A prominent businessman sold stock days before it took a dive, and congressional Democrats are pushing for an investigation, But the Washington Post’s February 14 report emphasized political posturing by congressmen and left out facts the paper reported four days earlier suggesting the sale was routine, not insider trading.
“[Sallie Mae Chairman Albert] Lord sold 400,000 shares of company stock Thursday, Feb. 1, and Friday, Feb. 2. The following Monday, after President Bush announced a budget that would cut subsidies to the student-lending industry by about $19 billion over five years, Sallie Mae’s stock plunged about 9 percent, to $42.37 from $46.46, its lowest closing price in more than two years,” Amit Paley noted in his February 10 article.
That story gave a plausible explanation for the sale, pointing out that it had been downgraded because of pending budget action.
Four days later in his February 14 article, Paley returned to the story, focusing on Democratic leaders suspicious of whether the White House tipped off Lord to the federal budget’s proposals impacting Sallie Mae.
“Given the timing of the Sallie Mae stock sale and the release of the President’s budget, the committee is seeking more information as a matter of routine oversight,” Paley quoted a statement from Rep. George Miller, before throwing in a brief defense of the stock sale from company officials.
Aside from Miller and Rep. Barney Frank (D-Mass.), Paley told readers that Sen. Edward Kennedy (D-Mass.), is pushing for an investigation by the Securities and Exchange Commission (SEC). Paley quoted Sallie Mae spokesman Tom Joyce insisting that the stock sale was “completely coincidental,” but didn’t explore the company’s defense any further.
Indeed, Sallie Mae’s board of directors was informed of the sale on January 25. “Everybody said fine, and that was it,” Paley quoted the company’s audit committee Chairman William Diefenderfer in his February 10 story.
What’s more, Paley noted, stock in SLM Corporation (NYSE: SLM), the holding company for Sallie Mae, had been on the decline for month, and industry analysts were already bearish on the stock because of rumors of cuts in lender subsidies.
“We downgraded Sallie Mae about three or four weeks ago because we had heard that the administration was looking at cutting into lender subsidies,” investment analyst Matt Snowling told Paley.
“It’s not completely a surprise to us, although it clearly was a surprise to a lot of investors,” Snowling added.