CASES
The Student Loan Corporation
Class Period: Jan 15, 2008 to Sep 23, 2010
Lead Plaintiff Deadline: Apr 3, 2012 + Deadline passed
Summary of Case:
A securities class action has been filed against The Student Loan Corporation ("STU" or the "Company")on behalf of all persons who purchased or otherwise acquired the common stock of STU between January 15, 2008 and September 23, 2010. This case has been filed in the USDC - Southern District of New York.
The Complaint alleges that while the majority of STU's student loans were originated under the Federal Family Education Loan (FFEL) program - and thus authorized and guaranteed by the Department of Education under the Higher Education Act of 1965, as amended - STU also offered its own, private educational loan products, called CitiAssist® loans, which the Company itself underwrote and serviced. Unlike FFEL loans, CitiAssist loans were not insured by the government. During the Class Period, however, some portion of STU's CitiAssist loan portfolio was partially insured against loss through private insurance purchased by STU itself, or by risk-sharing agreements with educational institutions. Other portions of STU's CitiAssist loan portfolio were uninsured, including many of STU's higher risk loans. Beginning in January 2008, STU elected to stop insuring all new CitiAssist loan originations, and so for all CitiAssist loan originations throughout the Class Period, STU was exposed to 100% ofthe potential losses.
As the economy rapidly deteriorated in 2008, STU began to experience a high level of defaults on its various student loan portfolios. These defaults continued to grow during the Class Period with the economy entering a recession and with unemployment rates soaring. Instead of informing the investing public about its mounting losses resulting from bad loans, taking appropriate impairment charges, and implementing sufficient loan loss provisions to account for STU's probable losses, STU failed to inform investors about the rapid deterioration of its business, and similarly failed to take adequate impairment charges and set adequate loan loss provisions and reserves.
At the same time STU was failing to properly account for its mounting risks and losses, defendants issued materially false and misleading statements regarding the Company's business and financial results, by telling the investing public that it was well positioned and performing well despite adverse market conditions. As a result of defendants' false statements, STU's stock traded at artificially inflated prices during the Class Period, reaching its Class Period high of over $135 per share.
The truth was not fully revealed to the market until the Company announced in an SEC filing on September 23, 2010, that it was taking a "pre-tax impairment" charge of over $900 million, because the fair market value of certain assets was far less then the Company's carrying value of those same assets. This announcement came just days after STU announced the sale of these same assets, and the Company itself, to a group of buyers for $30 per share (the "STU Transactions").
As the result of the STU Transactions, STU was acquired by Discover Financial Services ("Discover"), effective on December 31, 2010, and became a wholly owned subsidiary. STU securities were suspended from trading on January 3, 2011 and were delisted from the NYSE on January 14, 2011.
If you purchased this company's shares during the Class Period and suffered a loss or for further information about the case, please review the links below.