GLANCY PRONGAY & MURRAY LLP Lionel Z. Glancy … · GLANCY PRONGAY & MURRAY LLP Lionel Z. Glancy...

CLASS ACTION COMPLAINT

GLANCY PRONGAY & MURRAY LLP

Lionel Z. Glancy

Robert V. Prongay

1925 Century Park East, Suite 2100

Los Angeles, CA 90067

Telephone: (310) 201-9150

Facsimile: (310) 201-9160

LAW OFFICES OF HOWARD G. SMITH

Howard G. Smith

3070 Bristol Pike, Suite 112

Bensalem, PA 19020

Telephone: (215) 638-4847

Facsimile: (215) 638-4867

Attorneys for Plaintiff

UNITED STATES DISTRICT COURT

SOUTHERN DISTRICT OF NEW YORK

PLAINTIFF, Individually and on Behalf of

All Others Similarly Situated,

Plaintiff,

v.

Navient Corporation, John F. Remondi, and

Somsak Chivavibul,

Defendants.

Case No. DRAFT

CLASS ACTION COMPLAINT FOR

VIOLATIONS OF THE FEDERAL

SECURITIES LAWS

JURY TRIAL DEMANDED


1

Plaintiff (“Plaintiff”), by and through his attorneys, alleges the following upon

information and belief, except as to those allegations concerning Plaintiff, which are alleged

upon personal knowledge. Plaintiff’s information and belief is based upon, among other things,

his counsel’s investigation, which includes without limitation: (a) review and analysis of

regulatory filings made by Navient Corporation (“Navient” or the “Company”), with the United

States (“U.S.”) Securities and Exchange Commission (“SEC”); (b) review and analysis of press

releases and media reports issued by and disseminated by Navient; and (c) review of other

publicly available information concerning Navient.

NATURE OF THE ACTION AND OVERVIEW

1. This is a class action on behalf of purchasers of Navient securities between July

16, 2014 and July 13, 2015, inclusive (the “Class Period”), seeking to pursue remedies under the

Securities Exchange Act of 1934 (the “Exchange Act”).

2. Navient provides financial products and services in the United States. The

company operates in four segments: federal family education loan program (“FFELP”) loans

Loans, Private Education Loans, Business Services, and Other. It provides federal family

education loan program loans and servicing for FFELP loan portfolio; and servicing and asset

recovery services for loans on behalf of guarantors of FFELP loans, guaranty agencies, higher

education institutions, the United States Department of Education, and other federal clients, as

well as states, courts, and municipalities.

3. On July 13, 2015 the Company announced a substantial cut to its prior financial

guidance for the remainder of its 2015 annual financial performance. According to the

Company, Navient removed from its 2015 financial guidance additional private loan acquisitions

and reduced its forecast for net interest income as a result of increased cost of funds.


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Additionally, Jack Remondi, Navient CEO further stated, “the changes to our guidance reflect

marketplace conditions for private loan portfolio purchases and cost of funds, as well as a

conservative assessment of default trends for a small and declining segment of our private

education loan portfolio.”

4. On this news, shares of Navient declined $1.94 per share, 10.57%, to close on

July 14, 2015, at $16.42 per share, on unusually heavy volume.

5. Throughout the Class Period, Defendants made false and/or misleading

statements, as well as failed to disclose material adverse facts about the Company’s business,

operations, and prospects. Specifically, Defendants made false and/or misleading statements

and/or failed to disclose: (1) that the Company and its subsidiaries were misleading distressed

borrowers regarding rates; (2) that the Company and its subsidiaries were engaged in improper

debt-collection practices; (3) that, as a result, the U.S. Department of Education could terminate

its relationship with the Company and its subsidiaries; (4) that there was a trend of borrowers re-

entering repayment after returning to school during the recession; (5) that, as a result the

Company was experiencing a decrease in the quality of the Company’s private education loan

portfolio; and (6) that, as a result of the foregoing, Defendants’ statements about the Company’s

financial results, business, operations, and prospects were false and misleading and/or lacked a

reasonable basis.

6. As a result of Defendants’ wrongful acts and omissions, and the precipitous

decline in the market value of the Company’s securities, Plaintiff and other Class members have

suffered significant losses and damages.

JURISDICTION AND VENUE


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7. The claims asserted herein arise under Sections 10(b) and 20(a) of the Exchange

Act (15 U.S.C. §§78j(b) and 78t(a)) and Rule 10b-5 promulgated thereunder by the SEC (17

C.F.R. § 240.10b-5).

8. This Court has jurisdiction over the subject matter of this action pursuant to 28

U.S.C. §1331 and Section 27 of the Exchange Act (15 U.S.C. §78aa).

9. Venue is proper in this Judicial District pursuant to 28 U.S.C. §1391(b) and

Section 27 of the Exchange Act (15 U.S.C. §78aa(c)). Substantial acts in furtherance of the

alleged fraud or the effects of the fraud have occurred in this Judicial District. Many of the acts

charged herein, including the preparation and dissemination of materially false and/or misleading

information, occurred in substantial part in this Judicial District.

10. In connection with the acts, transactions, and conduct alleged herein, Defendants

directly and indirectly used the means and instrumentalities of interstate commerce, including the

United States mail, interstate telephone communications, and the facilities of a national securities

exchange.

PARTIES

11. Plaintiff, as set forth in the accompanying certification, incorporated by reference

herein, purchased Navient common stock during the Class Period, and suffered damages as a

result of the federal securities law violations and false and/or misleading statements and/or

material omissions alleged herein.

12. Defendant Navient is a Delaware corporation with its principal executive offices

located at 123 Justison Street, Wilmington, Delaware 19801.

13. Defendant John F. Remondi (“Remondi”) was, at all relevant times, Chief

Executive Officer (“CEO”) of Navient.


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14. Defendant Somsak Chivavibul (“Chivavibul”) was, at all relevant times,

Executive Vice President and Chief Financial Officer (“CFO”) of Navient.

15. Defendants Remondi and Chivavibul are collectively referred to hereinafter as the

“Individual Defendants.” The Individual Defendants, because of their positions with the

Company, possessed the power and authority to control the contents of Navient’s reports to the

SEC, press releases and presentations to securities analysts, money and portfolio managers and

institutional investors, i.e., the market. Each defendant was provided with copies of the

Company’s reports and press releases alleged herein to be misleading prior to, or shortly after,

their issuance and had the ability and opportunity to prevent their issuance or cause them to be

corrected. Because of their positions and access to material non-public information available to

them, each of these defendants knew that the adverse facts specified herein had not been

disclosed to, and were being concealed from, the public, and that the positive representations

which were being made were then materially false and/or misleading. The Individual

Defendants are liable for the false statements pleaded herein, as those statements were each

“group-published” information, the result of the collective actions of the Individual Defendants.

SUBSTANTIVE ALLEGATIONS

Background

16. Navient provides financial products and services in the United States. The

company operates in four segments: federal family education loan program (“FFELP”) loans

Loans, Private Education Loans, Business Services, and Other. It provides federal family

education loan program loans and servicing for FFELP loan portfolio; and servicing and asset

recovery services for loans on behalf of guarantors of FFELP loans, guaranty agencies, higher


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education institutions, the United States Department of Education, and other federal clients, as

well as states, courts, and municipalities.

