball guy and the Freakonomics economist,

both of whom have zero experience running retail operations, and they're like, yeah, you do those fucking Steven Pinker style counterintuitive analyses books. What if you just come in and run this company into the ground with me? Yeah, get the Freakonomics guy instead of the 30-year veterans in retail planning and pricing. All right, we're going to invest $1 billion in putting an orange inside an apple.

But yes, if you see Steven Levitt, the Freakonomics guy on Twitter, please ask him what happened to those 200,000 Sears jobs. This counterintuitive experiment shows that if you hire a dipshit economist, you'll run your business into the ground. But, yes, so in 2008, they switched to this. They divide the company into more than 30 business units, including apparel, tools, appliances, human resources, IT, brands, Kenmore Appliances, Craftsman Tools,

Die Hard Batteries, real estate, blah, blah, blah. So what happens is as the company rolled out the plan, Sears executives held dozens of meetings to decide how units would interact. By 2009, there were around 40 separate divisions, according to an internal company document. Lampert created SOAR, S-O-A-R, to help sears attract a higher caliber of talent but it also created a top heavy cost structure according oh yeah and soar is this idea uh it stands for sears holding organizations actions and responsibilities and basically every single division gets their own bonuses based on their own profit and losses and the funny thing about doing this in retail is uh in order to get people in the store, different divisions have to offer discounts to get people in the store and then buy other things.

But now that every division has its own P&Ls, nobody wants to offer discounts because they don't want to take the hit on their bottom line to get other people's other divisions prices jacked up. Sears employees would later give it a different nickname, SORE, S-O-R-E. Swish. Yes. So because every single division needed its own board of directors, but also each division had to hire and promote its own chief financial officers

and chief marketing officers and personnel. Personnel expenses shot up because each of these fucking divisions needs its own CFO and COO. And then they had to underpay middle managers to trim costs to have this really bloated structure. They actually took a problem that most large corporations deal with, which is how should divisions within a company politically divide up both their profits and their losses, both their costs and their pricing power, and just multiplied it.

So each one is like a little mini fiefdom within the company now. They have their own chief operating officers and everything. Idiotic. Yeah. So the most cumbersome aspect of the new structure, former employees say, was Lampert's edict that each unit create its own board of directors. Because there were so many departments, some presidents sat on as many as five or six boards, which met once a month.

Top executives were constantly mired in meetings. Under the new model, Lampert evaluated the different divisions and used a metric called business operating profit to allocate bonuses. Individual business units started to focus solely on their own profitability and stopped caring about the welfare of the company as a whole. According to several former executives, the apparel division cut back on labor to save money,

knowing that floor salesmen in other departments would inevitably pick up the slack so you just like start firing your people and being like yeah the other departments will take care of that right turf war sprang up over store displays no one was willing to make sacrifices in pricing to boost store traffic and then i love this 2013 in an email a sears spokesman writes that the executives work together if it makes sense he added quote clashes for resources are a product of competition and advocacy things that were sorely lacking before and are lacking in socialist economies so this sears is executive in 2013 is getting a spokesman

is getting a dig in at fucking socialist economies and defending their business model that they are running the company into the ground with it. 2013, you said? Let's see. That was when it had dropped to about $31. So that would be about $100 drop from their stock price high with another, yeah, 100-fold drop to go. So the bloodiest battles took place in marketing meetings

where different units would fight for space in the weekly circular, you know, the little guide they give, the mailers they send out for what products they're advertising. These sessions would often degenerate into screaming matches. Marketing chiefs would argue to the point of exhaustion. The result, former executives say, was a, quote, Frankenstein circular with incoherent product combinations. Think screwdrivers being advertised next to lingerie.

Eventually, they switched this by having a bidding system where each units pay for space in the circular. This created a new problem. The wealthier business units, such as appliances, could purchase more space. Two former business units recall how, business unit heads,

recall how for the Mother's Day 2011 circular, the Sporting Goods units purchased space on the cover for a product called a Doodle Bug Mini Bike, popular with young boys. Popular with young boys.

