The Dissident Who Remade Sallie Mae
Tuesday, April 17, 2007
Sallie Mae, the student loan behemoth that an investor group plans to buy for $25 billion, is largely the brainchild of a single man who was once one of the company's biggest detractors: Albert L. Lord.
Lord, now chairman of the company formally known as SLM Corp., was told to leave the Reston firm in 1993 because he saw its future differently than the executives then in charge. Lord wanted the company to offer student loans and not just purchase them from banks and resell them to the capital markets.
That vision sparked a long battle that Lord ultimately won. By 1997, he had taken control of the company through successful proxy fights and was restructuring its operations. The result has a boon for shareholders and gigantic wealth for Sallie Mae executives, including Lord.
How much wealth? Lord, 61, has been building his own private 18-hole golf course on 244 acres in Anne Arundel County, an hour's drive from downtown Washington. He was well-heeled enough to spearhead a serious-but-unsuccessful bid to purchase the District's new professional baseball team, the Nationals.
People who know Lord say he is a determined, no-nonsense executive with a penchant for thorough analysis. He is also considered generous and charitable, devoting time and money to education-related causes such as charter schools.
But his money-making proclivities have repeatedly gotten him in trouble with Congress. Democratic lawmakers in particular have complained that Sallie Mae executives, including Lord, were profiting handsomely -- in some cases, too handsomely -- from programs meant to provide low-interest loans to low-income college students.
Shortly after Democrats won control of Congress last year, the Senate's leading Democratic lawmaker on education issues, Edward M. Kennedy (D-Mass.), lambasted Sallie Mae and the student loan industry for profiting excessively. "The student loan program works brilliantly for the banks, but not for the students," he said. "We ought to take the money-changers out of the temple in terms of student loans."
Lord was singled out in February when lawmakers asked authorities to look into his sale of $18.3 million worth of company stock days before President Bush proposed subsidy cuts that caused Sallie Mae's stock to drop. A Sallie Mae spokesman said Lord did not know the administration was going to propose those cuts and called the timing of the sale "completely coincidental."
The son of a retired Linotype operator for the Philadelphia Inquirer, Lord was not much of a student -- at first. "Average in sports, average in school," he told Investor's Business Daily.
But he came into his own during his third year at Pennsylvania State University, made the dean's list and decided to become an accountant. He went on after graduation to rise rapidly in the accounting firm now called KPMG.
His exemplary work attracted the attention of one of the firm's top clients, First Pennsylvania, which was Philadelphia's largest bank. Lord was lured away by the bank and rose quickly in its executive ranks as well.
But by 1980, the bank hit a rough patch, and Lord was forced to look for another job. Sallie Mae, which had started eight years earlier as a federally chartered entity designed to bring down the cost of student lending, took him on as controller.
Lord applied his by-then-finely-honed skills as a manager and demanded a much more businesslike approach from his underlings. He streamlined the company's internal operations so completely that by 1990 he was among the firm's top three candidates to succeed Sallie Mae's original chief executive, Edward Fox.
But he had also angered enough of his colleagues with his reorganizing that he was passed over for the top job and then became anathema to some in the executive suite as he persisted in pressing for the company to change, Investor's Business Daily reported.
The company soon ran into a series of problems. The Clinton administration, along with many Democrats on Capitol Hill, wanted to cut out the middle man in student lending and increase the amount of direct federal student loans. Sallie Mae also contemplated getting into businesses unrelated to student loans.
At that time, Lord began his crusade to keep Sallie Mae in the student loan business but not just in its initial business of creating a so-called secondary market for batches of student loans. He also wanted Sallie Mae to have a presence on college campuses and to originate and service student loans as well. He won that argument with shareholders, who handed him and his team the chance to develop the company as he saw fit.
His efforts have paid off for shareholders and for company executives like himself. In 2002, The Washington Post's executive compensation survey of local companies ranked Lord first and Sallie Mae's current chief executive, Thomas J. Fitzpatrick, second. In 2004, Lord ranked second in total compensation in the survey with $41.8 million, of which $33.2 million was the estimated value of stock options. In 2005, when he stepped down as chief executive, Lord's basic compensation was $392,000, not counting millions of dollars in stock and options.
Staff researcher Richard Drezen contributed to this report.