Sears' Fired Card Boss Fires Back in Court

  There was no softer side to the news out of Sears, Roebuck and Co. when it was revealed that fired credit executive Kevin Keleghan had filed a three-count defamation lawsuit last November against his former employer. The battle escalated in January when Hoffman Estates, Ill.-based Sears filed a motion to dismiss Keleghan's main allegations.
  Keleghan's suit in an Illinois state court alleges that Sears Chief Executive Alan J. Lacy publicly made a number of false statements that impugned Keleghan's integrity and trustworthiness. Keleghan hired a private detective to serve Lacy the lawsuit at his home in Lake Forest, Ill., a tony Chicago suburb where Keleghan also lives.
  Keleghan charges that Lacy held him responsible for Sears' revision in its third-quarter earnings forecast and $100 million increase in its loan-loss reserves due to rising chargeoffs.
  In his suit, Keleghan said that before his firing he had been a highly respected senior executive, responsible for Sears' $28 billion proprietary and gold MasterCard credit portfolio that has 60 million cardholders.
  The conflict became public in October when Lacy announced at an analysts' conference call that he had fired Keleghan. Lacy said he had lost confidence in Keleghan's "personal credibility," but his leaving had nothing to do with business performance. After the conference call, Sears' stock fell to a 12-year low.
  Keleghan had been executive vice president of credit and financial products for about three years. He was replaced by Paul Liska, who had been chief financial officer ("An Unexpected Change At Sears' Card Unit," Card Watch, November 2002).
  Keleghan's suit argues that "Sears and Lacy have raised the false question of whether Keleghan is fit to serve in any position of trust in any executive capacity in any business where shareholder interests are at stake."
  Keleghan also charges that Sears has backed out of a severance deal signed in September. Sears agreed to pay Keleghan his base salary and annual bonus for two years, any vacation he had accrued, along with stock options and stock appreciation rights, the suit says. The Chicago Tribune reported that Keleghan earned $1 million annually.
  Sears responded sharply in its motions to dismiss. It argues Keleghan doesn't deserve severance pay because he hadn't been forthcoming about the difficulties facing Sears' credit division. Sears claims that Keleghan fraudulently induced it into signing the severance agreement because of his fear that Sears would fire him once the facts about his division became known.
  Also, Sears and Lacy sought dismissal of the defamation count because Keleghan "has not adequately pled any special damages."
  The case is being heard in Lake County Circuit Court in Waukegan, Ill. A hearing was set for early March.