Materially False and Misleading

Statements Issued During the Class Period

17. The Class Period begins on July 16, 2014. On this day, Navient issued a press

release entitled, “Navient Reports Second-Quarter 2014 Financial Results.” Therein, the

Company, in relevant part, stated:

Navient (Nasdaq:NAVI) today released second-quarter 2014 financial results, its

first since the successful launch as an independent publicly traded company

earlier this quarter. The company's results show a continued improvement in

student loan portfolio credit quality with 90-plus day delinquencies on its federal

and private loan portfolio declining to the lowest levels since 2008. During the

quarter, the company received an extension of its loan servicing contract from the

U.S. Department of Education.

"Navient's first earnings release demonstrates that strong financial performance

and industry-leading customer success go hand in hand," said Jack Remondi,

president and CEO, Navient. "Our approach to loan servicing continues to help

more customers successfully manage their student loan payments and avoid the

consequences of default, as reflected in the improving credit quality of the loans

we service. As the leader in default prevention, we assisted 667,000 borrowers to

pay off their student loans in full over the past year. Looking ahead, Navient is

well positioned to grow as more institutions turn to us for loan servicing and asset

recovery solutions that focus on customer success and compliance."

For the second-quarter 2014, GAAP net income was $307 million ($0.71 diluted

earnings per share), compared with $543 million ($1.20 diluted earnings per

share) for the year-ago quarter.

Core earnings for the quarter were $241 million ($0.56 diluted earnings per

share), compared with $447 million ($1.00 diluted earnings per share) for the

year-ago quarter. When compared to GAAP results, core earnings exclude the

impact of: (1) the financial results of the consumer banking business for historical

periods prior to the April 30, 2014 spin-off as well as restructuring and

reorganization expenses incurred in connection with the spin-off; (2) unrealized,

mark-to-market gains/losses on derivatives; and (3) goodwill and acquired

intangible asset amortization and impairment.

Last year, management undertook a series of actions to improve shareholder

value, including the sale of residual interests in several FFELP securitization


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trusts, the divestiture of two subsidiaries, debt repurchases, and the strategic

separation of Navient from SLM Corporation, which was completed on April 30,

2014. Adjusting for these transactions, second quarter 2014 core earnings

increased $0.04 per share compared to the year-ago quarter, primarily due to

increased servicing and asset recovery revenue and lower provisions for loan

losses. The table below summarizes the impact of these items on core earnings:

***

Navient reports core earnings because management makes its financial decisions

based on such measures. The changes in GAAP net income are impacted by the

same core earnings items discussed above, as well as changes in net income

attributable to (1) the financial results attributable to the operations of the

consumer banking business prior to the spin-off on April 30, 2014 and related

restructuring and reorganization expense incurred in connection with the spin-off,

(2) unrealized, mark-to-market gains/losses on derivatives and (3) goodwill and

acquired intangible asset amortization and impairment. These items are

recognized in GAAP but have not been included in core earnings results. Second-

quarter 2014 GAAP results included gains of $150 million from derivative

accounting treatment that are excluded from core earnings results, compared with

gains of $143 million in the year-ago period. See "Differences between Core

Earnings and GAAP" for a complete reconciliation between GAAP net income

and core earnings.

On April 30, 2014, the spin-off of Navient from SLM Corporation was completed

and Navient is now an independent, publicly-traded company. Due to the relative

significance of Navient to SLM Corporation prior to the spin-off, for financial

reporting purposes, Navient is treated as the "accounting spinnor" and therefore is

the "accounting successor" to SLM Corporation as constituted prior to the spin-

off, notwithstanding the legal form of the spin-off. Since Navient is the

accounting successor to SLM Corporation, the historical financial statements of

SLM Corporation prior to the distribution on April 30, 2014 are the historical

financial statements of Navient. As a result, the GAAP financial results reported

in this earnings release include the historical financial results of SLM Corporation

prior to the spin-off on April 30, 2014 (i.e., such consolidated results include both

the loan management, servicing and asset recovery business (Navient) and the

consumer banking business (SLM Corporation)) and reflect the deemed

distribution of the consumer banking business to SLM Corporation's stockholders

on April 30, 2014. See "Presentation of Information" and "Spin-Off of Navient"

for further information.

Federally Guaranteed Student Loans (FFELP)

In the FFELP Loans segment, Navient acquires and finances FFELP loans.


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Core earnings for the segment were $72 million in second-quarter 2014,

compared with the year-ago quarter's $238 million. The decrease is primarily due

to the $257 million gain from the sale of residual interests in FFELP loan

securitization trusts completed in the year-ago quarter, as well as a reduction in

net interest income due to the decrease in FFELP loans outstanding.

The company acquired $1.3 billion of FFELP loans in the first six months of

2014. At June 30, 2014, Navient held $100 billion of FFELP loans compared with

$107 billion at June 30, 2013.

Private Education Loans

In the private education loans segment, Navient acquires, finances and services

private education loans.

Quarterly core earnings were $86 million compared with $61 million in the year-

ago quarter. The increase is primarily the result of a $44 million decrease in the

provision for private education loan losses.

Core earnings second-quarter 2014 private education loan portfolio results vs.

second-quarter 2013 are as follows:

● Delinquencies of 90 days or more of 3.2 percent of loans in repayment,

down from 4.0 percent.

● Total delinquencies of 7.1 percent of loans in repayment, down from 8.4

percent.

● Annualized charge-off rate of 2.5 percent of average loans in repayment,


● Student loan spread of 4.10 percent, unchanged from the year-ago quarter.

● Provision for private education loan losses of $145 million, down from

$189 million.

● The portfolio balance, net of loan loss allowance, was $30.3 billion, down

from $31.8 billion.

Business Services

Navient's business services segment includes fees primarily from servicing and

asset recovery activities.

Business services core earnings were $130 million in second-quarter 2014,

compared with $168 million in the year-ago quarter. The decrease is primarily

due to the $38 million after-tax gain recognized on the sale of a subsidiary in the

year-ago quarter.

On June 13, 2014, the U.S. Department of Education extended its servicing

contract with Navient to service Direct Student Loan Program federal loans for


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five more years. Navient services approximately 5.8 million accounts under this

contract.

Operating Expenses

Second-quarter 2014 core earnings operating expenses were $195 million,

compared with $185 million in the year-ago quarter. The increase was primarily

due to increased third-party servicing and asset recovery activities that grew

revenue by $38 million.

Funding and Liquidity

During the second-quarter 2014, Navient issued $747 million in FFELP asset-

backed securities (ABS).

In June 2014, Navient closed a $1.0 billion private education loan asset-backed

commercial paper facility. The facility, which matures in June 2015, will be

available for private education loan refinancing and acquisitions.

18. On August 1, 2014, Navient filed its Quarterly Report with the SEC on Form 10-

Q for the 2014 fiscal second quarter. The Company’s Form 10-Q was signed by Defendant

Chivavibul and reaffirmed the Company’s statements previously announced on July 16, 2014.

