UNITED STATES DISTRICT COURT DISTRICT OF MASSACHUSETTS ) ) ) ) ) ) ) ) ) ) ) ) ) )

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1 UNITED STATES DISTRICT COURT DISTRICT OF MASSACHUSETTS RYAN EDMUNDSON, Individually and on Behalf of All Others Similarly Situated, vs. Plaintiff, THE FIRST MARBLEHEAD CORP., PETER B. TARR, JACK L. KOPNISKY, STEPHEN E. ANBINDER, JOHN A. HUPALO and DONALD R. PECK, Defendants. ) ) ) ) ) ) ) ) ) ) ) ) ) ) No. CLASS ACTION COMPLAINT FOR VIOLATIONS OF FEDERAL SECURITIES LAWS DEMAND FOR JURY TRIAL

2 Plaintiff has alleged the following based upon the investigation of Plaintiff s counsel, which included a review of United States Securities and Exchange Commission ( SEC ) filings by The First Marblehead Corporation ( First Marblehead or the Company ), as well as regulatory filings and reports, securities analysts reports and advisories about the Company, press releases and other public statements issued by the Company, and media reports about the Company, and Plaintiff believes that substantial additional evidentiary support will exist for the allegations set forth herein after a reasonable opportunity for discovery. NATURE OF THE ACTION 1. This is a federal class action on behalf of purchasers of the common stock of First Marblehead between August 10, 2006 and April 7, 2008, inclusive (the Class Period ), seeking to pursue remedies under the Securities Exchange Act of 1934 (the Exchange Act ). JURISDICTION AND VENUE 2. The claims asserted herein arise under and pursuant to 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 b-5]. 3. This Court has jurisdiction over the subject matter of this action pursuant to 28 U.S.C and Section 27 of the Exchange Act. 4. Venue is proper in this District pursuant to Section 27 of the Exchange Act and 28 U.S.C. 1391(b). Many of the acts charged herein, including the preparation and dissemination of materially false and misleading information, occurred in substantial part in this District. 5. In connection with the acts alleged in this Complaint, Defendants, directly or indirectly, used the means and instrumentalities of interstate commerce, including, but not limited to, the mails, interstate telephone communications and the facilities of the national securities markets.

3 PARTIES 6. Plaintiff Ryan Edmundson, as set forth in the accompanying certification and incorporated by reference herein, purchased the common stock of First Marblehead at artificially inflated prices during the Class Period and has been damaged thereby. 7. Defendant First Marblehead, together with its subsidiaries, provides outsourcing services for private education lending in the United States. 8. (a) Defendant Peter B. Tarr ( Tarr ) is, and was at all relevant times, Chairman and General Counsel of First Marblehead. (b) Defendant Jack L. Kopnisky ( Kopnisky ) is, and was at all relevant times, Chief Executive Officer, President and Chief Operating Officer of First Marblehead. (c) Defendant Stephen E. Anbinder ( Anbinder ) is Co-Founder of the Company. He is also Vice Chairman of First Marblehead. (d) Defendant John A. Hupalo ( Hupalo ) has been Chief Financial Officer and Senior Executive Vice President of First Marblehead since November 1, (e) Defendant Donald R. Peck ( Peck ) was Executive Vice President and Chief Financial Officer of First Marblehead until November 1, (f) Defendants Tarr, Kopnisky, Anbinder, Hupalo and Peck are collectively referred to herein as the Individual Defendants. 9. During the Class Period, the Individual Defendants, as senior executive officers and/or directors of First Marblehead, were privy to confidential and proprietary information concerning First Marblehead, its operations, finances, financial condition and present and future business prospects. The Individual Defendants also had access to material adverse non-public information concerning First Marblehead, as discussed in detail below. Because of their positions with First Marblehead, the Individual Defendants had access to non-public information about its - 2 -

4 business, finances, products, markets and present and future business prospects via internal corporate documents, conversations and connections with other corporate officers and employees, attendance at management and/or board of directors meetings and committees thereof, and via reports and other information provided to them in connection therewith. Because of their possession of such information, the Individual Defendants knew or recklessly disregarded that the adverse facts specified herein had not been disclosed to, and were being concealed from, the investing public. 10. The Individual Defendants are liable as direct participants in the wrongs complained of herein. In addition, the Individual Defendants, by reason of their status as senior executive officers and/or directors, were controlling persons within the meaning of Section 20(a) of the Exchange Act and had the power and influence to cause the Company to engage in the unlawful conduct complained of herein. Because of their positions of control, the Individual Defendants were able to and did, directly or indirectly, control the conduct of First Marblehead s business. 11. The Individual Defendants, because of their positions with the Company, controlled and/or possessed the authority to control the contents of its reports, press releases and presentations to securities analysts and through them, to the investing public. The Individual Defendants were 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. Thus, the Individual Defendants had the opportunity to commit the fraudulent acts alleged herein. 12. As senior executive officers and/or directors and as controlling persons of a publicly traded company whose common stock was, and is, registered with the SEC pursuant to the Exchange Act, and was, and is, traded on the New York Stock Exchange ( NYSE ) and governed by the federal securities laws, the Individual Defendants had a duty to promptly disseminate accurate and - 3 -

5 truthful information with respect to First Marblehead s financial condition and performance, growth, operations, financial statements, business, products, markets, management, earnings and present and future business prospects, and to correct any previously issued statements that had become materially misleading or untrue, so that the market price of First Marblehead s common stock would be based upon truthful and accurate information. The Individual Defendants misrepresentations and omissions during the Class Period violated these specific requirements and obligations. 13. The Individual Defendants are liable as participants in a fraudulent scheme and course of conduct, which operated as a fraud or deceit on purchasers of First Marblehead common stock by disseminating materially false and misleading statements and/or concealing material adverse facts. The scheme: (i) deceived the investing public regarding First Marblehead s business, operations, management and the intrinsic value of First Marblehead securities; (ii) allowed Defendant Anbinder and other Company insiders to collectively sell more than 4.3 million shares of their personally-held First Marblehead common stock for gross proceeds in excess of $194.3 million; and (iii) caused Plaintiff and members of the Class (defined below) to purchase First Marblehead s common stock at artificially inflated prices. PLAINTIFF S CLASS ACTION ALLEGATIONS 14. 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 the common stock of First Marblehead between August 10, 2006 and April 7, 2008, inclusive, 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

