Citigroup, Discover Financial Services and Student Loan Corp. were sued by the $1.7 billion Oklahoma Firefighters Pension & Retirement System over claims that Student Loan Corp. misled investors about increasing losses beginning in 2008.
The Oklahoma City-based system on Feb. 3 sued the companies and several Student Loan Corp. officials in U.S. District Court in New York, claiming it lost money when the company’s stock price dropped after information about the losses became public.
Student Loan Corp., formerly a unit of Citigroup, was sold to Discover in September 2010. The pension fund seeks to represent all Student Loan Corp. investors from Jan. 15, 2008, to Sept. 23, 2010. The company originated and held student loans.
“At the same time (Student Loan Corp.) 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,” the pension fund said in its complaint.
Student Loan Corp. in September 2010 told the Securities and Exchange Commission in a public filing that it was taking a $900 million charge, just days after it announced was being sold, according to the complaint. The lender became a wholly owned subsidiary of Discover on Dec. 31, 2010.
“The suit is baseless, and we will seek its prompt dismissal,” said Shannon Bell, a spokeswoman for Citigroup, in an e-mail. Leslie Sutton, a spokeswoman for Discover, declined to comment.