The Form 10-Q also contained required Sarbanes-Oxley certifications, signed by Defendants

Remondi and Chivavibul, who each certified:

1. I have reviewed this Quarterly Report on Form 10-Q of Navient

Corporation;

2. Based on my knowledge, this report does not contain any untrue

statement of a material fact or omit to state a material fact

necessary to make the statements made, in light of the

circumstances under which such statements were made, not

misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other

financial information included in this report, fairly present in all

material respects the financial condition, results of operations and

cash flows of the registrant as of, and for, the periods presented in

this report;


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4. The registrant’s other certifying officer and I are responsible for

establishing and maintaining disclosure controls and procedures

(as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and

internal control over financial reporting (as defined in Exchange

Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a. Designed such disclosure controls and procedures, or

caused such disclosure controls and procedures to be

designed under our supervision, to ensure that material

information relating to the registrant, including its

consolidated subsidiaries, is made known to us by others

within those entities, particularly during the period in

which this report is being prepared;

b. Designed such internal control over financial reporting, or

caused such internal control over financial reporting to be

designed under our supervision, to provide reasonable

assurance regarding the reliability of financial reporting

and the preparation of financial statements for external

purposes in accordance with generally accepted accounting

principles;

c. Evaluated the effectiveness of the registrant’s disclosure

controls and procedures and presented in this report our

conclusions about the effectiveness of the disclosure

controls and procedures, as of the end of the period covered

by this report based on such evaluation; and

d. Disclosed in this report any change in the registrant’s

internal control over financial reporting that occurred

during the registrant’s most recent fiscal quarter (the

registrant’s fourth fiscal quarter in the case of an annual

report) that has materially affected, or is reasonably likely

to materially affect, the registrant’s internal control over

financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based

on our most recent evaluation of internal control over financial

reporting, to the registrant’s auditors and the audit committee of

the registrant’s board of directors (or persons performing the

equivalent functions):

a. All significant deficiencies and material weaknesses in the

design or operation of internal control over financial

reporting which are reasonably likely to adversely affect


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the registrant’s ability to record, process, summarize and

report financial information; and

b. Any fraud, whether or not material, that involves

management or other employees who have a significant

role in the registrant’s internal control over financial

reporting.

19. On October 15, 2014, Navient issued a press release entitled, “Navient Reports

Third-Quarter 2014 Financial Results.” Therein, the Company, in relevant part, stated:

NEWARK, Del., Oct. 15, 2014 (GLOBE NEWSWIRE) -- Navient

(Nasdaq:NAVI) today released third-quarter 2014 financial results showing

continued improvements in delinquencies and defaults since a year ago. During

the quarter, the company also acquired $1.4 billion in student loans, bringing its

commitment to success to new customers.

"This quarter again demonstrated improved credit performance," said Jack

Remondi, president and CEO, Navient. "Private credit charge-offs set a new

record low since 2008, and our education campaign assisted more federal and

private loan customers to enroll in the repayment option that best meets their

needs. Earlier this week we also successfully completed the transition of our

servicing operations and rolled out the Navient brand to our 12 million customers,

including launch of new repayment and financial literacy tools. The transition

comes at an exciting time for Navient, as we are proud to share that our proactive

outreach, data-driven programs, and emphasis on payment plans has helped drive

the decline in the national federal student loan cohort default rate. In fact,

customers whose loans we service have a default rate 40 percent lower than the

national average. On behalf of 6,200 Navient team members, I'm proud of our

leadership in helping more people achieve financial success."

For the third-quarter 2014, GAAP net income was $359 million ($0.85 diluted





year-ago quarter. The decrease in core earnings was the result of a $39 million

reduction in asset recovery revenue, primarily related to a legislative reduction in

certain fees earned effective July 1, 2014, as well as a $48 million reduction in net

interest income, partially offset by a $47 million decrease in provisions for loan

losses.




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consumer banking business prior to the spin-off on April 30, 2014, and related




recognized in GAAP but have not been included in core earnings results. Third-



losses of $19 million in the year-ago period. See "Differences between Core


and core earnings.


In the FFELP Loans segment, Navient acquires and finances FFELP loans.

Core earnings for the segment were $79 million in third-quarter 2014, compared

with the year-ago quarter's $91 million. The decrease is primarily due to a

reduction in net interest income due to the decrease in FFELP loans outstanding.

The company acquired $521 million in FFELP loans in third-quarter 2014 for a

total of $1.8 billion of FFELP loans acquired year to date. At Sept. 30, 2014,

Navient held $97.7 billion of FFELP loans.


In the private education loans segment, Navient acquires, finances and services


Core earnings for the segment were $98 million in third-quarter 2014, compared

with the year-ago quarter's $75 million, which is primarily the result of a $46

million decrease in the provision for private education loan losses.

Core earnings third-quarter 2014 private education loan portfolio results vs. third-

quarter 2013 are as follows:




percent.



● Student loan spread of 4.06 percent, down from 4.12 percent.


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$176 million.

The company acquired $848 million in private education loans in third-quarter

2014 for a total of $1.6 billion of private education loans acquired year to date. At

Sept. 30, 2014, Navient held $30.5 billion of private education loans.

Business Services



Business services core earnings were $85 million in third-quarter 2014, compared

with $127 million in the year-ago quarter. The decrease in core earnings was the

result of lower asset recovery revenue, primarily related to a legislative reduction

in certain fees earned, as well as a lower balance of FFELP loans serviced.

The company services student loans for 12 million customers, including 6.1

million customers on behalf of the U.S. Department of Education (ED). Navient

consistently out-performs other servicers in assisting customers in the repayment

of their education loans. For example, Navient placed first in default prevention,

according to ED's most recent ranking of major federal student loan servicers.

Operating Expenses

Third-quarter 2014 core earnings operating expenses were $195 million,

compared with $190 million in the year-ago quarter.


During the third-quarter 2014, Navient issued $1.3 billion in FFELP asset-backed

securities (ABS) and $463 million in private education loan ABS.

20. On October 30, 2014, Navient filed an Quarterly Report with the SEC on Form

10-Q for its 2014 fiscal third quarter. The Company’s Form 10-Q was signed by Defendant

Chivavibul and reaffirmed the Company’s statements previously announced on October 15,

2014. The Form 10-Q also contained required Sarbanes-Oxley certifications, signed by

Defendants Remondi and Chivavibul, substantially similar to the certifications contained in ¶__,

supra.


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21. On January 21, 2015, Navient issued a press release entitled, “Navient Reports

Fourth-Quarter and Full-Year 2014 Financial Results.” Therein, the Company, in relevant part,

stated:

NEWARK, Del., Jan. 21, 2015 (GLOBE NEWSWIRE) -- Navient

(Nasdaq:NAVI) today released fourth-quarter 2014 and full-year 2014 financial

results that include $13 billion of student loan purchases during 2014 and lower

year-over-year charge-off rates on private education loans.

"2014 marked the successful launch of Navient as an industry leader in loan

management, servicing and asset recovery," said Jack Remondi, president and

CEO, Navient. "We enable millions of customers to successfully manage their

education loan repayment, helping them capture the value of their higher

education. Our customized outreach assisted a record 762,000 student loan

customers in 2014 to enroll in income-driven or other alternative payment

programs. We continued to meet our commitment to create shareholder value as

we announced $13 billion in portfolio acquisitions and realized year-over-year

improvements in credit quality. I'm proud of our 6,200 dedicated employees, who

each and every day deliver results for our customers, clients and shareholders.

Looking ahead to 2015 - our first full year as Navient - we are ready to continue

our track record of success."

