The complaint alleges that during the Class Period, defendants issued materially false and misleading statements regarding the Company’s business and financial results and, despite evidence that Sallie Mae’s loan loss provisions for its subprime borrowers attending non-traditional schools were inadequate both prior to and at the start of the Class Period, defendants failed to adequately reserve for losses in Sallie Mae’s non-traditional portfolio. As a result of defendants’ false statements, Sallie Mae’s stock traded at artificially inflated prices during the Class Period, reaching a Class Period high of $57.98 per share in July 2007.
On January 3, 2008, the Company 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 due to turmoil in the credit markets and a new federal law that slashed subsidies to the private companies that make government-backed student loans. On 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) the Company failed to engage in proper due diligence in originating student loans to subprime borrowers, particularly those attending non-traditional institutions; (b) the Company 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) the Company had far 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, the Company would be forced to tighten its lending standards on both its federal loans and private education loans which would have a direct material negative impact on its loan originations going forward.
On March 31, 2008, several motions were filed by different groups and individuals to be appointed as lead plaintiffs, lead counsels as well as to consolidate cases. A response to the above mentioned motion was filed on April 17, 2008 by SLM Venture. Just as quickly, a memorandum of law in opposition of consolidating cases, to appoint lead plaintiffs and counsels was filed by Sheet Metal Workers Pension Fund Trust at the same time.
On July 23, 2008, a memorandum and order was entered. The order stated that the actions are consolidated. In addition, the Westchester Capital is appointed as lead plaintiff and Abbey Spanier is approved as lead counsel. On July 29, 2008, a scheduling order No. 2 was entered in regards to the pretrial conference. However, a stipulation and pretrial order No. 2 amending pretrial order No. 1 was entered on September 16, 2008. Lastly, a scheduling order No. 3 was entered on September 30, 2008.
On January 9, 2009, a Consolidated Amended Class Action Complaint was filed with the court.
On September 03, 2009, a Second Amended Class Action Complaint was filed by the plaintiffs in the action.
On September 24, 2010, a Memorandum & Order was issued by the Court regarding Defendants SLM Corporation's and Albert Lord's motion to dismiss the Second Amended Class Action Complaint were denied. Defendant Charles Andrews' motion to dismiss the Complaint was granted.
On March 30, 2012, a Stipulation of Settlement was entered into the Court's docket.
On April 18, 2012, the Court issued an Order Preliminarily Approving Settlement.
On September 6, 2012, the Court issued a Final Judgment approving the settlement.