This is the Mother's Day circular on the front of the cover yes lost a lot of good men that day they they couldn't get the business heads to agree to open the store for uh midnight black friday 2011 um you know so and they oh yeah uh former executives say they, uh, individual unit heads began to bring laptops with, with screen protectors to meetings. So their colleagues couldn't see what they were doing. And then, you know, the other thing is he splits off these, you know, famous Sears brand like, uh, Kenmore and, you know, craftsman tools, uh, because they split it off. And if Kenmore, uh, license, yeah. and if Kenmore licenses from another Sears division, they have to pay that Sears division. Oh, really?

So the fucking thing has this exclusive brands, and they start promoting competitors' brands in order to sabotage the other divisions within Sears. years because the appliance unit could make uh yeah because the appliances unit so they have kenmore because the appliances unit could make more money selling devices manufactured by outside brands such as lg electronics it began giving kenmore's rifles more prominent placement in stores for the fridges and they talk about you know they could have combined craftsmen tools with uh diehard batteries which they also owned but both of the divisions didn't want to help each other because of the profits. So it's just like, I mean, it's fucking insane that this dipshit rich kid gets to do a real time Ayn Rand experiment with the livelihoods of 200,000 people and pay no consequences for it whatsoever. And like the senior, let's just serve like the ordo capitalist senior management he didn't listen to them while he was doing oh yeah no he had he had a slavish board

which didn't agree with his libertarian dream so and you know we already mentioned at the top here lampert constantly cooked up ideas blackberry appsbooks in stores, and a massive multiplayer game for employees. But of course, he ordered the IT department to build a proprietary social network called Pebble, which he joined anonymously under the pseudonym Eli Wexler. And Eli refers to someone... Wexler? Yeah, Wexler. Wexler. Yeah. And Eli refers to someone who attended Yale. His intention was... Oh, really? That's what that means? It quickly became clear that Eli Wexler was a little too engaged on Pebble. He left critical comments on other people's posts, according to more than 20 former employees.

He even got into arguments with store associates. Word got around that Wexler was Lampert. Bosses started tracking how often employees were pebbling one former business head says her group organized pebble conversations about miscellaneous topics just to appear they were active users another group held quote pebble jam sessions to create the illusion they were using the network and you know it just goes on and on like that but uh i mean he ran this fucking company into the ground uh uh again according to vanity fair at least 200 000 sears and kmart employees have been thrown out of work

during his tenure uh both lampert and sears are being sued for investing employees retirement money in sears stock when the top brass allegedly knew it was a terrible insolvent investment. Geffen got out in 2007. According to the New York Post, by 2013, a group of Goldman Sachs pension fund clients had poured more than $3.5 billion into his hedge fund. So, you know, I mean, Goldman Sachs leading their fucking pension funds into the slaughter. It's a jerk-off club, literally.

They start in the coffin and they end in the grave. The corporate grave. And look, with the time we have left here, another thing he does in 2015, according to CEPR.net, in 2015, when it was already obvious that Sears' days as a going concern were numbered, Lampert's hedge fund created a publicly traded real estate investment trust called seritage growth properties lampert then had sears sell 266 sears and kmart properties to seritage for three billion dollars the retail chain then paid the trust a total of 135 million in rent the first year of the lease agreements

for the stores it had previously owned with guaranteed rent hikes the following year of the lease agreements for the stores it had previously owned, with guaranteed rent hikes the following year. So 2015, he takes the properties that they already own, he sells them to himself, and then he starts charging them rent. So it's very clear that he tries this fucking Ayn Rand experiment, it doesn't work, and then he starts asset stripping the company. Reminds me of Adam Neumann. adam newman yeah very similar actually some of his buildings that we work yeah and he starts stripping off you know various pieces of the company uh in late 2018 there's a bankruptcy and he sets up a new company that i i'm spacing on

the name of it's called something really weird but but everybody just calls it new Sears. So there's new Sears and old Sears. It's like a new Coke, classic Coke situation. Do you hear what they're doing? Yeah. What are they doing? They got a new Sears. Oh,

there's a new Sears. Yeah. Um, so in, uh, uh, late 2018, in late 2018,

Sears goes through bankruptcy in early 2019 january eddie lampert actually buys a lot of the assets out of bankruptcy because he was its main lender where another thing that people go through is eddie lampert was was loaning money to pay sears's bills but the way bankruptcy court works if you are the lender you can have that converted into equity once it emerges from bankruptcy so people i think make the very credible allegation that he was lending money to sears just to put it into bankruptcy so that when it comes from bankruptcy he can convert all that debt into equity in the new company if it emerges from bankruptcy really yeah um so he's wait yeah explain this more sean it's confusing. It sounds like he's making money out of nothing. Yeah, he's like buying it back,