6 15. The members of the Class are so numerous that joinder of all members is impracticable. Throughout the Class Period, First Marblehead common stock was actively traded on the NYSE. 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. Record owners and other members of the Class may be identified from records maintained by First Marblehead 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. 16. 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 complained of herein. 17. Plaintiff will fairly and adequately protect the interests of the members of the Class and has retained counsel competent and experienced in class action and securities litigation. 18. 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 misrepresented material facts about the business and operations of First Marblehead; (c) whether the price of First Marblehead common stock was artificially inflated during the Class Period; and - 5 -

7 (d) to what extent the members of the Class have sustained damages and the proper measure of damages. 19. 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 make 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. SUBSTANTIVE ALLEGATIONS Background 20. According to its press releases, defendant First Marblehead provides outsourcing services for private, non-governmental education lending in the United States. The Company helps meet the growing demand for private education loans by providing national and regional financial institutions and educational institutions, as well as businesses and other enterprises, with an integrated suite of design, implementation and securitization services for student loan programs tailored to meet the needs of their respective customers, students, employees and members. 21. First Marblehead packages student loans given by banks like Bank of America Corp. and JPMorgan Chase & Co. and then sells the packaged student loans as bonds. The Company makes money by charging fees for advising on the deals and helping funnel the payments from the students to the bondholders. The prices the bonds command and, in turn, the commissions First Marblehead charges, are boosted by a nonprofit organization called The Education Resources Institute ( TERI ). TERI promises to buy student loans that are in default, which rescues bondholders from losses. This makes the bonds safer and thus more appealing to investors. The Company has been in a strategic alliance with TERI since

8 22. Unbeknownst to investors, TERI did not have enough cash to buy all the loans that were going to be in default. As a result, banks would look elsewhere to package their loans, which would have a negative impact on First Marblehead s business and operations. Materially False and Misleading Statements Issued During the Class Period 23. The Class Period begins on August 10, On that date, First Marblehead issued a press release announcing its financial results for the fiscal fourth quarter and year end of 2006, the period ended June 30, For the quarter, the Company reported total service revenues of $148.8 million, the securitization of $756 million of private student loans, which generated $115.4 million of service revenues, and net income of $70.8 million, or $1.12 per diluted share. Defendant Kopnisky, commenting on the results, stated, in pertinent part, as follows: Fiscal year 2006 was one of the strongest years in First Marblehead s history, as revenue, earnings and EPS all exceeded our expectations. We continue to demonstrate that our team can consistently deliver strong operating results. Looking forward, we are confident in our business model and believe a foundation is in place for significant growth into the future. 24. On September 14, 2006, the Company issued a press release announcing the closing of a securitization enabling the purchase of private student loans by The National Collegiate Student Loan Trust (the Trust) and the related issuance of Student Loan Asset Backed Notes by the Trust. Moreover, the Company previously stated that the loans were guaranteed by TERI. The press release continued, in pertinent part, as follows: In connection with that securitization, the Trust filed today with the Securities and Exchange Commission a Term Sheet providing additional preliminary details regarding the anticipated transaction. In that filing, the Trust announced that the amount that it expects to raise from the sale of asset-backed securities has increased to approximately $1.84 billion, and that the principal and accrued interest balance of private student loans that it expects to acquire has increased to approximately $1.39 billion. The Trust expects that 71% of the loans to be purchased at closing will be Direct to Consumer loans, and that the remaining 29% of loans to be purchased at closing will be School Channel loans

9 At the closing of the transaction, First Marblehead expects to receive up-front structural advisory fees of approximately $175 million, or 12.6% of the private student loan balance securitized. 25. Upon this news, shares of the Company s stock rose $9.10 per share, or 17%, to close at $61.45 per share, on heavy trading volume. 26. On September 26, 2006, the Company issued a press release announcing its estimated additional structural advisory fees and residual revenue in connection with a previously announced securitization involving The National Collegiate Student Loan Trust (the Trust). The press release continued, in pertinent part, as follows: At the closing of the transaction, First Marblehead expects to receive up-front structural advisory fees of approximately $173.3 million, or 12.5% of the private student loan balance securitized. In addition, over the term of the Trust, First Marblehead expects to receive additional structural advisory fees from the Trust with an estimated discounted present value of approximately $17 million, or 1.2% of the loan balance securitized, as well as residual revenue with an estimated discounted present value of approximately $53 million, or 3.8% of the loan balance securitized. * * * Jack L. Kopnisky, First Marblehead s President and Chief Executive Officer, stated, We are very pleased with the results of this securitization, which is our largest securitization of private student loans to date. Current market conditions presented our Capital Markets Group the opportunity to structure this securitization with a class of investment grade notes expected to be rated Baa2 by Moody s Investors Service, Inc., BBB by Standard & Poor s Ratings Services and BBB by Fitch, Inc., thereby generating higher cash yields for First Marblehead. 27. Upon this news, shares of the Company s stock rose $2.98 per share, or approximately 5%, to close at $68.98 per share, on heavy trading volume. 28. On October 26, 2006, First Marblehead issued a press release announcing its financial results for the fiscal first quarter of 2007, the period ended September 30, For the quarter, the Company reported total service revenues of $301.8 million and net income of $141.0 million, or $2.23 per diluted share. Defendant Kopnisky commented on the results, stating, in pertinent part, as follows: - 8 -

