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Two high-profile Democrats have questions for Treasury Secretary Steve Mnuchin about his role in the downfall of Sears as a former member of the retailer’s board of directors, and his possible role in government decisions about the company.
Rep. Alexandria Ocasio-Cortez (N.Y.) and Sen. Elizabeth Warren (Mass.), who is also a 2020 presidential candidate, released a video Thursday in which they outline the details of a letter (pdf) they sent to Mnuchin seeking answers about his involvement with Sears:
Steven Mnuchin and his college roommate Eddie Lampert (the CEO of Sears) piled the company with debt, closed thousands of stores, and enriched themselves at the expense of workers. Now, @StevenMnuchin1 could have a say in decisions affecting @Sears. pic.twitter.com/042ENythbO
— Elizabeth Warren (@SenWarren) May 23, 2019
“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,” reads the lawmakers’ letter to Mnuchin. “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.”
Last month, Sears Holding Corp. filed a lawsuit against former chairman Eddie Lampert and former board members, including Mnuchin, “for allegedly stripping [Sears] of billions of dollars as it collapsed into bankruptcy” through deals that served Lampert, his hedge fund ESL Investments, and other insiders. The suit claims that “had defendants not taken these improper and illegal actions, Sears would have had billions of dollars more to pay its third-party creditors today and would not have endured the amount of disruption, expense, and job losses resulting from its recent bankruptcy filing.”
Sears filed for Chapter 11 bankruptcy last October after years of financial trouble. In February, a federal judge approved the sale of the company’s major remaining assets to Lampert’s hedge fund. Mnuchin, a close friend and former college roommate of Lampert, served on Sears’ board of directors until December of 2016. The U.S. Senate confirmed Mnuchin as Treasury secretary in February of 2017.
The letter provides some examples of Sears engaging in “managerial decisions that enriched executives while decimating Sears’ long-term growth and sustainability.” It also explains how Mnuchin, in his current government post, has “had the opportunity to intervene on behalf of Sears and in favor of Lampert’s interests.”
After Sears declared bankruptcy but while Lampert still served as the Chairman of the Board of Sears, Sears Holdings Corporation transferred responsibility of the company’s two pension plans, underfunded by about $1.4 billion, to the Pension Benefit Guaranty Corporation (PBGC). PBGC took responsibility for the pension plans of more than 90,000 workers, as Sears Holdings Corporation was no longer able to pay the benefits owed to employees in these plans.
As Secretary of the Treasury, you are, along with the Secretary of Commerce and Secretary of Labor, one of three members of the board of directors that oversees the PBGC. You stated in your confirmation hearing that you would recuse yourself from any official PBGC actions related to Sears, and your ethics agreement required you to do so for one year after your confirmation, but the current status of your recusal requirements—and the exact types of decisions you are recused from-are unclear.
Given that the lawsuit names Mnuchin and the uncertainty over the Treasury secretary’s recusal requirements, the letter includes a list of detailed questions for Mnuchin and a request for answers no later than June 13.
“Washington is supposed to work for everyone,” Warren tweeted Thursday. “Instead, the rich and powerful like [Steven Mnuchin] and Eddie Lampert use it to become even more rich and powerful, while workers are left holding the bag. This is the D.C. swamp at its worst.”
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