SEC Sues AT&T For Leaking Info To Analysts To Cover Up Drooping Smartphone Sales

from the free-ride-appears-to-be-over dept

AT&T had a damn good ride during the Trump administration. Not only did it convince Trump regulators to effectively lobotomize the nation's top telecom regulator (right before a pandemic, no less), the company got billions in tax breaks for doing effectively nothing. And while the government did sue AT&T over the Time Warner merger, that had more to do with making Rupert Murdoch happy than making life hard on AT&T (AT&T won the lawsuit anyway). All told, AT&T nabbed billions upon billions in regulatory favors, merger approvals, and tax breaks. In exchange the US public saw...58,000 layoffs.

As another indication that AT&T's good times may be slowing down, the SEC filed suit against AT&T this week, accusing the telecom giant of leaking cell phone sales information to analysts and reporters to change their revenue forecasts for the company. This, in turn, let AT&T "beat" analysts' revenue forecasts in the first quarter of 2016, according to the SEC complaint (pdf). Technically, the SEC says AT&T violated the Securities Exchange Act and the SEC's Regulation "fair disclosure" rules, which "prohibit selective disclosures by issuers of material nonpublic information to securities analysts."

Granted, this will now see a year+ of litigation ending it a tiny, pathetic fine (that could then be negotiated away to nothing), but it's still interesting to see regulators trying. From the SEC announcement:

"The SEC remains committed to assuring an even playing field by taking appropriate action, including litigation when necessary, against public companies and their executives who selectively disclose material nonpublic information," added Melissa R. Hodgman, Acting Director of the Division of Enforcement."

Note that this four year investigation saw no charges during the Trump administration. Something AT&T tries to claim suggests that the company is innocent in a press release:

"AT&T claimed in a response Friday that "there was no disclosure of material nonpublic information and no violation" and said it will fight the lawsuit. AT&T also said that the SEC "spen[t] four years investigating this matter," but no charges were brought during the Trump administration. The lawsuit was filed about six weeks after President Biden appointed Democrat Allison Lee as acting chair for the SEC; although the SEC is an independent agency, its commissioners and chair are appointed by the president."

Granted I've spent several decades watching AT&T get "creative" in terms of earnings reports, particularly when it came to trying to hide the company's traditional broadband subscriber losses due to a lack of upgrades. This is also the same company that professed its innocence when it was sued by the US government for ripping off the hearing impaired, making bills more complicated so it would be easier for "crammers" to rip off its customers, turning a blind eye as drug dealers ran scams on its directory assistance customers, and for ripping off a program for low income Americans, so context matters.

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Filed Under: fair disclosure, revenue forecasts, sec
Companies: at&t

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  1. icon
    TKnarr (profile), 10 Mar 2021 @ 9:27am


    The SEC may just have noticed that certain analysts changed their projections shortly before the financial call for no obviously-apparent reason, and wondered what those analysts knew that others didn't. And I'm sure in that case the analysts showed the SEC the disclosures they got, because that gets them right off the hook for any impropriety. But you're right, even in that case it should've been easy for AT&T to show that it sent the same thing out to all analysts and some of them just must've ignored it (which isn't on AT&T).

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