SEC probing Sallie Mae actions near stock sales

WASHINGTON (Reuters) - Student lending company SLM Corp (SLM.N), or Sallie Mae, said on Wednesday the U.S. Securities and Exchange Commission is investigating the company's disclosures in December 2007, before and after executives and directors traded in its stock.

Sallie Mae said in an SEC filing that the agency made the request on January 17. It said it was cooperating with the regulator to provide the information and documents.

 

It did not provide more information, such as which company stock sales or which company insiders are the focus of the probe.

Sallie Mae also posted a fourth-quarter loss on Wednesday, citing higher provisions for loan losses as a result of weakening credit markets.

Shares of Sallie Mae fell $2.01, or 10.6 percent, to $17.01 at mid-afternoon on the New York Stock Exchange.

A Sallie Mae spokesman did not immediately return a call seeking comment.

In December, Sallie Mae shares tumbled 47 percent on news of a failed $25 billion buyout and a company announcement that it would need to add capital.

Two insiders reported open market stock sales in December: newly appointed Chief Executive Albert Lord and director Charles Daley.

Lord, the company's executive chairman, was named CEO on December 14, two days after it said a consortium led by private equity firm J.C. Flowers refused to renegotiate a disputed $25 billion agreement to buy Sallie Mae.

The same day he was named CEO, Lord sold about 1.2 million shares of the company's common stock on the open market for prices ranging from $26.64 to $27.99 a share, according to SEC filings.

Sallie Mae said the sales, representing about 10 percent of his equity units, were required under Lord's "borrowing arrangements." Regulatory filings with the SEC reporting the sales did not mention any plan dictating the transaction.

"This stock sale has been painful, and was dictated by the specific terms of my securities account," Lord said in a company statement on December 14. "I uniquely identify with shareholders' disappointment and frustration with this transaction."

The company also said on December 14 that it opened its trading window for directors and executives for the first time since discussions with the J.C. Flowers group began in March 2007.

The only other insider to immediately take advantage of the open trading window was Daley, who on December 14 sold about 80,000 shares on the open market at prices ranging from $26.38 to $27.99 a share, SEC filings show.

Five days after both executives' stock sales, Lord said on a conference call that Sallie Mae might face higher financing costs and that the company would need to add capital, sending Sallie Mae shares plunging nearly 21 percent to close at

$22.89.

Lord was testy at times on the call, and said he would take more questions at a meeting in January, recommending that participants arrive early "because I can assure, you will be going through a metal detector."

Lord earned about $5 million more in proceeds by selling his stock on December 14, compared to what he would have made if the transactions had occurred after the call, while Daley earned about $340,000 more, according to an analysis of SEC filings.