10 We are pleased with the strong results from this past quarter. Our team continues to maximize value derived from our securitizations, deliver strong loan volume growth and expand our market leadership position. With our continued addition of new clients and expanded programs, we are poised to seize future growth opportunities and will continue our relentless focus on delivering optimal value to our shareholders. 29. On December 5, 2006, the Company issued a press release announcing its estimated revenues in connection with a previously announced securitization involving The National Collegiate Student Loan Trust (the Trust ). Moreover, the Company previously stated that the loans were guaranteed by TERI. The press release continued, in pertinent part, as follows: At the closing of the transaction, First Marblehead expects to receive up-front structural advisory fees of approximately $89.6 million, or 12.4% of the private student loan balance securitized. In addition, over the term of the Trust, First Marblehead expects to receive additional structural advisory fees from the Trust with an estimated discounted present value of approximately $8.8 million, or 1.2% of the loan balance securitized, as well as residual revenue with an estimated discounted present value of approximately $48.7 million, or 6.7% of the loan balance securitized. The blended yield for the securitization, representing total securitization revenues as a percentage of the total principal and accrued interest balance of loans securitized, is expected to be approximately 20.3%. The Trust expects that approximately 93% of the loans to be purchased at closing will be direct to consumer loans and that the remaining 7% of the loans to be purchased will be school channel loans. Up-front structural advisory fees attributable to direct to consumer loans are expected to represent approximately 12.7% of the direct to consumer loan balance securitized, and additional structural advisory fees and residual revenues attributable to direct to consumer loans are expected to represent approximately 1.2% and 7.1%, respectively, of the direct to consumer loan balance securitized. Up-front structural advisory fees attributable to school channel loans are expected to represent approximately 7.3% of the school channel loan balance securitized, and additional structural advisory fees and residual revenues attributable to school channel loans are expected to represent approximately 1.2% and 2.1%, respectively, of the school channel loan balance securitized. * * * Jack L. Kopnisky, First Marblehead s President and Chief Executive Officer, stated, Our securitizations continue to be well-received by investors worldwide. This is our second consecutive transaction with BBB-rated securities, and we are very pleased with the results of this securitization

11 30. Following this press release, shares of the Company s stock fell $23.00 per share, or 30%, to close at $53.50 per share, on heavy trading volume. However, defendants continued to conceal the truth about TERI s ability to guarantee the loans that would go into default. 31. On January 25, 2007, First Marblehead issued a press release announcing its financial results for the fiscal second quarter of 2007, the period ended December 31, For the quarter, the Company reported total revenues of $197.8 million and net income of $81.2 million, or $0.85 per diluted share. Defendant Kopnisky commented on the results, stating, in pertinent part, as follows: The Company had an excellent quarter and first six months of fiscal Our facilitated loan volume remained strong, we added meaningful new clients, and we executed against our plan to complete quarterly securitizations. We remain focused on providing an excellent experience for our clients and value to our shareholders. 32. On April 26, 2007, First Marblehead issued a press release announcing its financial results for the fiscal third quarter of 2007, the period ended March 31, For the quarter, the Company reported total revenues of $180 million, and net income of $71 million, or $0.75 per diluted share. Defendant Kopnisky commented on the results, stating, in pertinent part, as follows: First Marblehead had a very strong third quarter and a terrific first nine months of fiscal Our facilitated loan volume continues to grow, we continue to diversify our client base, and we remain dedicated to our mission of helping students finance their education dreams. 33. On August 9, 2007, First Marblehead issued a press release announcing its financial results for the fiscal fourth quarter and year end of 2007, the period ended June 30, For the quarter, the Company reported total revenues of $200 million and net income of $78 million, or $0.83 per diluted share. Defendant Kopnisky commented on the results, stating, in pertinent part, as follows: Fiscal 2007 was the strongest year in First Marblehead s history. Our focus on adding value to our clients has resulted in exceptional revenue, earnings, and EPS growth. We processed a record 1.4 million loan applications resulting in $4.3 billion in student loans facilitated. Our business continues to grow as we remain focused on developing financial solutions to help students achieve their dreams

12 34. Upon this news, shares of the Company s stock rose $2.80 per share, or approximately 9%, to close at $34.49 per share, on heavy trading volume. 35. On August 31, 2007, the Company issued a press release announcing that, on August 22, 2007, it received a subpoena from the New York Attorney General s Office for information regarding the Company s role in the student loan industry. 36. From September 10, 2007 to September 18, 2007, shares of the Company s stock rose from $32.19 per share on September 7, 2007, to $40.60 per share on September 18, 2007 an $8.41 per share increase, or 26%. The result of the increase was due to the Company s press releases and earnings estimates relating to the fees associated with the securitization of two trusts. Specifically, on September 10, 2007, First Marblehead announced that it expected to raise about $2.8 billion from the securitization and sale of asset-backed securities involving private student loans. Moreover, the Company announced that the loans were guaranteed by TERI. 37. On October 25, 2007, First Marblehead issued a press release announcing its financial results for the fiscal first quarter of 2008, the period ended September 30, For the quarter, the Company reported total revenues of $380 million and net income of $169 million, or $1.80 per diluted share. Defendant Kopnisky commented on the results, stating, in pertinent part, as follows: We are off to a great start to the fiscal year as a result of record volumes in the first quarter. This fiscal quarter s volume of private student loans facilitated and available for securitization exceeded all such volume for fiscal Even in the midst of one of the most volatile credit cycles, we completed our largest securitization to date, providing market leadership and helping to increase the availability of private student loan financing. At a time when the cost of higher education continues to rise and demand for a college degree remains high, First Marblehead is pleased to provide its clients with private financial solutions as an alternative for borrowers once students have exhausted scholarships, grants, and lower cost federal loans. 38. The statements referenced above in 23-24, 26, 28-29, 31-33, and were materially false and misleading when made because they misrepresented and failed to disclose:

