One morning in late 2015, on Sears' vast Illinois campus, more than a dozen employees huddled in a videoconference room on a floor dubbed "B6."

There, two mid-level employees were preparing a presentation for the CEO, Eddie Lampert, when their boss rushed in with some last-minute advice.

On a chart pad he wrote three words.

"He looks at the presenters and says, 'Do not say these words to that guy,'" according to a former Sears executive who described the meeting to Business Insider. "That guy" meant Lampert, who would soon appear on a giant projector screen at the front of the room, beamed in live from a home office inside a $38 million Florida estate — 1,400 miles away from headquarters.

The pad with the three words was out of sight of Lampert's video feed. One of the words on it was "consumer."

The stakes were high. If any of those words were uttered in front of Lampert, the two presenters would "get shredded" by the CEO, whose frequent tirades had fostered a climate of fear among the company's most senior managers, said another person — this one a former vice president.

These two and other executives say "consumer" can trigger Lampert. He wants employees to instead refer to shoppers as "members," which is his term for customers who are enrolled in Sears' Shop Your Way rewards program.

It was at that moment, as the executive attending the meeting watched fellow employees anxiously censor themselves in front of Lampert, that he realized he needed to flee the sinking 123-year-old company.

Sears is in trouble

Sears CEO Eddie Lampert. Reuters Lampert, a former Wall Street prodigy, took control of Sears more than a decade ago and became its CEO in 2013. But he's rarely seen in the office, typically visiting about once a year for the shareholder meeting and projecting into videoconference rooms at Sears' Hoffman Estates, Illinois, headquarters the rest of the time, according to interviews with employees. He prefers to stay on Indian Creek Island, off the coast of Miami, behind a desk dressed up with the Sears logo. The island has been dubbed the "billionaire bunker," partly because of a private police force that protects the island's 86 residents.

"The only way you see Eddie is through a screen," one former executive told Business Insider. "We used to joke about who had to go upstairs to get fixed and see Oz."

Lampert's physical absence might be better received if Sears, which also owns Kmart, was in better shape. But the retailer, famous for selling everything from shoes to vacuum cleaners to whole houses, is facing its biggest crisis ever. It's closing hundreds of stores. Others are in shambles, with leaking ceilings and broken escalators. In some, employees hang bedsheets to shield shoppers from sections that stand empty.

Lampert, a billionaire, is trying to keep Sears afloat. He has provided up to $1 billion in financing to help keep it in operation.

Business Insider spoke with more than a dozen employees, ranging from store clerks to senior executives, about the unraveling of Sears. Many spoke on the condition that they not be identified for fear of legal retribution from Lampert and Sears, including one person who specified that she would only speak off the record upon the advice of an attorney. Some said they had signed nondisclosure forms barring them from sharing information about the company.

The content of this article was described in detail to two Sears spokesmen, both of whom declined to comment when asked. Requests to interview Lampert were also declined.

The employees who spoke to Business Insider describe an internal mess with a revolving door of executives and low morale. Senior executives say Lampert has cut investments in stores because he's trying to turn it into a tech company that collects and sells customer data through the Shop Your Way program.

In the past, Lampert has defended his strategy, saying he intends to turn Sears into a more "asset-light" organization, but one that would still include physical stores. He denies widespread claims that he's stripping the company of all its most valuable properties and brands and hastening its bankruptcy.

At the same time, he has executed a series of real-estate and financial transactions to help prop up Sears. While the failure of the company could certainly wipe out his hedge fund's investment in the stock, these deals have set Lampert up to benefit in other ways, creating a conflict of interest, a shareholder lawsuit claims.

A Kmart in Hillsboro, Ohio, uses white sheets to hide empty store space. Mark Schmidt

Failure is a near certainty, according to industry watchers. Analysts are expecting Sears to file for bankruptcy within the next two years, and perhaps much sooner.

Former and current Sears staff members who spoke to Business Insider put the blame squarely on Lampert for destroying the iconic American brand.

The next Warren Buffett

Lampert, 54, has the pedigree of a Wall Street blue blood. He graduated from Yale, worked at Goldman Sachs, and started his own hedge fund, ESL Investments, when he was 26. He was a celebrated investor for much of his three-decade career.

ESL generated annualized returns of more than 20% a year for 20 years, marking one of the strongest long-term investment records in history, according to a 2013 Wall Street Journal article. In 2004, BusinessWeek (now Bloomberg Businessweek) asked if Lampert was the next Warren Buffett.

