SLM Corp., better-known as educational funding provider Sallie Mae, has fired the chief financial officer of one of its debt-collection subsidiaries and demoted another manager, according to a filing with the Securities and Exchange Commission.
The two managers, whom the company did not identify, inflated revenue at their division to achieve business-performance goals and thus earn higher bonuses, Sallie Mae stated in its filing.
The SEC opened an informal probe into Sallie Mae in January 2004 concerning certain 2003 year-end accounting entries. Through that probe and its own investigation, added Sallie Mae, the company learned that on three occasions in 2003, senior managers in one of its debt-collection units intentionally recorded revenue from loan payments made or scheduled to be made in the first few days of a month in the prior month.
Although the amounts in question represented less than $75,000 of its 2003 revenue and were therefore immaterial for its financial statements, Sallie Mae stated that it still took action because the practices violated company policy and generally accepted accounting principles. According to the company, the denied the relevant bonus compensation to the managers and reprimanded all involved, required the unit’s chief operating officer to repay the majority of a separate bonus, and strengthened the unit’s financial controls.
Sallie Mae also announced that the SEC staff will not recommend any enforcement action against the company or its managers over the accounting errors in question.
A Reuters report noted that when Sallie Mae disclosed the SEC probe in 2004, it stated that the debt-collection unit was one it had recently bought. Two years earlier, added the wire service, Sallie Mae acquired General Revenue Corp., the largest U.S. university-focused collection agency, and Pioneer Credit Recovery Inc., a loan-collection service for the Department of Education.
A Sallie Mae spokesman declined to identify the managers’ names or the timing of their dismissal and demotion, Reuters noted. “We’re pleased to put the matter behind us,” he said. An SEC spokesman also declined to comment to the wire service.
The largest U.S. provider of student loans — it manages more than $116 billion in loans for about 8 million borrowers, reported Reuters — Sallie Mae ended its ties to the federal government last year.