13 (a) that the underlying loans of the Company s bonds were experiencing increasing default rates; (b) that the guarantor of those loans TERI did not have the money to buy all of the loans that were in default; (c) (d) that the Company lacked adequate internal and financial controls; and as a result of the foregoing, banks would look elsewhere to package their loans, which would have a negative impact on First Marblehead s business and operations. 39. On November 26, 2007, Friedman Billings Ramsey downgraded the Company s stock citing the fact that TERI did not have enough cash to buy the loans from First Marblehead that were going to be in default. 40. Upon this news, shares of the Company s stock fell $2.90 per share, or approximately 10%, to close at $27.10 per share, on heavy trading volume. 41. From December 3, 2007 to December 20, 2007, shares of the Company s stock plummeted to $11.24 per share on December 20, 2007 a decline of $18.77 per share, or over 60% - as investors continued to digest the news that TERI was in financial trouble. 42. On December 21, 2007, the Company issued a press release announcing that it entered into a definitive agreement with GS Capital Partners ( GSCP ) pursuant to which GSCP will invest up to $260.5 million equal to 19.99% of the shares currently outstanding upon closing of the transaction. Defendant Kopnisky, commenting on the capital infusion from Goldman Sachs, stated, in pertinent part, as follows: The fundamentals of our business are strong, and we remain encouraged and excited about our growth prospects. We see strong demand for loans in our second fiscal quarter and continue to believe that private student loans are an important source of college funding. We welcome Goldman Sachs equity investment and warehouse financing, and its validation of First Marblehead s unique business model. Goldman Sachs

14 investment and financing provides our Company with additional capital resources to fund our long-term strategy. In the current market, we plan to continue to focus on prudent credit underwriting. We believe this will allow us to provide the greatest value to our shareholders, our clients, students and their parents, and to our employees. 43. Upon this news, shares of the Company s stock temporarily rose $7.46 per share, or 66%, to close at $18.70 per share, on heavy trading volume. However, shares quickly dropped over the next few trading days reaching $12.67 per share on January 8, On January 31, 2008, First Marblehead issued a press release announcing its financial results for the fiscal second quarter of 2008, the period ended December 31, For the quarter, the Company reported that revenues declined as a result of a $178.0 million pre-tax write-down of the Company s service receivables due to changes in certain assumptions used in estimating their fair value. Moreover, the Company recorded a net loss of $117.7 million. Defendant Kopnisky commented on the results, stating, in pertinent part, as follows: Even though our business volumes were strong in the second fiscal quarter, our earnings were affected by the volatility in the capital markets. The strategic investment by GS Capital Partners significantly adds to our financial strength and expands our financing options for the future. Upon receipt of regulatory clearances and determinations, we expect to receive an additional $200.7 million in connection with the transaction announced in December In addition, the $1 billion secured warehouse credit facility that Goldman Sachs has committed to offer provides us with access to an alternative source of funding. First Marblehead s strategy is to deliver long-term value to our shareholders by focusing on our core competencies, such as our customized products and services and expert processing capabilities for private student loans. At the same time, we are managing through the disruptions in the capital markets by taking action to increase alternative funding sources, tighten credit criteria, adjust the recovery and collection process, and reduce our cost structure. We believe these actions are prudent in the current environment and are part of a broader strategy to further strengthen the company. 45. On March 27, 2008, the Company issued a press release reacting to the recent downgrades by Moody s. In that regard, the press release stated:

15 In the beginning of December 2007, Moody s Investors Service placed on review for possible downgrade the ratings of certain subordinated classes of asset-backed notes issued by the NCSLT. Since December, Moody s has conducted a thorough review of First Marblehead s NCSLT securitization portfolio, which consists of over 130 distinct classes of securities. Last evening, Moody s announced the results of their review. Three classes of securities had their current ratings affirmed and eighteen classes of subordinated notes had a downward adjustment to their ratings. During the review period, First Marblehead provided Moody s with a comprehensive level of historical data and cash flow projections for each outstanding trust. In addition, we detailed the significant steps taken to improve student loan collection practices, which are designed to reduce delinquencies and eventually defaults, said Jack Kopnisky, Chief Executive Officer and President of The First Marblehead Corporation. We also discussed the substantial modifications we have made to our credit underwriting policies. We have worked closely with our clients and TERI in recent months to tighten underwriting criteria. First Marblehead s management team has been focused on adjusting our business model to manage the challenges presented by the current negative consumer credit cycle and the capital markets credit dislocation. The performance of the securitization trusts continues to be strong as evidenced by the fact that the subordinated classes of securities have retained their investment grade ratings. We remain dedicated to taking the actions necessary to maintain the highest quality program to benefit students who require financial assistance to attend college and to support investors in our securitization program, added Kopnisky. Separately, Moody s has been conducting its own review of TERI, a nonprofit guarantor of private education loans. With regard to the rating action, Kopnisky made the following comment: The Education Resources Institute has a rich history of providing programs to help students achieve their dreams of attaining a higher education. First Marblehead is currently working with TERI to determine how we may be able to provide assistance in this challenging environment. As we have discussed in the past, First Marblehead has been developing other guaranty options for our clients including a selfguaranteed loan product and products guaranteed by another third party. In 2008, there will be more students starting college than ever before and early indications show that they will require substantial financial assistance. First Marblehead looks forward to providing high quality solutions to our clients and students to meet their growing needs. [Emphasis added.] 46. Upon this news, shares of the Company s stock fell $0.92 per share, or over 10%, to close at $7.46, over the next three trading days

