Billionaire investor and former Sears chairman and CEO Edward “Eddie” Lampert, 56, seemingly had a golden touch before presiding over the storied retailer’s descent into bankruptcy.
A Yale graduate whose college roommates included future U.S. Treasury Secretary Steven Mnuchin, Lampert cut his teeth at Goldman Sachs and started his successful hedge fund, ESL, while still in his 20s. In 2003, he took control of a bankrupt Kmart and made it profitable — until he combined it with Sears two years later in an $11 billion deal that eventually sunk both retailers.
But Lampert has had to overcome more than just the tumultuous attempt to turn around Sears, surviving the early death of his father, the arrest of his first boss and a fortunately bungled kidnapping.
Father’s death
The son of a lawyer and a stay-at-home mom, Lampert grew up in relative affluence on the North Shore of Long Island. But everything changed at age 14, when his father died of a heart attack, putting the family’s finances on shaky ground. Lampert’s mother went to work as a sales clerk and he pitched in with summer jobs.
Making connections at Yale
Lampert attended Yale on financial aid, where his roommates included Mnuchin, whose father was a senior partner at Goldman Sachs. Lampert landed an internship at Goldman before his senior year and a full-time gig after graduation.
Goldman Sachs
Lampert worked in the risk arbitrage department at the investment firm for four years, where colleagues included former U.S. Treasury Secretary Robert Rubin. He reportedly made the decision to strike out on his own after the 1987 arrest of Robert Freeman, head of stock arbitrage at Goldman, on insider trading charges.
Launching ESL
In 1988, Lampert started his own hedge fund, ESL Investments, with financial backing from former Goldman Sachs bigwig Richard Rainwater. His strategy was long-term investing for the well-heeled, with a minimum investment of $10 million for five years. Investors included David Geffen, Michael Dell and Mnuchin, among others.
Big investing wins
Lampert’s investing acumen scored some big wins at ESL, including large stakes in auto parts retailer AutoZone and car dealership AutoNation, that helped the firm achieve annual returns north of 20 percent for years. ESL took a similarly large stake in Kmart, guiding it out of Chapter 11 bankruptcy in 2003 and turning annual profits that only burnished Lampert’s reputation as a savvy investor in retail.
Bungled kidnapping
In January 2003, as Lampert was working on Kmart’s reorganization plan, he was forced into the backseat of a Ford SUV at the garage of his Greenwich, Conn., office building by four men, who held him hostage at a motel for 28 hours. The kidnappers brandished a shotgun, used Lampert’s credit card to buy pizza and attempted to negotiate the terms of his release. They freed Lampert after he agreed to pay a $5 million ransom. He never paid a cent and all four men were arrested within days.
Sears downfall
Despite all the investment wins, Lampert is perhaps best known for overseeing the inexorable demise of Hoffman Estates-based Sears. In 2005, his discount retailer, Kmart, acquired Sears in an $11 billion deal that formed what Lampert hoped would be a formidable rival to Walmart. Instead, the Great Recession hit, the age of Amazon dawned and Sears Holdings Corp. saw years of revenue declines and mounting losses before filing for bankruptcy in October.
Twitter @RobertChannick
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