Student lender replaces its CEO

First Marblehead turns to cofounder who resigned in '05

Struggling student lender First Marblehead Corp. replaced its chief executive with company founder Daniel M. Meyers yesterday, despite his resignation from the company in 2005 over lavish gifts to a client's executive.

First Marblehead also said it received a long-awaited $132.7 million investment from a Goldman Sachs unit. Together the actions drove up shares of the Boston lender 71.3 percent in trading yesterday.

Three years ago Meyers stepped down after the company's board learned he spent $32,000 of his own money on an expensive watch and other gifts to an executive at Bank of America, at the time a big client. Such exchanges raise ethics questions because they could give the appearance that business decisions were swayed.

The board replaced Meyers with Jack Kopnisky, its president and chief operating officer, previously an executive for Ohio bank KeyCorp.

But yesterday First Marblehead's directors once again embraced Meyers, now 45, as the leader to guide the Boston lender through the crisis in the capital markets. The company can no longer sell bundles of student loans to investors, and in May laid off 500 people, more than half of its workforce, in Boston and Medford.

"We believe there is no better person now to lead First Marblehead than our cofounder Dan Meyers," said lead director William Berkley in a statement.

Through a spokeswoman, Berkley, Meyers, and Kopnisky declined to be interviewed yesterday, as did executives at Goldman Sachs. Kopnisky, 52, will step down from the board Aug. 31; Meyers will start Sept. 1.

As for Meyers's lavish gifts, First Marblehead spokeswoman Janice Walker said they did not violate the company's ethics policy at the time because Meyers bought them with his own money. The policy has since been changed to cover nearly all gifts.

"It was a lapse in judgement at the time, but it wasn't a violation," she said.

In a research note Sandler O'Neill & Partners analyst Michael Taiano called the reinstatement of Meyers "somewhat surprising given the unusual circum stances from which he left," but in an interview said leaders appeared to be more concerned with the immediate challenges the company faces. "The circumstances have changed for the company," he said.

However, Taiano kept his "sell" rating on the stock, citing continuing problems in the credit markets. Shares in First Marblehead rose $2.14 to close at $5.14 in New York Stock Exchange trading yesterday, their highest since months.

Also yesterday, the firm reported a fourth-quarter loss of about $57 million, or 57 cents per share. That compares with a profit of $78 million, or 83 cents per share, in the year-ago period. Excluding a $60 million charge, analysts had expected a loss of 22 cents per share.

In December, Goldman had purchased $59.8 million worth of stock in the company and said previously it might buy up to $200.7 million more, which would give it 20 percent of the total shares. In a securities filing yesterday First Marblehead said Goldman's further investment was limited to $132.7 million because of a decline in its share price.

Meyers, who also will join the board of First Marblehead, cofounded the company in 1991 and oversaw its growth into a powerhouse middleman company providing loan services both for colleges and banks looking to lend to their students. According to filings, he holds about 7 percent of First Marblehead shares.

At the time of his departure in 2005 First Marblehead had built big partnerships with institutions such as Bank of America and Citizens Financial Group Inc. While the banks would provide the money for the loans, First Marblehead would administer the loans and structure them into securities that could be sold to investors. But the collapse of credit markets left First Marblehead unable to sell the securities, losing clients as a result.

Material from the Associated Press was used in this report. Ross Kerber can be reached at kerber@globe.com.