16 47. On April 8, 2008, the Company issued a press release announcing that TERI filed a voluntary petition for reorganization under Chapter 11 of the U.S. Bankruptcy Code in the United States Bankruptcy Court for the District of Massachusetts. 48. Upon this news, shares of the Company s stock fell $4.16 per share, or 54%, over the next five trading days, as the investing public continued to digest the news of TERI s bankruptcy and its effect on the Company. 49. On April 17, 2008, the Company issued a press release announcing that Bank of America notified the Company that due to the ongoing disruption in the capital markets it has decided to exit the private student loan business and focus on providing federal student loans. In connection with this decision, Bank of America has elected to exercise its right to terminate its agreements with First Marblehead due to the filing by The Education Resources Institute (TERI) of a voluntary bankruptcy petition on April 7, Upon this news, shares of the Company s stock fell $0.68 per share, or approximately 17%, to close at $3.37 per share, on heavy trading volume. 51. The markets for First Marblehead common stock were open, well-developed and efficient at all relevant times. As a result of these materially false and misleading statements and failures to disclose, First Marblehead s securities traded at artificially inflated prices during the Class Period. Plaintiff and other members of the Class purchased or otherwise acquired First Marblehead common stock relying upon the integrity of the market price of First Marblehead common stock and market information relating to First Marblehead, and have been damaged thereby. 52. During the Class Period, Defendants materially misled the investing public, thereby inflating the price of First Marblehead common stock, by publicly issuing false and misleading statements and omitting to disclose material facts necessary to make Defendants statements, as set

17 forth herein, not false and misleading. Said statements and omissions were materially false and misleading in that they failed to disclose material adverse information and misrepresented the truth about the Company, its business and operations, as alleged herein. 53. 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 or misleading statements about First Marblehead s business, prospects and operations. These material misstatements and omissions had the cause and effect of creating in the market an unrealistically positive assessment of First Marblehead and its business, prospects and operations, thus causing the Company s common stock to be overvalued and artificially inflated at all relevant times. Defendants materially false and misleading statements during the Class Period resulted in Plaintiff and other members of the Class purchasing the Company s common stock at artificially inflated prices, thus causing the damages complained of herein. Additional Scienter Allegations 54. 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 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 First Marblehead, their control over, and/or receipt and/or modification of First Marblehead s allegedly materially misleading misstatements, and/or

18 their associations with the Company which made them privy to confidential proprietary information concerning First Marblehead, participated in the fraudulent scheme alleged herein. 55. Defendants were further motivated to engage in this course of conduct in order to allow Defendant Anbinder and other Company insiders to collectively sell more than 4.3 million shares of their personally-held First Marblehead common stock for gross proceeds in excess of $194.3 million. The insider shares sold during the Class Period are set forth more fully in the following chart: Insider Date Shares Price Proceeds LESLIE ALEXANDER 8/29/ ,950 $35.47 $1,133,160 8/29/ ,400 $35.53 $724,880 8/29/ ,450 $35.54 $549,093 8/29/ ,150 $35.50 $537,825 8/29/ ,000 $35.43 $531,500 8/29/ ,250 $35.48 $505,590 8/29/ ,100 $35.41 $499,328 8/29/ ,200 $35.46 $468,072 8/29/2006 7,200 $35.44 $255,168 8/29/ $35.48 $31,932 8/29/ $35.52 $15,984 8/29/ $35.53 $10,658 8/30/2006 7,500 $35.11 $263,350 8/30/2006 7,500 $35.12 $263,400 8/30/2006 7,500 $35.13 $263,450 8/30/2006 7,500 $35.13 $263,500 8/30/2006 7,500 $35.35 $265,100 8/31/2006 7,500 $35.00 $262,500 8/31/2006 7,500 $35.01 $262,550 8/31/2006 7,500 $35.01 $262,600 8/31/2006 7,500 $35.02 $262,650 8/31/2006 7,500 $35.03 $262,700 9/1/ ,700 $35.17 $516,950 9/1/ ,700 $35.10 $410,670 9/1/2006 7,500 $35.05 $262,900 9/1/2006 7,500 $35.06 $262,950 9/1/2006 7,500 $35.07 $263,000 9/1/2006 7,500 $35.09 $263,200 9/1/2006 7,500 $35.10 $263,250 9/1/2006 7,500 $35.15 $263,600 9/1/2006 7,500 $35.17 $263,750 9/1/2006 7,500 $35.18 $263,850 9/1/2006 7,500 $35.20 $264,000 9/1/2006 7,500 $35.20 $264,000 9/1/2006 7,200 $35.05 $252,336 9/1/2006 6,600 $35.15 $232,

19 9/1/2006 6,000 $35.09 $210,520 9/1/2006 3,150 $35.12 $110,628 9/1/2006 1,500 $35.11 $52,660 9/1/ $35.20 $26,400 9/1/ $35.13 $10,540 9/1/ $35.25 $10,576 9/1/ $35.41 $10,624 9/5/ ,100 $35.20 $1,024,320 9/5/ ,500 $35.33 $795,000 9/5/ ,000 $35.30 $529,500 9/5/ ,000 $35.37 $530,500 9/5/ ,000 $35.40 $531,000 9/5/2006 7,800 $35.23 $274,820 9/5/2006 7,500 $35.27 $264,500 9/5/2006 7,500 $35.29 $264,650 9/5/2006 7,500 $35.31 $264,850 9/5/2006 7,500 $35.39 $265,450 9/5/2006 7,500 $35.43 $265,750 9/5/2006 7,500 $35.47 $266,000 9/5/2006 7,500 $35.50 $266,250 9/5/2006 7,500 $35.57 $266,750 9/5/2006 7,500 $35.60 $267,000 9/5/2006 7,500 $35.67 $267,500 9/5/2006 7,500 $35.70 $267,750 9/5/2006 3,750 $35.90 $134,625 9/5/2006 2,850 $35.73 $101,840 9/5/ $35.74 $26,805 9/5/ $35.25 $21,152 9/5/ $35.93 $5,389 9/11/ ,700 $35.34 $4,654,278 9/11/2006 6,150 $35.35 $217,382 9/11/2006 5,400 $35.47 $191,520 9/11/2006 3,900 $35.43 $138,190 9/11/2006 2,550 $35.44 $90,372 9/11/2006 1,350 $35.40 $47,790 9/11/2006 1,200 $35.45 $42,544 9/11/2006 1,200 $35.46 $42,552 9/11/2006 1,050 $35.35 $37,121 9/11/2006 1,050 $35.37 $37,142 9/11/2006 1,050 $35.45 $37,219 9/11/ $35.49 $31,944 9/11/ $35.36 $21,216 9/11/ $35.37 $21,220 9/11/ $35.38 $21,228 9/11/ $35.39 $21,236 9/11/ $35.47 $21,284 9/11/ $35.42 $15,939 9/11/ $35.39 $10,616 9/11/ $35.41 $10,624 9/11/ $35.50 $10,650 9/11/ $35.43 $5,314 9/12/ ,250 $35.34 $3,684,