For the fourth-quarter 2014, GAAP net income was $263 million ($0.64 diluted


share) for the year-ago quarter. For 2014, GAAP net income was $1.1 billion

($2.69 diluted earnings per share), compared with $1.4 billion ($3.12 diluted

earnings per share) for 2013.



year-ago quarter. Excluding expenses associated with regulatory matters, fourth-

quarter 2014 and 2013 diluted core earnings per share were $0.54 and $0.70,

respectively.

Core earnings for the year were $818 million ($1.93 diluted earnings per share),

compared with $1.2 billion ($2.77 diluted earnings per share) for 2013. Excluding

expenses associated with regulatory matters, 2014 and 2013 diluted core earnings

per share were $2.10 and $2.85, respectively.

The results for 2013 include gains from the sale of residual interests in FFELP

securitization trusts, the divestiture of two subsidiaries and debt

repurchases. These transactions increased core earnings by $0.14 and $0.75 per

diluted share for the fourth-quarter and full-year 2013, respectively. Excluding


14

these transactions and the expenses associated with regulatory matters, fourth-

quarter and full-year 2013 diluted core earnings per share were $0.56 and $2.10,

respectively. The table below summarizes the impact of the 2013 transactions

resulting in gains on core earnings:

***





consumer banking business prior to the spin-off on April 30, 2014, and related




recognized in GAAP but have not been included in core earnings results. Fourth-



gains of $8 million in the year-ago period. See "Differences between Core


and core earnings.


In its FFELP loans segment, Navient acquires and finances FFELP loans.

Core earnings for the segment were $82 million in fourth-quarter 2014, compared

with the year-ago quarter's $81 million.

Full-year 2014 core earnings for this segment were $296 million compared with

$513 million in 2013. This decrease was primarily due to $312 million of gains

from the sale of residual interests in FFELP securitization trusts which occurred in

2013.

The company acquired $9.5 billion of FFELP loans in the fourth-quarter 2014 for

a total of $11.3 billion of FFELP loans acquired during the full-year 2014. At

Dec. 31, 2014, Navient held $104.5 billion of FFELP loans, compared with

$103.2 billion of FFELP loans held at Dec. 31, 2013.


In its private education loans segment, Navient acquires, finances and services



15

Core earnings for the segment were $92 million in fourth-quarter 2014, compared

with the year-ago quarter's $86 million. This increase is primarily the result of a

$24 million decrease in the provision for private education loan losses.

Core earnings fourth-quarter 2014 private education loan portfolio results vs.

fourth-quarter 2013 are as follows:




percent.



● Student loan spread of 3.99 percent, down from 4.04 percent.


$152 million.

Full-year core earnings for this segment were $351 million, compared with

$269 million in 2013. This increase was primarily the result of a $183 million

decrease in the provision for loan losses.

The company acquired $11 million of private education loans in the fourth-

quarter 2014 for a total of $1.6 billion of private education loans acquired during

the full-year 2014. At Dec. 31, 2014, Navient held $29.8 billion of private

education loans, compared with $31 billion of private education loans held at Dec.

31, 2013.

Business Services



Business services core earnings were $98 million in fourth-quarter 2014,

compared with $187 million in the year-ago quarter. The decrease in core

earnings was primarily the result of the $62 million after-tax gain recognized with

the sale of a subsidiary in the year-ago quarter, as well as lower asset recovery

revenue, primarily related to a legislative reduction in certain fees earned, and a

lower balance of FFELP loans serviced.

Full-year core earnings for this segment were $428 million compared with $609

million in 2013. This decrease was primarily the result of $109 million of after-


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tax gains from the sale of two subsidiaries in 2013, lower asset recovery revenue

and a lower balance of FFELP loans serviced.

The company services student loans for over 12 million customers, including

6.2 million customers on behalf of the U.S. Department of Education (ED).

Operating Expenses

The company recognized core earnings operating expenses related to regulatory

matters of $9 million and $54 million for fourth-quarter 2014 and 2013,

respectively, and $120 million and $54 million for full-year 2014 and 2013,

respectively. Excluding these regulatory matters, fourth-quarter 2014 core

earnings operating expenses were $206 million, compared with $179 million in

the year-ago quarter, and full-year 2014 operating expenses were $804 million,

compared with $734 million in 2013. The respective increases over the prior-year

periods are primarily due to incremental costs post-spin-off resulting from

operating as a new separate company, as well as increased third-party servicing

and asset recovery activities.


During the fourth-quarter 2014, Navient issued $1 billion in FFELP asset-backed

securities (ABS), $664 million in private education loan ABS and $1 billion in

unsecured debt. In November 2014, Navient closed a $10 billion FFELP loan

asset-backed commercial paper facility. The facility, which matures in November

2017, will finance the acquisition of FFELP loans, as well as provide additional

liquidity to the company.

During 2014, Navient issued $5 billion in FFELP ABS, $1.8 billion in private

education loan ABS and $1.9 billion in unsecured debt.

22. On February 27, 2015, Navient filed its Annual Report with the SEC on Form 10-

K for the 2014 fiscal year. The Company’s Form 10-K was signed by Defendants Remondi and

Chivavibul, and reaffirmed the Company’s statements previously announced on January 21,

2015. The Form 10-K also contained required Sarbanes-Oxley certifications, signed by

Defendants Remondi and Chivavibul, substantially similar to the certifications contained in ¶__,

supra.

23. The statements contained in ¶¶__-__ were materially false and/or misleading

when made because defendants failed to disclose or indicate the following: (1) that the Company


17

and its subsidiaries were misleading distressed borrowers regarding rates; (2) that the Company

and its subsidiaries were engaged in improper debt-collection practices; (3) that, as a result, the

U.S. Department of Education could terminate its relationship with the Company and its

subsidiaries; (4) that there was a trend of borrowers re-entering repayment after returning to

school during the recession; (5) that, as a result the Company was experiencing a decrease in the

quality of the Company’s private education loan portfolio; and (6) that, as a result of the

foregoing, Defendants’ statements about the Company’s financial results, business, operations,

and prospects were false and misleading and/or lacked a reasonable basis.

24. On February 27, 2015, the Huffington Post published an article entitled,

“Education Department Terminates Contracts With Debt Collectors Accused Of Wrongdoing.”

Therein, the article, in relevant part, stated:

The U.S. Department of Education, under fire for its lackluster oversight of

student loan contractors, said Friday it will terminate its relationship with five

debt collectors after accusing them of misleading distressed borrowers at

"unacceptably high rates."

The surprise announcement follows years of complaints about allegedly illegal

debtcollection practices by Education Department contractors, the department's

seeming lack of interest in ensuring that borrowers are treated fairly, and the

relative opacity of the entire operation.

The most prominent of the debt collectors, Pioneer Credit Recovery, is owned by

Navient Corp., the student loan giant formerly known as Sallie Mae. Pioneer,

under investigation by the Consumer Financial Protection Bureau, generated $127

million from the contract over the past two years, according to its annual report to

investors on Friday. It has worked for the Education Department since 1997.

With the number of borrowers in default now more than 7 million as federal

student debt surpasses $1.1 trillion, the contracts have become among the most

lucrative Education Department offerings, generating hundreds of millions of

dollars a year for debt collectors tasked with recouping cash from borrowers who

have defaulted on their federal student loans. In November 2013, Dwight Vigna,

the Education Department official who oversees the program, told the financial

industry that debt collectors stood to reap nearly $5.8 billion in commissions over

the fouryear period ending in 2016.


