SearsOng et al., v. Sears Roebuck & Co., et al. In 2003, a class action complaint was filed on behalf of a proposed class of purchasers and traders of Sears Roebuck Acceptance Corporation (“SRAC”) bonds between October 24, 2001 and October 17, 2002, inclusive (the “Class Period”) in the United States District Court for the Northern District of Illinois. Cohen Milstein (or the “Firm”) acts as co-lead counsel in the litigation. The operative complaint in this litigation, Plaintiffs’ Third Amended Complaint (the “Complaint”), was filed on October 25, 2005. After several rounds of extensive briefing, the following individuals and entities have, in part, had their motions to dismiss denied: Sears Roebuck & Co. (“Sears”), SRAC, Alan Lacy (Sears’ former Chief Executive Officer, President, and Chairman at all relevant times), Glenn Richter (Sears’ Chief Financial Officer since October 2002), Paul Liska (Sears’ Chief Financial Officer from the beginning of the Class Period until October 2002 and director of SRAC), Kevin Keleghan (President of Sears’ Credit and Financial Products segment and Executive Vice President from the beginning of the Class Period until October 2002), K.R. Vishwanath (Sears’ Vice President of Risk Management from the beginning of the Class Period until October 2002), Keith Trost (President and a director of SRAC throughout the Class Period), George Slook (Vice President of Finance and a director of SRAC throughout the Class Period), Larry Raymond (a director of SRAC throughout the Class Period), and Thomas Bergmann (Chief Accounting Officer and Controller of Sears and also a director of SRAC throughout the Class Period) (collectively the “Sears Defendants”). The Complaint alleges that the Sears Defendants violated the Securities Act of 1933 (the “Securities Act”) and the Securities Exchange Act of 1934 (the “Exchange Act”). The Court also denied, in part, the motions to dismiss filed by Credit Suisse First Boston (“CSFB”), Goldman, Sachs & Co. (“Goldman Sachs”), and Merrill Lynch & Co. (“Merrill Lynch”) (the “Underwriter Defendants”) who all acted as Underwriters to SRAC Bond Offerings during the Class Period. The Underwriter Defendants were also alleged to have violated the Securities Act. Sears is one of America’s largest retailers. In addition to this business, Sears provides financing to its customers through private label credit cards and installment plans. SRAC is a wholly-owned subsidiary of Sears, whose principal business is purchasing Sears’ short-term notes and account receivable balances which it finances through public sales of SRAC notes. In this action, Plaintiffs alleged that Sears manipulated information regarding its credit card operations to make it appear more stable and profitable than it actually was, and that this artificially inflated the market value of SRAC debt securities. Specifically, Sears allegedly misrepresented its reliance on sub-prime creditors; selectively reported delinquency and charge-off rates; and disguised portfolio losses in order to generate high levels of reported receivables that Sears knew would prove uncollectible. While Plaintiffs’ motion for class certification was pending, the parties were able to reach an all cash settlement in the amount of $15,500,000. The Firm believes this was an outstanding result, especially considering that Sears had already redeemed many of the damaged bonds. The deadline to file a claim in this action is July 8, 2008. |
