There’s still a battle with the fates of Sears and Kmart in the balance. As The Toy Book reported last week, both Sears and Kmart are open for the short-term as ESL Investments, a hedge fund controlled by Eddie Lampert, embattled chairman of Sears Holdings Corp., scored the winning bid for “substantially all” of Sears assets.

That news, of course, is still subject to court approval of the sale. The hearing date moved from Feb. 1 to Feb. 4, and the Sears creditors committee is objecting to the $5.2 billion bid from ESL.

In documents filed late last week, the committee does not hold back, raising allegations of fraud and misconduct. With eerie echoes of last year’s Toys “R'”Us collapse, the committee says, “Sears’s downfall—while, like the financial struggles of other big box retailers, was caused in part by the internet age and other factors beyond Sears’s control—also was precipitated by years of misconduct by Lampert, ESL, and others against Sears and its creditors.”

Citing public interest in sealed documents that they believe “should be heard in open court,” the committee breaks down numerous transactions that it believes to have been conducted without the best interests of the company in mind.

Committee Statement:

“Sears’s downfall is nothing short of tragic. After taking control of Sears in 2005, ESL—acting at all times at founder and namesake Lampert’s direction—engaged in serial asset stripping, taking Sears’s best assets out of the enterprise to shield them from the claims of other creditors and maximize ESL’s investments (in Sears and other entities) in anticipation of these inevitable bankruptcy proceedings. Over the course of Lampert’s and ESL’s reign, Sears closed over 3,500 stores, cut approximately 250,000 jobs, and lost untold billions in value. In effect, Lampert and ESL managed Sears as if it were a private portfolio company that existed solely to provide the greatest returns on their investment, recklessly disregarding the damage to Sears, its employees, and its creditors. As Sears’s CEO, Chairman of the Board, controlling shareholder (with ESL), and “bank,” Lampert was hopelessly conflicted as he presided over Sears’s descent into insolvency and a persistent state of liquidity crisis. Time after time, Lampert used those selfmade crises to divert more of Sears’s assets for his and ESL’s benefit or to burden Sears with more and more purported “debt” obligations (held by ESL, of course) that would never and could never be paid back without an unfathomable turnaround of Sears.”

Read the entire document here. For additional thoughts on Sears, click here.