First Marblehead Corporation Case 04/10/2008
According to a press release dated April 10, 2008, the lawsuit claims that First Marblehead and a number of individual defendants violated Sections 10(b) and 20(a) of the Exchange Act, 15 U.S.C. Sections 78j (b) and 78t(a) and Rule 10b-5 promulgated thereunder by the Securities and Exchange Commission (”SEC”), 17 C.F.R. Section 240.10b-5.
According to the complaint, the defendants made materially false and misleading statements about the performance and quality of First Marblehead’s securitizations in SEC filings and other statements to the investing public. Among other things, First Marblehead misrepresented the level of default rates in its portfolio and the default rates’ effect on the Company’s ability to securitize additional student loan underwritings. The complaint also states that First Marblehead recklessly disregarded that its student loan guarantor, The Education Resources Institute, was under-reserved and unable to adequately insure student loans underwritten by the Company. The guarantor filed for bankruptcy protection on April 7, 2008.