Sallie Mae 2009 Annual Report Download - page 17

currently available information, that the results of such proceedings, if resolved in a manner adverse to the
Company in the aggregate, will not have a material adverse effect on the financial condition of the Company.
Investor Litigation
On January 31, 2008, a putative class action lawsuit was filed against the Company and certain officers in
the U.S. District Court for the Southern District of New York. This case and other actions arising out of the
same circumstances and alleged acts have been consolidated and are now identified as In Re SLM Corporation
Securities Litigation. The case purports to be brought on behalf of those who acquired common stock of the
Company between January 18, 2007 and January 23, 2008 (the “Securities Class Period”). The complaint
alleges that the Company and certain officers violated federal securities laws by issuing a series of materially
false and misleading statements and that the statements had the effect of artificially inflating the market price
for the Company’s securities. The complaint alleges that defendants caused the Company’s results for year-end
2006 and for the first quarter of 2007 to be materially misstated because the Company failed to adequately
provide for loan losses, which overstated the Company’s net income, and that the Company failed to
adequately disclose allegedly known trends and uncertainties with respect to its non-traditional loan portfolio.
On July 23, 2008, the court appointed Westchester Capital Management (“Westchester”) Lead Plaintiff. On
December 8, 2008, Lead Plaintiff filed a consolidated amended complaint. In addition to the prior allegations,
the consolidated amended complaint alleges that the Company understated loan delinquencies and loan loss
reserves by promoting loan forbearances. On December 19, 2008, and December 31, 2008, two rejected lead
plaintiffs filed a challenge to Westchester as Lead Plaintiff. On April 1, 2009, the court named a new Lead
Plaintiff, SLM Venture, and Westchester appealed to the Second Circuit Court of Appeals. On September 3,
2009, Lead Plaintiffs filed a Second Amended Consolidated Complaint on largely the same allegations as the
Consolidated Amended Complaint, but dropped one of the three senior officers as a defendant. On October 1,
2009, the Second Circuit Court of Appeals denied Westchester’s Writ of Mandamus, thereby deciding the Lead
Plaintiff question in favor of SLM Venture. On December 11, 2009, Defendants filed a Motion to Dismiss the
Second Amended Consolidated Complaint. This Motion is pending. Lead Plaintiff seeks unspecified compen-
satory damages, attorneys’ fees, costs, and equitable and injunctive relief.
A similar case is pending against the Company, certain officers, retirement plan fiduciaries, and the Board
of Directors, In Re SLM Corporation ERISA Litigation, also in the U.S. District Court for the Southern
District of New York. The proposed class consists of participants in or beneficiaries of the Sallie Mae 401(K)
Retirement Savings Plan (“401K Plan”) between January 18, 2007 and “the present” whose accounts included
investments in Sallie Mae stock (“401K Class Period”). The complaint alleges breaches of fiduciary duties and
prohibited transactions in violation of the Employee Retirement Income Security Act arising out of alleged
false and misleading public statements regarding the Company’s business made during the 401K Class Period
and investments in the Company’s common stock by participants in the 401K Plan. On December 15, 2008,
Plaintiffs filed a Consolidated Class Action Complaint and a Second Consolidated Amended Complaint on
September 10, 2009. On November 10, 2009, Defendants filed a Motion to Dismiss the matter on all counts.
This Motion is pending. The plaintiffs seek unspecified damages, attorneys’ fees, costs, and equitable and
injunctive relief.
Lending and Collection Litigation and Investigations
On April 6, 2007, the Company was served with a putative class action suit by several borrowers in
U.S. District Court for the Central District of California (Anne Chae et al. v. SLM Corporation et al.).
Plaintiffs challenged under California common and statutory law the Company’s FFELP billing practices as
they relate to the use of the simple daily interest method for calculating interest, the charging of late fees
while charging simple daily interest, and setting the first payment date at 60 days after loan disbursement for
Consolidation and PLUS Loans thereby alleging that the Company effectively capitalizes interest. The
plaintiffs seek unspecified actual and punitive damages, restitution, disgorgement of late fees, pre-judgment
and post-judgment interest, attorneys’ fees, costs, and equitable and injunctive relief. On June 16, 2008, the
Court granted summary judgment to the Company on all counts on the basis of federal preemption. The
16