but then selling it because he's got it. If he's able to... If his rescue plan for Sears works, then he's entitled to convert some of the debt used to do all this over equity and just have it for himself and his companies. Right. So, yeah, like the way bankruptcy works is um if it goes through

chapter 11 bankruptcy all of the stockholders are wiped out but the people who owe money or who are owed money they become um that uh debt is converted into equity in the new company so if he's which he is the largest lender to sears he could conceivably become the largest shareholder again when it when it reemerges from bankruptcy. It's basically a sleight of hand to steal shareholder money. Absolutely. Of course, the entire thing is

he can also collect fees from Sears for the money that he is loaning to Sears and all these other things. He can loan to them at exorbitant interest rates. He has all of these financial engineering things that are going on that we'll see if he gets called on on bankruptcy court and wait all of this is legal but um so in january 2019 he buys he does get an agreement to buy sears out of bankruptcy from old sears uh his new sears buys it. But as part of this, in January 2019,

he promises to pay the workers laid off $43 million in severance pay. He has since reneged on that and said that because, you know, old Sears didn't honor its obligations, he doesn't have to pay any severance pay. And Bernie Sanders makes the point that this is $43 million.

His yacht is $130 million. Jesus Christ. So he's, you know, just kind of... And look, the other thing is Old Sears is now suing him. They're suing him and Steve Mnuchin, and Thomas Tisch of the Tisch family fortune was another board member of this. And it should just be noted that Thomas Tisch

is the uncle of the Tisch lady who who went on msnbc and said if you don't support bernie if you don't support warren over sanders you are a sexist so just should be noted her uncle is being sued for two billion dollars by old sears um but yeah so old sears is suing him steve mnuchin the tish uh thomas tish and the other board members for two billion saying they asset-stripped about $2 billion out of this company through the real estate deal we mentioned. If you don't support asset-stripping

and screwing unemployed employees out of their severance due to financial mismanagement, you're sexist. And look, I know we've run a little long here, i guess for closing out i just want to talk there's a there's a story in the nation uh from april 2019 i think that's your new catchphrase

sean i think we're running a little long here but there's a story in the nation from april 2019 it talks about 29 years ago kathy cagle got a job at sears in newark california she started out in clothing moved up to selling appliances after lampert took control uh cagle's commissions plummeted she was making a decent middle class living her hours were before then her hours were cut she has had to take on extra work like dog walking to make ends meet it gradually got worse and worse she recalled when she was told at the end of of June 2018 that her store would be closing, management said that as long as employees stayed till the very end, they would receive severance pay.

Kegel was due eight weeks of pay, which would have come to about $5,600, plus 10 weeks of health and dental coverage. On the final day of the store's operation, she and her co-workers got paperwork to apply for severance, which they were told to fax on the following Monday. Two weeks later, no one had gotten a response. Kegel tried to make a doctor's appointment, but found out that her health insurance for her

daughter had been cut off. What? The promised severance never materialized. They never paid us, didn't call us, didn't write to us, Kegel said. They dropped my health plan and dental without telling me at all. She and her co-workers didn't get an answer until they wrote the company a letter. In response, the company told them that because it had filed for bankruptcy on october 15 no one in their store would be getting severance that was the same day that

kegel and her co-workers were told to send in their paperwork for severance uh quote they must have known that they were going to file for bankruptcy but they still led us to believe that if you stayed until the end they would give you this severance package i feel like they tricked people because they didn't want people to leave the company. So they knew they were going to fucking Welsh on this severance. They still kept people working until the very end. And then they fucked them out of 43 million, which is pennies. Right.

These fucking people. But, you know, for and, you know, again, take that story, multiply it by 200,000. And The Nation interviews other people, including her. She talks about, you know, skipping meals, just drinking water. Other people talk about losing their homes because they lost their jobs at Sears Kmart. Sean, there are days when Donald Rumsfeld, all he drank was water. Listen, Kegels might have been fucked, but her pussy was real tight. God damn it. Listen, Kegels might have been fucked, but her pussy was real tight. Goddamn.

