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Week of 6.19.09

Lawsuits Against Sallie Mae

Below are two federal lawsuits that have been brought against student loan giant Sallie Mae over the last few years. Both allege that company employees were given incentives to push large numbers of borrowers into forbearance. Both say Sallie Mae wanted to put those borrowers into forbearance to keep loan default rates artificially low. Both lawsuits say, in some cases, the borrowers did not know they were being put into forbearance.

See the lawsuit filed by Sallie Mae's shareholders. [pdf]

See Sallie Mae's motion to dismiss [pdf]

See the lawsuit filed by former Sallie Mae employee Mike Zahara in 2005. [pdf]

Timeline of Michael Zahara's Qui Tam Case:

August 16, 2005: Zahara terminated (pdf) from Sallie Mae.

November 8, 2005: Zahara files qui tam lawsuit in California.

January 19, 2006: Case transferred from California to Indiana.

June 2, 2008: Justice Dept. declined intervention (pdf) to the case. The complaint is unsealed, but the evidence in the case is kept under federal seal.

July 22, 2008: Zahara arrested for extortion of local Democratic Party official in a local Nevada court.

November 17, 2008: Zahara arraigned on extortion case.

December 22, 2008: Zahara exonerated (pdf) of all charges.

October 2008: Lawyers on qui tam bring a motion to be withdrawn as counsel from the case, based on the fact that Zahara didn't tell them he was arrested for extortion.

October 29, 2008: Granted motion. Zahara has 30 days to find another lawyer.

November 18, 2008: Zahara files a motion to get more time to find a lawyer and is granted an extension to December 1, 2008. This is later extended to Feb 2, 2009.

March 12, 2009: Court rules "dismissal without prejudice" because "the plaintiff has failed to obtain substitute counsel by the deadline." He can pursue the case at a later date when he finds alternate counsel. (pdf)

April 2009: Zaharainformally requested Justice Department reviewof June 2008 ruling declining case.

June 2009: Justice Department asks Zahara to file that request formally. Zahara is looking for a new lawyer.

Student Loan Sinkhole?

Student Loan Stories

Student Loan Survival: Advice You Can Bank On

In Your State: Graduates in Debt

Sallie Mae's Response

Lawsuits Against Sallie Mae

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