Warren, AOC target Treasury Secretary Steven Mnuchin over Sears bankruptcy

Democratic presidential candidate Elizabeth Warren gestures as she speaks during a campaign stop at George Mason University in Fairfax, Virginia on May 16, 2019.

Mandel Ngan | AFP | Getty Images

Presidential candidate Sen. Elizabeth Warren, D-Mass., and Rep. Alexandria Ocasio-Cortez, D-N.Y., are targeting Treasury Secretary Steven Mnuchin, raising questions about his time on Sears Holdings‘ board of directors and his relationship with the troubled company’s former CEO, Eddie Lampert.

Mnuchin, who was Lampert’s roommate at Yale University, was on the Sears board until December 2016, after President-elect Donald Trump picked him to join the incoming Cabinet.

Under Lampert, who led Sears from 2013 to 2018, the company closed more than 3,500 stores, shed some of its most valuable assets, including Lands’ End, and laid off thousands. Sears filed for bankruptcy in October. Lampert bought Sears through an affiliate of his hedge fund ESL Investments, saving it from total liquidation.

In a four-page letter sent Thursday morning, Warren and Ocasio-Cortez asked Mnuchin a series of questions about his advisory role in Lampert’s decisions.

In a video on Twitter announcing the letter to Mnuchin, Ocasio-Cortez criticized the secretary as “a walking example of what happens when rich and powerful people put other rich and powerful people into power.”

Workers “deserve a Treasury secretary who fights for them,” Warren said in the video, “not someone who spent a decade raking in cash for himself at the expense of hundreds of thousands of Sears employees.”

The Treasury Department did not immediately respond to CNBC’s request for comment on the letter from Warren and Ocasio-Cortez. ESL declined to comment.

Letter follows a lawsuit

The letter from Warren and Ocasio-Cortez, consumer advocates who are among the most liberal lawmakers in Congress, comes about a month after Sears filed a lawsuit against Lampert, Mnuchin and other past board members, alleging they stole billions from the former titan of the U.S. retail industry.

Lampert, the suit alleges, “caused more than $2 billion of assets to be transferred to himself and Sears’ other shareholders and beyond the reach of Sears’ creditors.”

The suit was brought by Sears’ unsecured creditors on behalf of Sears, alleging that, “In an effort to create a false record to cover up their asset stripping, at Lampert’s personal direction, Sears employees repeatedly produced financial plans reflecting fanciful, bad-faith predictions that the company would experience an immediate and dramatic turn-around from deep and mounting losses to sudden profitability.”

Mnuchin’s ethics agreement

Warren and Ocasio-Cortez also asked whether Mnuchin had sought to waive an ethics agreement in which he promised to “not participate personally and substantially in any particular matter involving specific parties” where Sears was involved. That January 2017 agreement, which applied for one year, has expired.

Warren and Ocasio-Cortez’s letter notes that Mnuchin is one of three members on the board of the federal oversight organization Pension Benefit Guaranty Corp., or PBGC, the group that guarantees Sears’ pensions.

Mnuchin said in his confirmation hearing that he would recuse himself from PBGC’s actions related to Sears, but Warren and Ocasio-Cortez wrote that “the current status of your recusal requirements — and the exact types of decision you are recused from — are unclear.”

Warren, one of nearly two dozen Democrats running for president in 2020, and Ocasio-Cortez, the most visible freshman in the House, have both been vocal critics of corporations and income inequality. Warren had been a driving force behind the creation of the Consumer Financial Protection Bureau and had advised the Treasury secretary through that agency during President Barack Obama’s administration.

As a presidential candidate, Warren has proposed breaking up the giants of the tech industry, such as Amazon, Facebook and Google, and has proposed new taxes on so-called ultra-millionaires who are worth more than $50 million.

Ocasio-Cortez, a democratic socialist who is the youngest woman ever to serve in Congress, has made staunchly progressive pitches to address economic and environmental issues, making her a champion of the Democratic Party’s left flank and a popular target of Republicans.

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