18

But the department's debt collection program has also become a headache for

Education Secretary Arne Duncan, as plaintiffs' lawyers, state and federal

regulators and borrower advocates have demanded changes after discovering

evidence that borrowers in distress were given false information or otherwise

mistreated when they tried to make good on their debts.

The Education Department said Friday that its decision was prompted by what it

described as "high incidences of materially inaccurate representations" to

borrowers that it discovered in reviews spanning several months. The five debt

collectors, according to the department, misled borrowers about their options to

get out of default, the resulting benefits to their credit reports and collection fees.

Misleading borrowers about their defaulted debts may violate federal fair debt

collection laws.

"Every company that works for the department must keep consumers’ best

interests at the heart of their business practices by giving borrowers clear and

accurate guidance," said Education Undersecretary Ted Mitchell. "It is our

responsibility and our commitment to uphold the highest standards of service

for America’s student borrowers and consumers."

The admission that some of its contractors likely violated borrowers' rights under

fair debt collection laws will likely lead to increased scrutiny of the department's

debt collectors, oversight of them, and how borrowers may have been harmed.

The Education Department didn't respond to queries beyond an emailed news

release.

The Treasury Department is among federal agencies that have been concerned by

the Education Department's debt collection program. The Huffington Post

reported in November that the Treasury would soon take some student borrowers'

accounts away from the Education Department's contracted debt collectors and

give them to federal workers in a pilot program that may cut out student loan

middlemen.

The other companies to lose their contracts are: Coast Professional, Enterprise

Recovery Systems, National Recoveries, and West Asset Management. The

Federal Trade Commission in 2011 accused West Asset of violating the Fair Debt

Collection Practices Act. The two sides settled for $2.8 million, which at the time

was the FTC's largest civil penalty in a debt collection case.

“Student loan debt collectors that mislead and harm consumers must be held

accountable," said Rohit Chopra, the consumer bureau's top official overseeing

student loans. "Today, the Education Department took an important step by

winding down contracts with five debt collectors for not playing by the rules. The

CFPB will continue to work with our federal and state partners to root out bad


19

actors and ensure that debt collectors are treating student borrowers fairly.

Consumers need clarity, not confusion."

The Education Department said it would transfer accounts from affected

companies, including Pioneer, to its other debt collectors, and would officially

terminate its relationship with the companies once all accounts have been moved

over. The move is the department's most forceful response in years to alleged

misdeeds by its student loan contractors.

The National Consumer Law Center, which advocates on behalf of borrowers, has

previously criticized the department's debt collectors for routinely violating

borrowers' consumer rights under federal and state laws. Deanne Loonin has been

among the borrower advocates most critical of the department's relationship with

allegedlysloppy debt collectors, and has urged the department for years to

terminate its contracts as a result.

Federal watchdogs at the Government Accountability Office and the Education

Department's inspector general have repeatedly criticized the department's

oversight of contractors. In a report last year, the GAO found that the Education

Department documented apparent violations of federal debt collection laws by its

contractors, yet did nothing about it. The Education Department's inspector

general has faulted the department for ignoring both borrowers' complaints and its

own debt collectors' potential violations of federal consumer laws.

In its annual report to investors on Friday, Navient indicated it disagreed with the

Education Department's decision. "We are engaged with [the department] to learn

more about their decision and address any questions or concerns they may have,"

the company said.

The Education Department's decision is likely to come as a shock to the debt

collection industry and the financiers who bankroll the companies. Pioneer,

Enterprise and Coast have been among the Education Department's

highestranking debt collectors, according to the department.

"After years of hearing complaints from borrowers of abusive treatment, we are

relieved to hear that the Education Department has taken this first step to protect

borrowers and hold the companies they contract accountable," said Chris Hicks,

an organizer who leads the DebtFree Future campaign for Jobs With Justice, a

Washingtonbased nonprofit.


March 2, 2015, at $19.51 per share, on unusually heavy volume.


20

26. On April 21, 2015, Navient issued a press release entitled, “Navient Reports First-

Quarter 2015 Financial Results.” Therein, the Company, in relevant part, stated:

WILMINGTON, Del., April 21, 2015 (GLOBE NEWSWIRE) -- Navient

(Nasdaq:NAVI) today released first-quarter 2015 financial results that include

$830 million of student loan purchases, $300 million of common share

repurchases, and the acquisition of a new asset recovery and business process

outsourcing firm focused on state and local public sector markets.

"We're pleased to begin our first full year as Navient by helping more recent

college graduates successfully transition into repayment," said Jack Remondi,

president and CEO, Navient. "Private credit quality also continued to improve,

leading to a lower loan loss provision. During the quarter, we continued to make

investments to enhance our service to clients and customers, and we continue to

deliver on our growth plan by welcoming Gila to our family of top-performing

asset recovery firms, adding 600 clients and accelerating our growth in business

process outsourcing."

For the first-quarter 2015, GAAP net income was $292 million ($0.72 diluted





year-ago quarter. Excluding expenses associated with regulatory matters, first-

quarter 2015 and 2014 diluted core earnings per share were $0.48 and $0.49,

respectively.



same core earnings items discussed below, as well as changes in net income


consumer banking business prior to the April 30, 2014 spin-off of Navient from

SLM Corporation, and related restructuring and reorganization expense incurred

in connection with the spin-off, (2) unrealized, mark-to-market gains/losses on

derivatives and (3) goodwill and acquired intangible asset amortization and

impairment. These items are recognized in GAAP but have not been included in

core earnings results. First-quarter 2015 GAAP results included gains of $166

million from derivative accounting treatment that are excluded from core earnings

results, compared with gains of $99 million in the year-ago period. See

"Differences between Core Earnings and GAAP" for a complete reconciliation

between GAAP net income and core earnings.



21

In its FFELP loans segment, Navient acquires and finances FFELP loans.

Core earnings for the segment were $85 million in first-quarter 2015, compared

with the year-ago quarter's $64 million. This increase was primarily the result of

$7 million more net interest income due to an increase in the balance of, and net

interest margin on, the portfolio, a $7 million increase in servicing fees and a $5

million decline in the provision for FFELP loan losses.

The company acquired $824 million of FFELP loans in the first-quarter 2015. At

March 31, 2015, Navient held $102.4 billion of FFELP loans, compared with

$101.2 billion of FFELP loans held at March 31, 2014.


In its private education loans segment, Navient acquires, finances and services


Core earnings for the segment were $77 million in first-quarter 2015, compared

with the year-ago quarter's $74 million. This increase is primarily the result of a

$16 million decrease in the provision for private education loan losses, a $6

million increase in servicing fees and a $9 million reduction in expenses. This was

partially offset by a $26 million decrease in net interest income due to a decline in

the net interest margin and the balance of the portfolio.

Core earnings first-quarter 2015 private education loan portfolio results vs. first-

quarter 2014 are as follows:




percent.



● Net interest margin of 3.74 percent, down from 3.91 percent.


$136 million.

At March 31, 2015, Navient held $29.0 billion of private education loans,

compared with $30.9 billion of private education loans held at March 31, 2014.

