Sallie Mae Securities Suit May Proceed on Some Claims, U.S. Judge Rules
A lawsuit alleging student-loan maker SLM Corp. hid its lack of reserves and made misleading statements about earnings may proceed, a judge ruled.
U.S. District Judge William Pauley in Manhattan said the investor plaintiffs presented enough evidence to continue their case against Reston, Virginia-based SLM, known as Sallie Mae, and its executives. The 2008 suit claims the lender was misleading about its underwriting guidelines, loan forbearance, and financial performance in a bid to inflate its stock price.
The lead plaintiff is SLM Venture, a joint venture established by families to invest in Sallie Mae stock. The suit seeks class-action status for investors who relied on statements made by the company from January through November 2007 to buy common stock. Sallie Mae dropped 57 percent during the period, according to data compiled by Bloomberg.
Pauley dismissed a related suit brought by plaintiffs who sought to represent participants in SLM’s employee savings and retirement plans, which invested in SLM stock. The plaintiffs, Jitandra Patel and Alex Cordero, claimed SLM breached its fiduciary duty by masking the “precariousness” of its loan portfolio and hid losses from investors.
“Patel and Cordero have neither participated in nor been beneficiaries of the retirement plan,” said Pauley.
He also dismissed related claims filed against the company’s former president and chief executive officer, C.E. Andrews saying the plaintiff “failed to adequately allege motive and opportunity.”
Edward Ciolko, a lawyer who represents Cordero and Patel, didn’t immediately return a voicemail message seeking comment left at his office after business hours. Jamie Kohen, a lawyer for SLM, also didn’t return a voicemail message left at her office after business hours.
The cases are In re SLM Securities Corporation Securities Litigation, 08-CV-1029, U.S. District Court, Southern District of New York (Manhattan).
To contact the reporter on this story: Patricia Hurtado in New York at pathurtado@bloomberg.net.
To contact the editor responsible for this story: David E. Rovella at drovella@bloomberg.net.
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