A federal judge has certified a securities fraud class action against Sallie Mae, the top student loan provider in the United States.
Lead plaintiff SLM Ventures accused SLM Corp., Sallie Mae's corporate name, of telling investors it used strict underwriting standards for its loans, while weakening those standards by approving risky loans to students at for-profit schools.The suit was filed in the Southern District Court of New York (a copy of the pdf filing is here).
What's the primary reason why the plaintiff filed suit? Sallie Mae offers federally guaranteed loans and private education loans ("PELs"). The company claimed it was adhering to, as the Courthouse News Services said above, to underwriting standards for its loans, all of its loans. In 2006, Sallie Mae's management team expanded the PEL program. As a result, the portfolio doubled, and it increased from $7 billion in PELs to over $15 billion.
The plaintiff accuses "Sallie Mae actually [of] relax[ing] its underwriting standards." In so doing, they "loaned billions of dollars to borrowers with low credit scores and other high risk borrowers who
attended part-time, correspondence, or for-profit schools [my emphasis]."
In order to hide the number of PEL loans that had were delinquent or in default, Sallie Mae moved as many of them into forbearance, which is a violation of regulations.
Albert Lord, who was a the Chairman at the time, also comes into play. In 2007, he tried to sell the company off to private equity investors. If he had succeeded, he would have received $225 million, the total amount of his stock options in the company. The deal, however, fell through.
Lord's was extremely defensive during a 2007 investors call (read the full transcript here). When discussing the expansion of PEL, he was tight-lipped and refused to answer specific questions about it. At one point he said, rather oddly, " Most of the advice I get takes the direction of playing poker and how to play poker."
But he quickly added this contradictory claim, "I think it’s important that you understand that I’m not playing poker. The board is not playing poker. We are trying to do what we’ve always done and that’s create value by running the company well."
Whatever that means . . .
The call worsened, and Lord kept delivering bad jokes. (A word of advice to Lord: if you do quit your day job as a loan predator, don't go into stand-up comedy).
He continued with a line of dumb jokey comments."I don’t play chess. I play golf -- poorly. I don’t play the piano, but we have a piano and if you put CDs in it, it plays itself," he said.
That didn't go off well, as Lord said a few minutes later, "You guys are pretty serious today, I can see."
Again, and as the Courthouse News Service reported, he would not discuss the creditworthiness of PEL.
David Jackson, who is a contributor to Seeking Alpha, described the Q&A session as the "most remarkable" he ever experienced (see Jackson's transcription here).
This is when Lord gets nasty. Jason Miller asks Lord several questions, and Lord essentially lets him know that it's too much. They move to the next caller who is Bill Cavalier. Cavalier begins to ask questions about securitization. Lord refuses to respond, and insists that Cavalier direct those questions to Steve McGarry (McGarry was promoted to senior vice president, investor relations in 2008).
Cavalier sounds surprised by Lord's reaction, and says, "But you’re the CEO. You’re the guy who just took over the company."
Lord replies, "Yeah, that’s exactly right. I’m the CEO. You should give Steve a call. Next question."
Apparently, that means CEOs aren't responsible for understanding the innerworkings of their companies, especially when it relates to securitizations and banking. That's obviously expecting far too much!
When the call is wrapped up, and there are no more questions, Lord says to McGarry, "How good is this? Steve, let’s go. There’s no -- no questions. Let’s get the fuck out of here [my emphasis].
Lord, like usual, was keepin' it classy. Stay tuned for updates on this case of SLM vs. SLM.
 |
| Lord: "Look, I don't f%$@*ing know! I'm just the CEO. Ask Steve. I'm going golfin' on my 18-hole golf course on my estate in Anne Arundel County. Yeah, that course was built by turning millions of Americans into indentured educated citizens . . .Oh s---t! I mean . .. just ask Steve!" |
9 comments:
Here come the lawsuits! I know it isn't the first (or the last), but this is great. Alan Lord is a vile, filthy pig. The behavior is criminal.
That's real f**king cute - Al Lord knows nothing, wants to know nothing, and is hiding what little he does know. I hope this lawsuit demolishes Sallie Mae; it;s one of the worst loan companies out there....if they didn't have a captive market, the company would have vanished a long time ago.
Excellent! Let's see if Sallie Mae is willing to purchase some judges or favorable jury verdicts. After all, they might see such "expenditures" as a wise investment.
Well.... Lord might, after all, just be a frontman or puppet for other interests.
A Cheeky Chappie who can do no wrong?
He is almost like a sort of surreal and chuckling golfer/non entity in that he is like a man behind the curtain that is in front of an infinite number of clever financial curtains?
Hence the odd responses to press etc. on the part of poor Albert.
Who knows?
These days, no one seems to be responsible for anything, because it is all so diffuse.
Anywhere and everywhere one goes......
But maybe things have always been that way, and I am just catching on as a youngster going on 47?
oK ..SO THIS IS ANOTHER LAWSUIT...BUT THIS ONE COULD BE VERY STRONG..
Case 1:08-cv-01029-WHP Document 160 Filed 01/24/12 Page 1 of 19
http://www.girardgibbs.com/slm-class-cert-order-2012-01-24.pdf
SLM FORCED STUDENTLAONS ON PURPOSE INTO FORBERAENCE AND THEN INTO DEFAULT TO COLLECT FASTER ON THE MONEY ...THAT IS INDEED CRIMINAL !!!
slm Lowered the standards it used to qualify borrowers in order to increase its portfolio of lucrative private loans,
Hid borrower defaults from the public by changing its loan forbearance policy, and
Maintained inadequate reserves to compensate for potential loan losses in order to inflate profits.
http://community.lawyers.com/forums/t/26561.aspx?PageIndex=6
Remember this ...that was in 2008 and they stilll are criminals !!
http://wikileaks.org/wiki/USA_Funds_-_Sallie_Mae_Guarantee_Services_Agreement_2006
Summary by a Wikileaks contact with inside knowledge of the situation. Wikileaks has checked the summary for congruence with the public record. Where items are from private knowledge the view is that of the contact. Both USAfunds and Sallie Mae, sent legal threats to Wikileaks within 4 minutes of each other over this document on June 24, 2008 (see Note).
The agreement discloses the details of USA Funds compensation payments to Sallie Mae in exchange for Sallie Mae using USA Funds as its guarantor. There is a statute, regulation and Dear Colleague letter that strictly prohibit any payments by a guarantor to a lender in order to induce the lender to use said guarantor for said lender's FFELP loans. USA Funds "bribes" Sallie Mae to use it as guarantor for all Sallie Mae loans. This, in turn, causes USA Funds, who is a U.S. fiduciary, to do "favours" for Sallie Mae to the detriment of the U.S. taxpayer.
Sallie Mae is a predatory lender. All of their private student loans are now double what they originally were. It should be criminal to lend a student loan at an interest rate so much higher than the prime lending rate. This organization is corrupt to the core, and the government is allowing it all to happen. The CEO of Sallie Mae (Al Lord) knows exactly what he has done. The lives of many students have been ruined by this company. We need consumer protections for private student loans to be returned to the people.
Sallie Mae is a predatory lender. All of their private student loans are now double what they originally were. It should be criminal to lend a student loan at an interest rate so much higher than the prime lending rate. This organization is corrupt to the core, and the government is allowing it all to happen. The CEO of Sallie Mae (Al Lord) knows exactly what he has done. The lives of many students have been ruined by this company. We need consumer protections for private student loans to be returned to the people.
True dat.
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