In re SLM Corporation Securities Litigation (Sallie Mae)
CASE UPDATE
On April 1 , 2009, Honorable William H. Pauley III of the Southern District of New York issued an order appointing SLM Venture as Lead Plaintiff and approving SLM Venture’s selection of Girard Gibbs to serve as Lead Plaintiffs’ Counsel in this consolidated securities action. The lawsuit was filed on behalf of a class of investors who purchased SLM Corporation stock during the period from January 18, 2007 through January 3, 2008.
Click here to view the Order Appointing Girard Gibbs as Lead Counsel
CASE BACKGROUND
On January 31, 2008, a class action lawsuit was filed on behalf of SLM (“Sallie Mae”) investors alleging that during the class period, defendants issued materially false and misleading statements regarding the Sallie Mae’s business and financial results and, despite evidence that the company’s loan loss provisions for its subprime borrowers attending non-traditional schools were inadequate. It is further alleged that as a result of defendants’ false statements, Sallie Mae’s stock traded at artificially inflated prices during the class period, reaching a high of $57.98 per share in July 2007.
On January 3, 2008, the Sallie Mae disclosed in an SEC filing that it would be cutting back on its core business of lending to students by being “more selective” in making students loans. The company attributed this decision to turmoil in the credit markets and a new federal law mandating a reductionin subsidies to the private companies issuing government-backed student loans. Upon revealing this news, Salle Mae’s stock dropped $2.49 per share to close at $16.67 per share, a one-day decline of 15%.
According to the complaint, the true facts, which were known by the defendants but concealed from the investing public during the class period, were as follows: (a) Sallie Mae failed to engage in proper due diligence in originating student loans to subprime borrowers, particularly those attending non-traditional institutions; (b) Sallie Mae was not adequately reserving for uncollectible loans in its non-traditional portfolio in violation of generally accepted accounting principles, causing its financial results to be materially misstated; (c) Sallie Mae had significantly greater exposure to anticipated losses and defaults related to its non-traditional loan portfolio than it had previously disclosed; and (d) given the deterioration and the increased volatility in the subprime market and reductions in federal subsidies, Sallie Mae would be forced to tighten its lending standards on both its federal loans and private education loans, resulting in a material negative impact on the company’s loan originations going forward.
Why Girard Gibbs LLP?
Girard Gibbs is a national litigation firm specializing in securities litigation, consumer class actions and complex business litigation. Girard Gibbs' managing partner Daniel Girard was voted one of Northern California's Super Lawyers in 2007, 2008, and 2009 by Law & Politics, recognizing him as one of the top 5-percent of attorneys practicing in Northern California.
