Sallie Mae Taps CFO as CEO

Private equity firm J.C. Flowers, which last month led a $25-billion acquisition of the student lender, reportedly pressured the chief executive to...
Stephen TaubMay 23, 2007

SLM Corp. announced that Thomas J. Fitzpatrick has resigned as vice chairman and chief executive officer. He will be succeeded as CEO by executive vice president and chief financial officer C.E. Andrews.

The student-loan company, better known as Sallie Mae, gave no reason for the abrupt change, but added that over the next few weeks Fitzpatrick will serve the company in an advisory role to facilitate an effective transition.

“C.E. is well versed with the company’s operations and financial performance and is the ideal candidate to lead Sallie Mae into the next phase of its history,” the company stated. “C.E.’s experience with the company’s operations and financial performance make him the right person to continue and enhance Sallie Mae’s leadership in the educational finance marketplace.”

The Wall Street Journal asserted that J.C. Flowers — the private-equity firm that last month led a $25 billion acquisition of Sallie Mae — pressured Fitzpatrick to quit to help reduce congressional opposition to the deal.

Though Sallie Mae is privately held, the Journal noted, Congress sets the subsidies received by Sallie Mae and other student lenders, and these lenders have recently faced growing criticism for their close ties to college loan officials.

“I support Tim Fitzpatrick’s decision to step down from his position at Sallie Mae,” said J. Christopher Flowers, the firm’s chairman, in a statement. “I look forward to working with C.E. Andrews over the course of the next several months as we work toward finalizing our acquisition of the company.”

Fitzpatrick is not exactly being thrown to the wolves.

In a regulatory filing, Sallie Mae disclosed that he will receive a pro-rated bonus payment of $945,000, a cash payment of $3.2 million, the acceleration of unvested stock options of $8.4 million, and the acceleration of unvested restricted stock units and performance stock of $11.9 million.

What’s more, if the payments are deemed under federal income tax rules to be contingent on a change in control, the company will provide Fitzpatrick with as much as $8.1 million in additional payments.

He also will receive an annual retirement benefit payment of about $271,400 and will be eligible to participate in the company’s medical plan and charitable contribution matching program for one year.