Business Services


22



Business services core earnings were $86 million in first-quarter 2015, compared

with $116 million in the year-ago quarter. The decrease in core earnings was

primarily the result of lower asset recovery revenue, primarily related to a

legislative reduction in certain fees earned and a lower balance of FFELP loans

serviced.

The company services student loans for more than 12 million customers,

including 6.2 million customers on behalf of the U.S. Department of Education

(ED).

In February 2015, Navient completed the acquisition of Gila LLC, an asset

recovery and business process outsourcing firm serving more than 600 clients in

39 states. The firm provides receivables management services and account

processing solutions for state governments, court systems and municipalities.

Operating Expenses

First-quarter 2015 core earnings operating expenses were $230 million, compared

with $207 million in the year-ago quarter (excluding $111 million of core

earnings operating expenses related to regulatory matters recognized in first-

quarter 2014). This $23 million increase over the year-ago quarter was primarily

due to incremental costs resulting from operating as a new separate company,

costs related to the Gila LLC acquisition this quarter, as well as incremental third-

party servicing expenses related to an $8.5 billion loan acquisition in fourth-

quarter 2014.


During the first-quarter 2015, Navient issued $1.0 billion in FFELP asset-backed

securities (ABS), $689 million in private education loan ABS and $500 million in

unsecured debt.

During the first-quarter 2015, Navient repurchased $530 million in senior

unsecured debt. At March 31, 2015, senior unsecured debt outstanding was $17.3

billion, compared with $17.9 billion outstanding at March 31, 2014.

27. On April 30, 2015, Navient filed an Quarterly Report with the SEC on Form 10-Q

for its 2015 fiscal first quarter. The Company’s Form 10-Q was signed by Defendant Chivavibul

and reaffirmed the Company’s statements previously announced on April 21, 2015. The Form


23

10-Q also contained required Sarbanes-Oxley certifications, signed by Defendants Remondi and

Chivavibul, substantially similar to the certifications contained in ¶__, supra.

28. The statements contained in ¶¶__-__ were materially false and/or misleading

when made because defendants failed to disclose or indicate the following: (1) that there was a

trend of borrowers re-entering repayment after returning to school during the recession; (2) that,

as a result the Company was experiencing a decrease in the quality of the Company’s private

education loan portfolio; and (3) that, as a result of the foregoing, Defendants’ statements about

the Company’s financial results, business, operations, and prospects were false and misleading

and/or lacked a reasonable basis.

Disclosures at the End of the Class Period

29. On July 13, 2015, the Company issued a press release entitled, “Navient previews

second-quarter 2015 earnings, updates 2015 guidance. Therein, the article, in relevant part,

stated:

WILMINGTON, Del., July 13, 2015 (GLOBE NEWSWIRE) -- Navient

(Nasdaq:NAVI) today announced that it expects second-quarter 2015 core

earnings of approximately $0.40 diluted earnings per share, or GAAP earnings of

approximately $0.47 diluted earnings per share. In addition, the company revised

its guidance for full-year 2015 core earnings to approximately $1.85 diluted

earnings per share.

Expected second-quarter results and the revised core earnings guidance are driven

primarily by the following factors:

● As a result of aggressive market pricing for private education loan

portfolios, the company has removed from 2015 guidance additional

private loan acquisitions. The company also has reduced its forecast for

net interest income as a result of increased cost of funds. As a result, for

the second half of 2015, the net interest margin is projected to range

between 3.83 percent and 3.85 percent for private education loans and

between 0.81 percent and 0.85 percent for FFELP loans. The company

expects second quarter net interest margin to be 3.55 percent for private

education loans and 0.81 percent for FFELP loans. The private education


24

loan net interest margin in the second quarter was also impacted by

reduced interest income related to the factor immediately below.

● While the majority of the private education loan portfolio continues to

perform as expected and is experiencing positive credit trends, a segment

of higher risk private education loan borrowers who returned to school

during the recession deferred repayment on their existing loans and exited

deferment status in 2014. These loans are experiencing unfavorable credit

trends compared to loans that exited deferment in prior years. In addition,

loan balances exiting deferment increased to $2.5 billion in 2014, as

compared to $1.8 billion in 2013 and $2.1 billion in 2012. For 2015, these

figures are projected to decline to $1.7 billion. As a result, the company

increased its provision for these loans and now projects a private

education loan loss provision of $191 million for the quarter and $575 to

$600 million for the year. As of June 30, 2015, the company's private

education loan portfolio totaled $28.1 billion.

● As a result of the recent performance in its long-term recovery rate on

defaulted loans, the company changed its recovery rate assumption on

charged-off loans to 21 percent. The company reduced the balance of the

receivable for partially charged-off loans by $330 million to reflect this

update. Because this item was previously reserved for, this change did not

impact the loan loss provision.

During the quarter, the company launched a restructuring initiative to simplify

and streamline its management structure. Approximately $29 million of

restructuring expenses in the second quarter are included in GAAP results but

excluded from core earnings.

"The changes to our guidance reflect marketplace conditions for private loan

portfolio purchases and cost of funds, as well as a conservative assessment of

default trends for a small and declining segment of our private education loan

portfolio," said Jack Remondi, president and CEO, Navient. "While we have

removed private education loan acquisitions from our guidance, we continue to

believe that there will be opportunities for Navient to acquire loans in 2015 and

beyond. Our restructuring initiative reflects changes post-separation to improve

the operating efficiency and effectiveness of our organization, producing positive

results for our customers and shareholders. Furthermore, we continue to see

positive credit trends for new college graduates."


July 14, 2015, at $16.42 per share, on unusually heavy volume.

CLASS ACTION ALLEGATIONS


25

34. Plaintiff brings this action as a class action pursuant to Federal Rule of Civil

Procedure 23(a) and (b)(3) on behalf of a class, consisting of all those who purchased Navient’s

securities between July 16, 2014 and July 13, 2015, inclusive (the “Class Period”) and who were

damaged thereby (the “Class”). Excluded from the Class are Defendants, the officers and

directors of the Company, at all relevant times, members of their immediate families and their

legal representatives, heirs, successors or assigns and any entity in which Defendants have or had

a controlling interest.

35. The members of the Class are so numerous that joinder of all members is

impracticable. Throughout the Class Period, Navient’s securities were actively traded on the

NASDAQ Stock Exchange (“NASDAQ”). While the exact number of Class members is

unknown to Plaintiff at this time and can only be ascertained through appropriate discovery,

Plaintiff believes that there are hundreds or thousands of members in the proposed Class.

Millions of Navient shares were traded publicly during the Class Period on the NASDAQ. As of

June 30, 2015, Navient had 374,032,762 shares of common stock outstanding. Record owners

and other members of the Class may be identified from records maintained by Navient or its

transfer agent and may be notified of the pendency of this action by mail, using the form of

notice similar to that customarily used in securities class actions.

36. Plaintiff’s claims are typical of the claims of the members of the Class as all

members of the Class are similarly affected by Defendants’ wrongful conduct in violation of

federal law that is complained of herein.

37. Plaintiff will fairly and adequately protect the interests of the members of the

Class and has retained counsel competent and experienced in class and securities litigation.