20 9/12/ ,900 $35.37 $1,517,230 9/12/ ,100 $35.36 $498,576 9/12/ ,600 $35.43 $446,460 9/12/ ,550 $35.41 $408,947 9/12/2006 9,450 $35.45 $335,034 9/12/2006 8,100 $35.43 $286,956 9/12/2006 6,900 $35.41 $244,352 9/12/2006 4,650 $35.53 $165,230 9/12/2006 4,350 $35.44 $154,164 9/12/2006 4,200 $35.38 $148,596 9/12/2006 4,050 $35.40 $143,370 9/12/2006 3,750 $35.53 $133,225 9/12/2006 3,000 $35.39 $106,160 9/12/2006 3,000 $35.45 $106,340 9/12/2006 2,850 $35.39 $100,871 9/12/2006 2,850 $35.42 $100,947 9/12/2006 2,850 $35.46 $101,061 9/12/2006 2,700 $35.37 $95,508 9/12/2006 2,250 $35.35 $79,545 9/12/2006 1,800 $35.49 $63,876 9/12/2006 1,500 $35.35 $53,020 9/12/ $35.52 $21,312 9/12/ $35.47 $15,960 9/12/ $35.48 $10,644 9/12/ $35.49 $10,648 9/12/ $35.47 $5,321 9/12/ $35.50 $5,325 9/12/ $35.51 $5,326 9/13/ ,100 $35.38 $2,621,658 9/13/ ,200 $35.47 $893,760 9/13/ ,000 $35.40 $637,200 9/13/ ,550 $35.46 $622,323 9/13/ ,650 $35.50 $591,075 9/13/2006 9,900 $35.43 $350,790 9/13/2006 8,550 $35.45 $303,126 9/13/2006 5,100 $35.44 $180,744 9/13/2006 4,650 $35.45 $164,827 9/13/2006 4,350 $35.53 $154,570 9/13/2006 3,750 $35.59 $133,450 9/13/2006 3,450 $35.41 $122,176 9/13/2006 3,300 $35.39 $116,776 9/13/2006 3,300 $35.39 $116,798 9/13/2006 2,850 $35.56 $101,346 9/13/2006 2,700 $35.42 $95,634 9/13/2006 2,250 $35.43 $79,710 9/13/2006 2,250 $35.63 $80,175 9/13/2006 1,800 $35.55 $63,996 9/13/2006 1,650 $35.53 $58,619 9/13/2006 1,500 $35.41 $53,110 9/13/2006 1,350 $35.49 $47,907 9/13/2006 1,050 $35.48 $37,254 9/13/ $35.47 $31,

21 9/13/ $35.54 $26,655 9/13/ $35.55 $21,328 9/13/ $35.49 $15,972 9/13/ $35.51 $15,978 9/13/ $35.57 $16,005 9/13/ $35.52 $5,328 9/15/ ,400 $40.87 $4,511,680 9/15/ ,150 $39.73 $2,151,560 9/15/ ,600 $40.00 $1,104,000 9/15/ ,900 $40.98 $651,582 9/15/2006 9,900 $39.99 $395,934 9/15/2006 9,750 $39.99 $389,870 9/15/2006 6,600 $40.05 $264,308 9/15/2006 6,300 $40.90 $257,670 9/15/2006 4,650 $41.00 $190,650 9/15/2006 4,500 $40.05 $180,240 9/15/2006 4,350 $40.04 $174,174 9/15/2006 3,600 $40.03 $144,120 9/15/2006 2,700 $40.93 $110,502 9/15/2006 2,250 $40.91 $92,040 9/15/2006 1,950 $40.07 $78,130 9/15/2006 1,950 $40.10 $78,195 9/15/2006 1,650 $40.99 $67,628 9/15/2006 1,500 $39.95 $59,930 9/15/2006 1,500 $41.05 $61,570 9/15/2006 1,350 $39.94 $53,919 9/15/2006 1,350 $39.98 $53,973 9/15/2006 1,350 $40.01 $54,009 9/15/2006 1,350 $40.89 $55,197 9/15/2006 1,350 $40.97 $55,305 9/15/2006 1,200 $40.09 $48,104 9/15/ $40.01 $36,012 9/15/ $40.12 $30,090 9/15/ $40.06 $24,036 9/15/ $40.08 $24,048 9/15/ $40.91 $24,548 9/15/ $40.89 $18,402 9/15/ $40.09 $12,028 9/15/ $40.87 $12,262 9/15/ $40.97 $12,292 9/15/ $40.03 $6,004 9/15/ $40.88 $6,132 9/15/ $41.08 $6,162 11/17/ ,350 $48.00 $784,800 11/17/2006 4,950 $47.99 $237,567 11/17/2006 3,900 $47.98 $187,122 11/17/2006 3,000 $47.95 $143,840 11/17/2006 2,850 $47.99 $136,762 11/17/2006 2,100 $47.97 $100,730 11/17/2006 2,100 $47.97 $100,744 11/17/ $47.93 $43,140 11/17/ $48.03 $36,

