By David Cho and Thomas Heath
Washington Post Staff Writers
Friday, October 12, 2007; D01

Sallie Mae lost $344 million last quarter. Its plan to sell itself for $25 billion to private buyers is in shambles. The two sides are in a nasty court showdown.

Albert L. Lord is coming out swinging.

In an interview with The Washington Post and a boisterous conference call with investors yesterday, Sallie Mae's chairman showed his hard-nosed, scrappy side, alternately cracking jokes, talking openly about the firm's bad results and firing off salvos against his would-be buyers, led by J. Christopher Flowers, J.P. Morgan Chase and Bank of America.

Lord, the son of a newspaper linotype operator who turned himself into one of the highest-paid executives in the Washington area, portrayed himself as an odds-defying fighter in the battle over his company.

Flowers "is a Harvard guy. I'm a Penn State guy," he said in the interview, speaking publicly about the buyout for the first time. "That's a land-grant school. They're making it out to be the gunfight at the OK Corral, [but] it's not just the two of us. Chris has got a lot of muscle. It's Chris, Jamie Dimon [of J.P. Morgan Chase] and Ken Lewis [of Bank of America]."

He said that he would not compromise on his company's price. "They're not the only possible owners," Lord said. "And so if [the] deal doesn't go, so be it. We'll start over."

If he has to start over, Lord wants the other side to pay up. After the buyers cut their $60-a-share offer for Sallie Mae to $50 two weeks ago, Lord filed suit demanding they live up to the original terms or fork over a $900 million breakup fee.

The sale of Sallie Mae was supposed to usher in a new era for the Reston student lender, which had been under fire on Capitol Hill for receiving large government subsidies even as the company was enriching its executives. The buyout would have provided Lord options and stock awards of $224.9 million.

After the deal was announced in April, the company -- formally known as SLM Corp. -- went through a costly "cultural change" to prepare to go private, Lord said. "It's clear that the deal distractions are significant," he said. "They've cost us earnings momentum."

Sallie Mae yesterday reported a net loss of $344 million in its most recent quarter compared with a profit of $263 million in the comparable period last year.

Appearing before a roomful of investors at the Palace Hotel in Manhattan yesterday, Lord made it clear that he sees this fight as personal. In an emotional and sometimes puzzling speech, he made an apparent reference to Flowers's known pastimes of piano and chess. "I don't play chess," he said. ". . . I don't play the piano, but we have a piano, and if you have CDs in it, it plays itself."

He interrupted his breathless remarks, which were broadcast in a conference call, to make a direct appeal to the buyer who rejected him.

"Chris Flowers wants to own Sallie Mae. I firmly believe that," he said. "And Chris, I know you're here somewhere. I know you're here. You can still do it."

A source close to Flowers, who spoke on condition of anonymity, said Flowers was neither in the room nor listening. Flowers declined to respond to Lord's comments through a spokeswoman.

Lord said that he has received calls from other private-equity suitors. But he said the "merger mess" makes it complicated for the firm to conduct business, let alone talk to other buyers.

"It ties our hands on day-to-day activities," Lord said. "We've got some people who actually call lawyers before they go to the bathroom."

He also announced that he will take a more active day-to-day role in getting the company on the right track. But he joked that "this may be an unpaid position because we have to get Chris's permission to pay me."