Eddie Lampert's home on Indian Creek Island. Bing Maps

But Lampert's career before Sears' downfall was not without drama. Most notably, on a January evening in 2003, as Lampert was walking to his car from his office in Greenwich, Connecticut, four people grabbed him, shoved him into a rented SUV, and took him to a cheap motel, where he was held captive for 28 hours, according to The Journal. The ever private Lampert has never spoken about the incident publicly.

At the time of the kidnapping, Lampert was hammering out the final details of a deal to acquire the discount retailer Kmart out of bankruptcy. Then in 2005, he combined it with Sears to create Sears Holdings in what was, at the time, the largest retail merger ever. ESL, which has long been one of Sears' largest shareholders, now owns about half of the company with Lampert.

About a year after the deal to create Sears Holdings closed, Lampert described the company — which included more than 3,000 Sears and Kmart stores — as a "$55 billion-revenue, 350,000-person startup."

"My goal is to see Sears Holdings become a great company whose greatness is sustainable for generations to come," Lampert, then just chairman of the company, told shareholders in a March 2006 letter.

He has publicly compared Sears' strategy to Apple's and Microsoft's, and in his most recent letter to shareholders, he said that Sears is trying to meet new customer needs like Uber, Amazon, and Tesla are doing. Sears is facing more scrutiny from Wall Street than those companies, however, because of the sheer fact that it's a retail company, he said.

"In an environment where new companies like Uber can raise almost unlimited capital, what are the implications for older companies that are held to a very different standard when it comes to profitability and regulation?" Lampert wrote.

A hard look at the numbers shows that Sears Holdings looks nothing like a fast-growing tech company. In the near term, Sears must raise about $1.5 billion to stay in business through 2017, according to Moody's.

How Sears would raise that money "remains unclear," according to Kirk Ludtke, an analyst at Cowen & Co. "But we suspect that it involves the closure of a significant number of unprofitable stores," he recently wrote.

The company is doing just that. It announced in the last week that it's closing 150 Sears and Kmart stores, or roughly 10% of its store base, in early 2017. Sears has arranged a deal to sell its iconic Craftsman brand to Stanley Black & Decker for about $900 million, which includes a cash payment of $525 million in the near term and another $250 million in three years, as well as ongoing payments of a percentage of Craftsman sales.

The company is also looking for buyers for its Kenmore and DieHard brands.

And Lampert has been lending the company money to pay off debt and keep it afloat. Within the last two weeks, ESL has promised Sears up to $1 billion in loans and letters of credit, in addition to a $300 million cash infusion in the second quarter. ESL has suffered, too; its assets are down to $2.8 billion from $18 billion in 2007, according to a March 2016 regulatory filing.

Traditional big-box retailers have been hit hard by the rise of online shopping and falling foot traffic in shopping malls. But current and former workers say Sears' problems have more to do with Lampert's management and strategies than the larger industry changes.

'He would find a hole in the data and then explode'

The videoconference room where employees meet, virtually, with Lampert has become infamous for the shouting matches that happen inside.

The first time a new Sears vice president strolled into the room, two years ago, he found top managers sitting around a table, burying their faces in computers. He tried to introduce himself — "Hey!" "Hi!" and "How are you doing?" — but he didn't get much in return.

"I see everyone look up like, 'Do you know where you are?' And I was like, 'What the hell is going on?'" he told Business Insider. He later understood why.

The Sears headquarters in Hoffman Estates, Illinois. Reuters

Lampert has been known to get so angry in these meetings, particularly when he is challenged, that employees gossip about who is getting ushered into the conference room on any given day to "get their knees cut off," one former manager told Business Insider.

The meetings typically start with a presentation, and then Lampert fires off a series of questions to the presenter until he finds one that the person can't answer, one former vice president said.

"He would find a hole in the data and then explode," the executive said. "Then there would be a 45-minute rant."

Lampert's management style — including the harrowing videoconferences — has been questioned before. In a July 2013 Bloomberg Businessweek profile that focused on the fierce competition between business units, the CEO defended his approach as a way to "drive decision-making and accountability at a more appropriate level."

But the situation has taken on a far greater urgency in the three years since that story was published. Sales are down 37% since early 2013, Sears' debt load has spiked to over $1.6 billion, and the company is losing well over $1 billion annually. To meet its obligations, the company has been selling off valuable brands and properties.

Shop his way

Before Sears and Kmart, Lampert had no experience in retail. The big plan he hoped would transform Sears was a rewards program called Shop Your Way, which the company introduced in 2009.

Through the program, frequent buyers accumulate points for their Sears and Kmart purchases and turn them into coupons and discounts. One primary goal of Shop Your Way was to acquire customers' personal information and sell it to other companies, according to a former executive who worked on the program.

