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Sallie Mae's Top Lawyer Resigns -- Quietly
General counsel steps down days after company reaches settlement
Corporate Counsel
February 06, 2008
Sallie Mae's Robert Lavet
image: Stacey Cramp/Legal Times
Sallie Mae has been in the headlines a lot recently. Maybe that's why it didn't bother announcing that its top lawyer resigned last week. General counsel Robert Lavet stepped down Jan. 31 after 16 years at the student loan consolidator formally known as SLM Corp.
Lavet's resignation came three days after Sallie Mae settled a suit against a buyout group that abandoned a $25.3 billion bid for the company. Sallie Mae went to court to force the consortium to go through with the deal or at least pay a $900 million breakup fee. But in the end the company accepted the deal's demise in exchange for a new credit line from its lenders.
Despite the timing, both Lavet and a Sallie Mae spokesman say that the GC's resignation had nothing to do with the settlement. Deputy general counsel Michael Sheehan will head the company's 29-attorney law department on an interim basis.
Lavet, 53, joined Sallie Mae from Washington, D.C.–based Cole Corette & Abrutyn in 1992. Before that, he had been an associate at Howrey & Simon and also served a three-year stint as a trial attorney at the U.S. Department of Justice. Sallie Mae, which is based in Reston, Va., promoted him to general counsel in 2005.
The company did not publicize Lavet's departure but confirmed his resignation after being contacted for comment. "Rob resigned from Sallie Mae," spokesman Tom Joyce said in a statement. "It was an amicable parting. Rob has been a tremendous general counsel for Sallie Mae. We wish him all the best."
In an interview, Lavet said that he formalized his resignation Thursday. "I just wanted to take some time off and be with my family. I have a daughter who is graduating high school this year, and that's the whole story," he said. "Obviously it was a difficult year, but I just decided I needed some time off."
Indeed, it has been a rough stretch for Sallie Mae, which has been hammered by the credit crunch. Over the summer Congress reduced federal subsidies to student lenders, which also squeezed the company's business. Sallie Mae's share price has dropped 53 percent since January 2007. CEO Thomas Fitzpatrick resigned last May. And this past Monday, Standard & Poor's lowered the company's credit rating.
But Sallie Mae's biggest problem was the failed buyout, which was first announced last April. J.C. Flowers & Co., a New York–based private equity firm, led the acquisition group, which also included JPMorgan Chase & Co. and Bank of America Corp.
As general counsel, Lavet helped oversee the legal aspects of the deal. Had the buyout gone through, he and other Sallie Mae executives stood to make a considerable profit. According to a proxy statement, Lavet would have personally made $9.73 million, since all of his options and restricted and performance shares would have vested. If he had been terminated within two years of the merger, he stood to earn another $1.36 million.
But those riches never came to be. Last fall the Flowers group cut its offer from $60 per share to $50 and threatened to walk away from the deal completely. The skittish buyers said that the credit crunch and student loan subsidy cut had reduced Sallie Mae's value.
In response, Sallie Mae sued the consortium in Delaware Chancery Court in October, seeking either completion of the deal or a breakup fee. At the same time, however, the company was eating through a $30 billion credit line from JPMorgan and Bank of America, which would have to be refinanced by February 15. Given that its suit wouldn't go to trial for months, Sallie Mae was forced to settle for more immediate financial relief. As part of the settlement that it reached with the buyout group, Sallie Mae received a new $31 billion round of financing from seven banks, including JPMorgan and BofA.
Shareholders reacted positively to the Jan. 28 settlement. Sallie Mae's share price closed that day at $20.45, up nearly 3 percent. But this Monday, Standard & Poor's downgraded Sallie Mae's credit rating and said it may lower it further because of concerns that the $31 billion credit line may not close as expected.