26

38. Common questions of law and fact exist as to all members of the Class and

predominate over any questions solely affecting individual members of the Class. Among the

questions of law and fact common to the Class are:

(a) whether the federal securities laws were violated by Defendants’ acts as

alleged herein;

(b) whether statements made by Defendants to the investing public during the

Class Period omitted and/or misrepresented material facts about the business, operations, and

prospects of Navient; and

(c) to what extent the members of the Class have sustained damages and the

proper measure of damages.

39. A class action is superior to all other available methods for the fair and efficient

adjudication of this controversy since joinder of all members is impracticable. Furthermore, as

the damages suffered by individual Class members may be relatively small, the expense and

burden of individual litigation makes it impossible for members of the Class to individually

redress the wrongs done to them. There will be no difficulty in the management of this action as

a class action.

UNDISCLOSED ADVERSE FACTS

40. The market for Navient’s securities was open, well-developed and efficient at all

relevant times. As a result of these materially false and/or misleading statements, and/or failures

to disclose, Navient’s securities traded at artificially inflated prices during the Class Period.

Plaintiff and other members of the Class purchased or otherwise acquired Navient’s securities

relying upon the integrity of the market price of the Company’s securities and market

information relating to Navient, and have been damaged thereby.


27

41. During the Class Period, Defendants materially misled the investing public,

thereby inflating the price of Navient’s securities, by publicly issuing false and/or misleading

statements and/or omitting to disclose material facts necessary to make Defendants’ statements,

as set forth herein, not false and/or misleading. Said statements and omissions were materially

false and/or misleading in that they failed to disclose material adverse information and/or

misrepresented the truth about Navient’s business, operations, and prospects as alleged herein.

42. At all relevant times, the material misrepresentations and omissions particularized

in this Complaint directly or proximately caused or were a substantial contributing cause of the

damages sustained by Plaintiff and other members of the Class. As described herein, during the

Class Period, Defendants made or caused to be made a series of materially false and/or

misleading statements about Navient’s financial well-being and prospects. These material

misstatements and/or omissions had the cause and effect of creating in the market an

unrealistically positive assessment of the Company and its financial well-being and prospects,

thus causing the Company’s securities to be overvalued and artificially inflated at all relevant

times. Defendants’ materially false and/or misleading statements during the Class Period

resulted in Plaintiff and other members of the Class purchasing the Company’s securities at

artificially inflated prices, thus causing the damages complained of herein.

LOSS CAUSATION

43. Defendants’ wrongful conduct, as alleged herein, directly and proximately caused

the economic loss suffered by Plaintiff and the Class.

44. During the Class Period, Plaintiff and the Class purchased Navient’s securities at

artificially inflated prices and were damaged thereby. The price of the Company’s securities

significantly declined when the misrepresentations made to the market, and/or the information


28

alleged herein to have been concealed from the market, and/or the effects thereof, were revealed,

causing investors’ losses.

SCIENTER ALLEGATIONS

45. As alleged herein, Defendants acted with scienter in that Defendants knew that

the public documents and statements issued or disseminated in the name of the Company were

materially false and/or misleading; knew that such statements or documents would be issued or

disseminated to the investing public; and knowingly and substantially participated or acquiesced

in the issuance or dissemination of such statements or documents as primary violations of the

federal securities laws. As set forth elsewhere herein in detail, Defendants, by virtue of their

receipt of information reflecting the true facts regarding Navient, his/her control over, and/or

receipt and/or modification of Navient’s allegedly materially misleading misstatements and/or

their associations with the Company which made them privy to confidential proprietary

information concerning Navient, participated in the fraudulent scheme alleged herein.

APPLICABILITY OF PRESUMPTION OF RELIANCE

(FRAUD-ON-THE-MARKET DOCTRINE)

46. The market for Navient’s securities was open, well-developed and efficient at all

relevant times. As a result of the materially false and/or misleading statements and/or failures to

disclose, Navient’s securities traded at artificially inflated prices during the Class Period.

Plaintiff and other members of the Class purchased or otherwise acquired the Company’s

securities relying upon the integrity of the market price of Navient’s securities and market

information relating to Navient, and have been damaged thereby.

47. During the Class Period, the artificial inflation of Navient’s stock was caused by

the material misrepresentations and/or omissions particularized in this Complaint causing the

damages sustained by Plaintiff and other members of the Class. As described herein, during the


29

Class Period, Defendants made or caused to be made a series of materially false and/or

misleading statements about Navient’s business, prospects, and operations. These material

misstatements and/or omissions created an unrealistically positive assessment of Navient and its

business, operations, and prospects, thus causing the price of the Company’s securities to be

artificially inflated at all relevant times, and when disclosed, negatively affected the value of the

Company stock. Defendants’ materially false and/or misleading statements during the Class

Period resulted in Plaintiff and other members of the Class purchasing the Company’s securities

at such artificially inflated prices, and each of them has been damaged as a result.

48. At all relevant times, the market for Navient’s securities was an efficient market

for the following reasons, among others:

(a) Navient stock met the requirements for listing, and was listed and actively

traded on the NASDAQ, a highly efficient and automated market;

(b) As a regulated issuer, Navient filed periodic public reports with the SEC

and/or the NASDAQ;

(c) Navient regularly communicated with public investors via established

market communication mechanisms, including through regular dissemination of press releases

on the national circuits of major newswire services and through other wide-ranging public

disclosures, such as communications with the financial press and other similar reporting services;

and/or

(d) Navient was followed by securities analysts employed by brokerage firms

who wrote reports about the Company, and these reports were distributed to the sales force and

certain customers of their respective brokerage firms. Each of these reports was publicly

available and entered the public marketplace.


30

49. As a result of the foregoing, the market for Navient’s securities promptly digested

current information regarding Navient from all publicly available sources and reflected such

information in Navient’s stock price. Under these circumstances, all purchasers of Navient’s

securities during the Class Period suffered similar injury through their purchase of Navient’s

securities at artificially inflated prices and a presumption of reliance applies.

NO SAFE HARBOR

50. The statutory safe harbor provided for forward-looking statements under certain

circumstances does not apply to any of the allegedly false statements pleaded in this Complaint.

The statements alleged to be false and misleading herein all relate to then-existing facts and

conditions. In addition, to the extent certain of the statements alleged to be false may be

characterized as forward looking, they were not identified as “forward-looking statements” when

made and there were no meaningful cautionary statements identifying important factors that

could cause actual results to differ materially from those in the purportedly forward-looking

statements. In the alternative, to the extent that the statutory safe harbor is determined to apply to

any forward-looking statements pleaded herein, Defendants are liable for those false forward-

looking statements because at the time each of those forward-looking statements was made, the

speaker had actual knowledge that the forward-looking statement was materially false or

misleading, and/or the forward-looking statement was authorized or approved by an executive

officer of Navient who knew that the statement was false when made.

FIRST CLAIM

Violation of Section 10(b) of

The Exchange Act and Rule 10b-5

Promulgated Thereunder Against All Defendants

51. Plaintiff repeats and realleges each and every allegation contained above as if

fully set forth herein.


31

52. During the Class Period, Defendants carried out a plan, scheme and course of

conduct which was intended to and, throughout the Class Period, did: (i) deceive the investing

public, including Plaintiff and other Class members, as alleged herein; and (ii) cause Plaintiff and

other members of the Class to purchase Navient’s securities at artificially inflated prices. In

furtherance of this unlawful scheme, plan and course of conduct, defendants, and each of them,

took the actions set forth herein.