22 11/17/ $48.01 $21,603 11/17/ $48.01 $14,404 11/20/2006 6,600 $48.27 $318,560 11/20/2006 4,950 $48.30 $239,085 11/20/2006 3,450 $48.33 $166,727 11/20/2006 2,250 $48.27 $108,615 11/20/2006 1,800 $50.92 $91,656 11/20/2006 1,200 $48.29 $57,952 11/20/ $48.29 $14,486 11/20/ $48.33 $7,250 11/21/ ,000 $50.63 $4,557,000 11/21/ ,350 $50.70 $1,285,245 11/21/ ,450 $50.79 $937,014 11/21/ ,700 $50.74 $898,098 11/21/ ,850 $50.75 $753,588 11/21/ ,950 $50.81 $708,753 11/21/ ,650 $50.69 $691,964 11/21/ ,450 $50.72 $631,464 11/21/ ,400 $50.81 $579,272 11/21/ ,950 $50.67 $554,800 11/21/2006 6,900 $50.73 $350,060 11/21/2006 6,000 $50.79 $304,760 11/21/2006 5,700 $50.80 $289,560 11/21/2006 5,400 $50.78 $274,212 11/21/2006 5,100 $50.77 $258,944 11/21/2006 4,950 $50.75 $251,229 11/21/2006 3,600 $50.64 $182,304 11/21/2006 3,600 $51.04 $183,744 11/21/2006 3,300 $50.77 $167,530 11/21/2006 2,850 $50.83 $144,875 11/21/2006 2,700 $50.89 $137,394 11/21/2006 2,550 $50.67 $129,217 11/21/2006 2,550 $50.97 $129,965 11/21/2006 2,100 $50.97 $107,044 11/21/2006 2,100 $50.99 $107,072 11/21/2006 1,650 $50.65 $83,567 11/21/2006 1,650 $50.65 $83,578 11/21/2006 1,650 $50.71 $83,666 11/21/2006 1,650 $50.99 $84,139 11/21/2006 1,350 $50.73 $68,481 11/21/2006 1,350 $50.85 $68,652 11/21/2006 1,350 $51.03 $68,895 11/21/2006 1,200 $50.71 $60,856 11/21/2006 1,200 $50.76 $60,912 11/21/2006 1,200 $50.87 $61,040 11/21/2006 1,200 $50.90 $61,080 11/21/2006 1,050 $50.89 $53,438 11/21/2006 1,050 $50.93 $53,473 11/21/ $50.68 $45,612 11/21/ $50.84 $45,756 11/21/ $50.93 $45,840 11/21/ $50.95 $45,

23 11/21/ $50.91 $38,185 11/21/ $50.66 $30,396 11/21/ $50.87 $30,524 11/21/ $51.02 $30,612 11/21/ $50.69 $22,809 11/21/ $50.82 $22,869 11/21/ $50.85 $22,881 11/21/ $50.86 $22,887 11/21/ $50.88 $22,896 11/21/ $50.98 $22,941 11/21/ $51.01 $22,956 11/21/ $51.03 $22,962 11/21/ $50.95 $15,286 11/21/ $51.00 $15,300 11/21/ $50.83 $7,624 11/21/ $50.91 $7,636 11/21/ $50.94 $7,641 11/21/ $51.01 $7,651 11/22/ ,550 $51.13 $1,817,790 11/22/ ,950 $51.65 $565,604 11/22/2006 8,700 $51.71 $449,848 11/22/2006 8,550 $51.70 $442,035 11/22/2006 7,350 $51.14 $375,879 11/22/2006 5,250 $51.66 $271,215 11/22/2006 4,950 $51.16 $253,242 11/22/2006 4,800 $51.15 $245,536 11/22/2006 4,650 $51.63 $240,095 11/22/2006 4,650 $51.65 $240,157 11/22/2006 4,650 $51.74 $240,591 11/22/2006 4,500 $51.69 $232,620 11/22/2006 4,350 $51.15 $222,488 11/22/2006 4,350 $51.69 $224,837 11/22/2006 4,200 $51.64 $216,888 11/22/2006 4,200 $51.68 $217,056 11/22/2006 3,450 $51.71 $178,411 11/22/2006 3,300 $51.43 $169,730 11/22/2006 3,300 $51.67 $170,522 11/22/2006 3,300 $51.75 $170,764 11/22/2006 3,150 $51.63 $162,624 11/22/2006 3,150 $51.67 $162,750 11/22/2006 3,000 $51.73 $155,200 11/22/2006 2,850 $51.17 $145,844 11/22/2006 2,700 $51.17 $138,150 11/22/2006 2,550 $51.21 $130,577 11/22/2006 2,550 $51.73 $131,903 11/22/2006 2,400 $51.27 $123,056 11/22/2006 2,400 $51.30 $123,120 11/22/2006 2,400 $51.57 $123,760 11/22/2006 2,100 $51.61 $108,388 11/22/2006 2,100 $51.72 $108,612 11/22/2006 1,950 $51.46 $100,347 11/22/2006 1,800 $51.28 $92,