You know, and look, it is just something where these really human stories that you just multiply it by hundreds of thousands of times, and it's fucked up what happened to these people, and we'll see what comes out of the bankruptcy court, but it should be noted, according to the Wall Street Journal, there's about 425 remaining sears and kmart stores eddie lampert has said he will close some of them but he's trying to relaunch this company that he would then control again having the other thing is he's got i think 1.5 or 1.6 billion worth of pensions he's pushed on to the federal government the pension guarantee corps is run

by steve mnuchin's treasury department so. So he's got his old former college roommate says, yeah, this is a great deal. We'll take your pensions off your hand, which will, of course, result in haircuts to those pensions for those workers. The guy who is also named in a lawsuit on the bankruptcy. Yes. the bankruptcy yes and you know so it is just something where uh we'll see if he gets away with it we'll see what happens with the bankruptcy court um uh as we mentioned you know some of the appliances and other people are suing i'm sure they're going to come up with a solution that makes everyone happy you know one that's good for the loyal workers and you know the management listen i know the employees that were fired are pretty hot right now but trust me they'll be cooled off

pretty soon they uh they canceled life insurance for 29 000 retirees but they told them they settled with the bankruptcy court they'll give them three million dollars between 29 000 people about a hundred dollars each wow uh and you know it just goes on and on and on like that uh you know hey a hundred dollars is a lot of money let's not let's stop this bourgeois uh condescension okay you can buy a lot with a hundred dollars yeah you could support our show for at least 10 to 15 months. And, you know, at the end of the day, as of today... That's what they're doing with their $100. Eddie Lampert still has a net worth, according to Forbes, $1.1 billion.

Even if this entire thing gets wiped out, he's doing fine. But if it is allowed to emerge from bankruptcy with him still as the principal shareholder, I mean, he's just going to fucking run it into the ground again or acid strip it. Or, you know, if he makes it a growing concern, he'll probably just sell the real estate after he's managed to get out of all the pension obligations, all the life insurance obligations, all the health insurance, all of the, you know, all of the other obligations to the workers. So he can just sell the real estate, acid strip the rest of it. And he's not, you're not going to be able to claw back the fees that all of the other obligations to the workers so he can just sell the real estate, um, asset strip,

the rest of it. And he's not, you're not going to be able to claw back the fees that he's already paid himself. So again, this is just a hedge fund model for an economy where there's no way for these fucking people to lose and it's fucked up. And you know, some of the Sears workers are working with the Toys R Us workers and rise up

retail to say, you know, the workers should have a seat on the company board so it's not just fucking guys like Eddie Lampert and their six college roommates making all these decisions. But I guess keep an eye on that bankruptcy court and hopefully we can, you know,

elect some people who will actually do something about guys like Eddie Lampert. Cool. And that's just about everything. There's still about 68,000 workers today who still have their jobs at risk, who may or may not be able to come back in a newly formed Kmart Sears. But, you know, our thoughts and prayers are with them. And if they need some outside consulting, I know a jamaica who has firsthand experience with eddie lamper and might be able to advise rise up retail on possible solutions to uh to this lawsuit but we'll see what happens with the bankruptcy court and uh best of luck to uh all the retail workers

suffering under private equity and hedge funds and with that this has been grubstickers i'm i'm andy palmer i'm steve jeffries all right i'm sean mccarthy bye thanks for listening equity, and hedge funds. And with that, this has been Grubstakers. I'm Yogi Poliwal. I'm Andy Palmer. I'm Steve Jeffries. All right. I'm Sean McCarthy. Bye. Thanks for listening. Cool. Brightens your holidays with super values like this Kenmore dishwasher at a $50 savings.

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There's more for your life. There's more for your life at Sears. I used to think when I made 25 grand, I'd be on easy street. I make double what my father made, and I've got less to show for it. I thought I was working for the future. Truth is, I'm just staying even. People need help with their money, and many of the people getting help the least are the people Sears has served for close to a century.

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No. All right, maybe I did, but I didn't shoot him. Checks out. Okay, sir, you're free to go. Good, because I got a hot date tonight. Odd date. Dinner with friends. Dinner alone.

Watching TV alone. All right. I'm going to sit at home and ogle the ladies in the Victoria's Secret catalogue. See his catalogue. Now would you unhook this already please? I don't deserve this kind of shabby treatment.