53. Defendants (i) employed devices, schemes, and artifices to defraud; (ii) made

untrue statements of material fact and/or omitted to state material facts necessary to make the

statements not misleading; and (iii) engaged in acts, practices, and a course of business which

operated as a fraud and deceit upon the purchasers of the Company’s securities in an effort to

maintain artificially high market prices for Navient’s securities in violation of Section 10(b) of

the Exchange Act and Rule 10b-5. All Defendants are sued either as primary participants in the

wrongful and illegal conduct charged herein or as controlling persons as alleged below.

54. Defendants, individually and in concert, directly and indirectly, by the use, means

or instrumentalities of interstate commerce and/or of the mails, engaged and participated in a

continuous course of conduct to conceal adverse material information about Navient’s financial

well-being and prospects, as specified herein.

55. These defendants employed devices, schemes and artifices to defraud, while in

possession of material adverse non-public information and engaged in acts, practices, and a

course of conduct as alleged herein in an effort to assure investors of Navient’s value and

performance and continued substantial growth, which included the making of, or the

participation in the making of, untrue statements of material facts and/or omitting to state

material facts necessary in order to make the statements made about Navient and its business


32

operations and future prospects in light of the circumstances under which they were made, not

misleading, as set forth more particularly herein, and engaged in transactions, practices and a

course of business which operated as a fraud and deceit upon the purchasers of the Company’s

securities during the Class Period.

56. Each of the Individual Defendants’ primary liability, and controlling person

liability, arises from the following facts: (i) the Individual Defendants were high-level executives

and/or directors at the Company during the Class Period and members of the Company’s

management team or had control thereof; (ii) each of these defendants, by virtue of their

responsibilities and activities as a senior officer and/or director of the Company, was privy to and

participated in the creation, development and reporting of the Company’s internal budgets, plans,

projections and/or reports; (iii) each of these defendants enjoyed significant personal contact and

familiarity with the other defendants and was advised of, and had access to, other members of the

Company’s management team, internal reports and other data and information about the

Company’s finances, operations, and sales at all relevant times; and (iv) each of these defendants

was aware of the Company’s dissemination of information to the investing public which they

knew and/or recklessly disregarded was materially false and misleading.

57. The defendants had actual knowledge of the misrepresentations and/or omissions

of material facts set forth herein, or acted with reckless disregard for the truth in that they failed

to ascertain and to disclose such facts, even though such facts were available to them. Such

defendants’ material misrepresentations and/or omissions were done knowingly or recklessly and

for the purpose and effect of concealing Navient’s financial well-being and prospects from the

investing public and supporting the artificially inflated price of its securities. As demonstrated

by Defendants’ overstatements and/or misstatements of the Company’s business, operations,


33

financial well-being, and prospects throughout the Class Period, Defendants, if they did not have

actual knowledge of the misrepresentations and/or omissions alleged, were reckless in failing to

obtain such knowledge by deliberately refraining from taking those steps necessary to discover

whether those statements were false or misleading.

58. As a result of the dissemination of the materially false and/or misleading

information and/or failure to disclose material facts, as set forth above, the market price of

Navient’s securities was artificially inflated during the Class Period. In ignorance of the fact that

market prices of the Company’s securities were artificially inflated, and relying directly or

indirectly on the false and misleading statements made by Defendants, or upon the integrity of

the market in which the securities trades, and/or in the absence of material adverse information

that was known to or recklessly disregarded by Defendants, but not disclosed in public

statements by Defendants during the Class Period, Plaintiff and the other members of the Class

acquired Navient’s securities during the Class Period at artificially high prices and were

damaged thereby.

59. At the time of said misrepresentations and/or omissions, Plaintiff and other

members of the Class were ignorant of their falsity, and believed them to be true. Had Plaintiff

and the other members of the Class and the marketplace known the truth regarding the problems

that Navient was experiencing, which were not disclosed by Defendants, Plaintiff and other

members of the Class would not have purchased or otherwise acquired their Navient securities,

or, if they had acquired such securities during the Class Period, they would not have done so at

the artificially inflated prices which they paid.

60. By virtue of the foregoing, Defendants have violated Section 10(b) of the

Exchange Act and Rule 10b-5 promulgated thereunder.


34

61. As a direct and proximate result of Defendants’ wrongful conduct, Plaintiff and

the other members of the Class suffered damages in connection with their respective purchases

and sales of the Company’s securities during the Class Period.

SECOND CLAIM

Violation of Section 20(a) of

The Exchange Act Against the Individual Defendants

62. Plaintiff repeats and realleges each and every allegation contained above as if

fully set forth herein.

63. The Individual Defendants acted as controlling persons of Navient within the

meaning of Section 20(a) of the Exchange Act as alleged herein. By virtue of their high-level

positions, and their ownership and contractual rights, participation in and/or awareness of the

Company’s operations and/or intimate knowledge of the false financial statements filed by the

Company with the SEC and disseminated to the investing public, the Individual Defendants had

the power to influence and control and did influence and control, directly or indirectly, the

decision-making of the Company, including the content and dissemination of the various

statements which Plaintiff contends are false and misleading. The Individual Defendants were

provided with or had unlimited access to copies of the Company’s reports, press releases, public

filings and other statements alleged by Plaintiff to be misleading prior to and/or shortly after

these statements were issued and had the ability to prevent the issuance of the statements or

cause the statements to be corrected.

64. In particular, each of these Defendants had direct and supervisory involvement in

the day-to-day operations of the Company and, therefore, is presumed to have had the power to

control or influence the particular transactions giving rise to the securities violations as alleged

herein, and exercised the same.


35

65. As set forth above, Navient and the Individual Defendants each violated Section

10(b) and Rule 10b-5 by their acts and/or omissions as alleged in this Complaint. By virtue of

their positions as controlling persons, the Individual Defendants are liable pursuant to Section

20(a) of the Exchange Act. As a direct and proximate result of Defendants’ wrongful conduct,

Plaintiff and other members of the Class suffered damages in connection with their purchases of

the Company’s securities during the Class Period.

PRAYER FOR RELIEF

WHEREFORE, Plaintiff prays for relief and judgment, as follows:

(a) Determining that this action is a proper class action under Rule 23 of the Federal

Rules of Civil Procedure;

(b) Awarding compensatory damages in favor of Plaintiff and the other Class

members against all defendants, jointly and severally, for all damages sustained as a result of

Defendants’ wrongdoing, in an amount to be proven at trial, including interest thereon;

(c) Awarding Plaintiff and the Class their reasonable costs and expenses incurred in

this action, including counsel fees and expert fees; and

(d) Such other and further relief as the Court may deem just and proper.

JURY TRIAL DEMANDED

Plaintiff hereby demands a trial by jury.

DATED: GLANCY PRONGAY & MURRAY LLP

By:_______DRAFT__________________

Lionel Z. Glancy

Robert V. Prongay

1925 Century Park East, Suite 2100

Los Angeles, CA 90067

Telephone: (310) 201-9150

Facsimile: (310) 201-9160


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LAW OFFICES OF HOWARD G. SMITH Howard G. Smith

3070 Bristol Pike, Suite 112

Bensalem, PA 19020

Telephone: (215) 638-4847

Facsimile: (215) 638-4867

Attorneys for Plaintiff

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