24 11/22/2006 1,800 $51.44 $92,592 11/22/2006 1,800 $51.53 $92,748 11/22/2006 1,800 $51.59 $92,856 11/22/2006 1,650 $51.47 $84,931 11/22/2006 1,500 $51.36 $77,040 11/22/2006 1,500 $51.75 $77,630 11/22/2006 1,350 $51.47 $69,480 11/22/2006 1,350 $51.56 $69,606 11/22/2006 1,350 $51.59 $69,651 11/22/2006 1,200 $51.58 $61,896 11/22/2006 1,050 $51.50 $54,075 11/22/2006 1,050 $51.51 $54,082 11/22/2006 1,050 $51.55 $54,124 11/22/2006 1,050 $51.61 $54,187 11/22/ $51.23 $46,110 11/22/ $51.41 $46,266 11/22/ $51.42 $46,278 11/22/ $51.49 $46,344 11/22/ $51.55 $46,398 11/22/ $51.76 $46,584 11/22/ $51.29 $38,470 11/22/ $51.31 $38,480 11/22/ $51.32 $38,490 11/22/ $51.35 $38,515 11/22/ $51.45 $38,585 11/22/ $51.53 $38,650 11/22/ $51.57 $38,680 11/22/ $51.77 $38,825 11/22/ $51.78 $38,835 11/22/ $51.25 $30,752 11/22/ $51.29 $30,772 11/22/ $51.33 $30,796 11/22/ $51.38 $30,828 11/22/ $51.40 $30,840 11/22/ $51.77 $31,064 11/22/ $51.19 $23,034 11/22/ $51.19 $23,037 11/22/ $51.22 $23,049 11/22/ $51.26 $23,067 11/22/ $51.37 $23,115 11/22/ $51.37 $23,118 11/22/ $51.48 $23,166 11/22/ $51.18 $15,354 11/22/ $51.35 $15,404 11/22/ $51.45 $15,436 11/22/ $51.27 $7,690 11/22/ $51.31 $7,697 11/22/ $51.41 $7,712 11/22/ $51.49 $7,723 11/24/2006 6,300 $51.57 $324,870 11/24/2006 6,000 $51.60 $309,600 11/24/2006 3,450 $51.64 $178,

25 11/24/2006 1,650 $51.69 $85,283 11/24/2006 1,350 $51.66 $69,741 11/24/2006 1,350 $51.70 $69,795 11/24/2006 1,200 $51.71 $62,048 11/24/2006 1,200 $51.73 $62,080 11/24/2006 1,050 $51.57 $54,152 11/24/2006 1,050 $51.73 $54,313 11/24/ $51.68 $38,760 11/24/ $51.79 $38,840 11/24/ $51.65 $23,241 11/24/ $51.65 $23,244 11/24/ $51.67 $23,253 11/24/ $51.72 $23,274 11/24/ $51.79 $23,307 11/24/ $51.63 $15,490 11/24/ $51.69 $15,508 11/24/ $51.78 $15,534 11/24/ $51.59 $7,738 11/24/ $51.71 $7,757 11/29/ ,950 $50.13 $1,451,360 11/29/2006 1,350 $50.19 $67,761 11/29/ $50.20 $37,650 11/29/ $50.18 $30,108 11/29/ $50.21 $30,128 11/29/ $50.23 $22,602 11/29/ $50.21 $7,531 11/30/2006 7,800 $50.23 $391,820 11/30/ $50.24 $37,680 11/30/ $50.27 $37,700 11/30/ $50.25 $7,537 11/30/ $50.26 $7,539 12/1/ ,000 $50.97 $1,223,280 12/1/2006 5,100 $50.97 $259,947 12/1/2006 2,700 $50.97 $137,619 12/1/2006 2,300 $50.97 $117,231 12/1/2006 2,100 $50.97 $107,037 12/1/2006 2,000 $50.97 $101,940 12/1/2006 1,900 $50.97 $96,843 12/1/2006 1,900 $50.97 $96,843 12/1/2006 1,700 $50.97 $86,649 12/1/2006 1,600 $50.97 $81,552 12/1/2006 1,600 $50.97 $81,552 12/1/2006 1,400 $50.97 $71,358 12/1/2006 1,200 $50.97 $61,164 12/1/2006 1,200 $50.97 $61,164 12/1/2006 1,100 $50.97 $56,067 12/1/2006 1,000 $50.97 $50,970 12/1/ $50.97 $45,873 12/1/ $50.97 $45,873 12/1/ $50.97 $45,873 12/1/ $50.97 $40,776 12/1/ $50.97 $35,

26 12/1/ $50.97 $35,679 12/1/ $50.97 $35,679 12/1/ $50.97 $25,485 12/1/ $50.97 $25,485 12/1/ $50.97 $25,485 12/1/ $50.97 $25,485 12/1/ $50.97 $25,485 12/1/ $50.97 $15,291 12/1/ $50.97 $10,194 12/1/ $50.97 $10,194 12/1/ $50.97 $10,194 12/1/ $50.97 $5,097 12/1/ $50.97 $5,097 12/4/ ,100 $51.00 $770,100 12/4/2006 8,600 $51.00 $438,600 12/4/2006 8,400 $51.00 $428,400 12/4/2006 8,300 $51.00 $423,300 12/4/2006 8,000 $51.00 $408,000 12/4/2006 7,300 $51.00 $372,300 12/4/2006 6,800 $51.00 $346,800 12/4/2006 5,700 $51.00 $290,700 12/4/2006 5,400 $51.00 $275,400 12/4/2006 4,300 $51.00 $219,300 12/4/2006 3,800 $51.00 $193,800 12/4/2006 3,500 $51.00 $178,500 12/4/2006 2,900 $51.00 $147,900 12/4/2006 2,500 $51.00 $127,500 12/4/2006 2,300 $51.00 $117,300 12/4/2006 2,100 $51.00 $107,100 12/4/2006 1,800 $51.00 $91,800 12/4/2006 1,700 $51.00 $86,700 12/4/2006 1,600 $51.00 $81,600 12/4/2006 1,400 $51.00 $71,400 12/4/2006 1,400 $51.00 $71,400 12/4/2006 1,400 $51.00 $71,400 12/4/2006 1,200 $51.00 $61,200 12/4/2006 1,200 $51.00 $61,200 12/4/2006 1,100 $51.00 $56,100 12/4/2006 1,100 $51.00 $56,100 12/4/2006 1,000 $51.00 $51,000 12/4/ $51.00 $45,900 12/4/ $51.00 $40,800 12/4/ $51.00 $35,700 12/4/ $51.00 $35,700 12/4/ $51.00 $35,700 12/4/ $51.00 $30,600 12/4/ $51.00 $25,500 12/4/ $51.00 $25,500 12/4/ $51.00 $20,400 12/4/ $51.00 $20,400 12/4/ $51.00 $20,400 12/4/ $51.00 $20,