There's also a social networking component on shopyourway.com, where members can see and comment on products their friends have liked or purchased.

A user who goes by the name Eli Wexler posts frequently on the site, asking questions such as if a $2,495 handbag is "too expensive, or is it worth it?"

In 2013, Bloomberg reported that Eli Wexler is a pseudonym for Lampert himself.

In February 2016, Lampert, presumably posting as Wexler, clicked on a pair of boxing gloves and posed a question: "Does anybody have these? Will it protect my hands since I punch very hard?"

Shop Your Way Lampert aggressively pushed the rewards program, requiring store employees to meet ambitious quotas for new sign-ups. But in many ways it backfired. The program is complicated, and it has held up lines at checkouts, angering customers.

Because of the program, Kmart cashiers went from scanning 18 items a minute to just five, according to a former assistant manager at one store who left in 2012 after 12 years with the company. Some frustrated customers abandon their shopping carts, forcing employees to return all the goods back to shelves.

At the same time Lampert was pushing Shop Your Way and posting on the site, employees started complaining that Sears had stopped investing in its physical stores.

"While we have been criticized for not investing more in our stores, I have explained in the past that the investments in our transformation go well beyond our stores, but don't ignore our stores," Lampert wrote in a letter to shareholders in February 2016.

"We believe that our investments in the Shop Your Way membership platform and our integrated retail capabilities were more appropriate investments given the massive shift in how customers are shopping and how competition has evolved."

"Integrated retail capabilities" is Lampert's term for shopping at stores and online.

Sears stopped reporting its e-commerce growth in 2014, and Shop Your Way is now a "giant margin drain," according to two former executives who worked closely with the program. Part of the problem is simply that Sears' clientele is generally older and less interested in online shopping.

"The reality is, when your top line falls as significantly as it has and your customer base doesn't buy all online — they are middle-aged to older, and they shop the store — as much as you try to shift channels to online, it's just not happening," one former executive said.

Lampert has conceded that the company has "fallen short" on getting customers engaged in the program.

"Our reputation will change when we get [the Shop Your Way network] to matter," he said at the company's annual meeting in 2016, according to Crain's Chicago Business.

'The ceilings are leaking and the floors are cracked'

Lampert's plan is for Sears to one day be a tech company, more like Apple or Facebook than a traditional retailer, according to three former executives.

"He's got it all set out in his mind, how he wants things to run, regardless of any type of value proposition," said one former employee. "If Eddie thinks it's 'cool' and it will position us with Amazon or what the young people are buying, then you go marching toward it like a zombie."

Interviews with dozens of store-level and corporate employees over the past year yielded a common refrain: Lampert is out of touch with reality.

"He refuses to put a dime in updating stores," one former vice president said. "You walk in and you are embarrassed as an employee when the ceilings are leaking and the floors are cracked."

"No one believes in Eddie's vision," this person said. "He has just gone rogue."

Business Insider spoke to several store-level employees who said the stores are severely understaffed, with some operating on fewer than half of the employees they need. That has led to widespread complaints among shoppers that they can't find an employee to check them out, so they end up leaving the store empty-handed.

Lampert continues to assert that the retailer is in the midst of a "transformation" into a more "asset-light" organization — rather than the "protracted liquidation" that critics describe it as.

He's telling that to investors, analysts, and store employees in blog posts, annual letters, and at shareholder meetings, as well as to members of his senior team of executives, according to interviews with Sears employees.

Can Lampert lose?

For all the problems in Sears stores, Lampert has set up his various businesses in a way that means he has other ways to gain no matter what happens to the company.

ESL holds a majority share of Sears, and that stake has lost three-quarters of its value just in the past few years — more than $1.5 billion since early 2015 alone.

But Lampert, through ESL, has loaned Sears more than $1.12 billion and promised an additional $679 million over the past two years to help keep the company afloat. In return, Sears pays origination fees and interest directly to ESL, and, by extension, Lampert. A recent shareholder complaint claims that Lampert and ESL made at least $19 million in fees and interest payments from a $400 million loan in 2014.

Lampert and ESL could potentially seize stores and inventory if Sears can't pay its bills. That $400 million loan, for instance, is backed by collateral of 25 stores valued at $500 million total.

Even if the company went bankrupt, Lampert wouldn't walk away empty-handed, according to bankruptcy experts and former executives.

"He's moving money from one pocket to the other pocket, and he's protected himself on both sides," one former vice president said. "The guy is a brilliant asset manager. He's just not a retailer."

Both tenant and landlord

Shareholders have filed suit against ESL for another way they say Lampert benefits from both sides of Sears' dealings.

