Student Loan Corp. Shareholder Suit on Reserves Dismissed
A suit against Student Loan Corp., Citigroup Inc. (C) and Discover Financial Services (DFS) that claimed the student loan lender misled investors about losses starting in 2008, was thrown out by a federal judge.
U.S. District Judge Naomi Reice Buchwald in Manhattan dismissed the suit, filed in February 2012 by the Oklahoma Firefighters Pension & Retirement System. The pension fund claimed Student Loan Corp. failed to maintain adequate reserves and misrepresented the size and risk of its loan portfolios’ exposure.
“We find that none of plaintiffs’ claims states an actionable claim for relief,” Buchwald said in a written opinion dated June 25.
The Oklahoma pension fund sought to represent a class of shareholders in Student Loan Corp. who claimed they lost money when information about the losses became public and shares fell. The suit also targeted three former Student Loan Corp. officers, including Michael Reardon, the company’s former chief executive officer.
Student Loan Corp., formerly a unit of Citigroup, was sold to Riverwoods, Illinois-based Discover in September 2010. The pension fund sought to represent all Student Loan Corp. investors from Jan. 15, 2008, to Sept. 23, 2010.
“We are pleased with the court’s opinion dismissing the complaint,” Citigroup spokesman Mark Costiglio said in an e-mail.
Discover spokesman Jon Drummond declined to comment.
Student Loan Corp. in September 2010 told the U.S. Securities and Exchange Commission in a public filing that it was taking a $900 million charge, just days after announcing it was being sold, according to the complaint.
The case is Oklahoma Firefighters Pension & Retirement System v. Student Loan Corp., 0012-cv-895, U.S. District Court, Southern District of New York (Manhattan).
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