It starts with a real-estate investment trust called Seritage Growth Properties, which Lampert created in 2015. Even though ESL and Seritage are separate entities, Lampert and his hedge fund own a little more than 43% of Seritage. They also own a little more than 54% of Sears Holdings.

After creating Seritage, Lampert orchestrated a big real-estate deal. Sears sold 235 stores to Seritage in 2015. Sears raised $2.7 billion from the sale and rented back the store space from Seritage.

In many of these locations, Seritage has the right to take over all or half of the square footage and then rent the empty space to other retailers at sometimes four times the rent.

"Seritage is transforming retail rents from $4 per square foot to $20-plus," Sears director Bruce Berkowitz said in November on a conference call for his investment fund, which also owns a stake in the REIT. "Seritage clearly proves the point about the value of the real estate remaining at Sears."

It has already happened in six stores and seven Sears auto centers, according to Securities and Exchange Commission filings. Seritage has converted half the square footage in nine other stores.

Sears also has the option to exit all the leases and give the space to Seritage. This is good for Sears when it needs to close stores, and it's good for Seritage, which can then rent it out to other companies. Sears has already begun to do this, terminating leases on 17 stores it plans to vacate this month.

But in their lawsuit, shareholders accuse Lampert of stripping Sears Holdings of its core assets to benefit himself and his hedge fund. They say the Seritage deal unfairly enriches Lampert at the expense of other Sears investors, as the stores were sold well below market rates.

"Eddie Lampert used his position at Sears as its CEO and controlling shareholder to further his and his hedge fund's interests rather than the best interests of the company [by spinning off its] crown-jewel assets to the REIT at an unfair price," said Ned Weinberger, a partner at the law firm Labaton Sucharow LLP, which is representing the shareholders.

'There are so many people running for the door'

The meeting in which employees were instructed not to say "consumer" was the last straw for one senior executive who spoke to Business Insider.

It was emblematic of an overarching problem plaguing Sears: Lampert "doesn't want to hear anything that challenges his vision," even if it could help improve business, he said.

The executive sought guidance from a colleague after the meeting, who advised him to jump ship.

"He said, 'On your watch, this thing is going to sink,'" the executive said. "This is when I knew I had to leave."

There have been an unusual number of high-level departures from Sears in the past several years. At least 67 executives — vice-president level or higher — have left the company just within the past two years, according to LinkedIn data. Fifteen of them left after less than two years of service, and seven left after less than 12 months, according to the employees' profiles.

The departures include Sears' chief financial officer, Robert Schriesheim; its executive vice president, Jeff Balagna; and its president and chief member officer, Joelle Maher. None of the three responded to Business Insider's requests for comment on their departures.

A Kmart store in Richmond, Virginia. Business Insider/Hayley Peterson

"There are so many people running for the door not just because the ship is sinking, but because the captain of the ship is screaming at them, blaming it on them, and telling them it's their fault," one former vice president said.

Evercore ISI analyst Greg Melich, the last remaining stock research analyst covering Sears, noted last year that Sears executives "tend to last less than a year or two."

One mid-level employee who currently works in the corporate office said people are quitting, updating their LinkedIn profiles and résumés, and "having whispered conversations" in their cubicles about the state of the company.

But no one really knows what's going to happen.

"As of right now, it is all up in the air," this person said.

'The game's over'

Sears' suppliers, meanwhile, are getting nervous and canceling orders, according to current and former corporate employees, as well as representatives of the manufacturers.

An employee who worked out of Sears' former New York City design office, which the company shut down in July, said vendors have started canceling orders because they can't get insurance on their shipments.

"It started happening about a year ago, and then it started happening more and more," this person said.

A mid-level manager at headquarters also told Business Insider that suppliers have been canceling contracts.

"It's getting really hard to do my job," this employee, who works directly with Sears vendors, wrote in an email. "A lot of vendors are discreetly cutting ties with Sears."

The employee declined to provide names for the companies involved because they feared retribution if they were discovered as the source of the information.

All of this, industry watchers say, means chances for Sears' survival have dwindled.

"They are going out of business," said Van Conway, an expert in bankruptcy and debt restructuring and CEO of Van Conway & Partners. "This snowball is 90% of the way to the bottom of the hill."

That's one reason those executives look so nervous in that videoconference room at headquarters, while Lampert, sitting at home in Florida, keeps finding ways to plug holes with cash infusions.

One day, Sears' assets will likely run dry. And right now, there's no sign of a strategy that would cure the underlying business by restoring brand loyalty and sales, Conway said.

"The game's over," he said.