WASHINGTON (Reuters) – The U.S. Securities and Exchange Commission on Friday sued AT&T Inc and three executives for allegedly disclosing nonpublic information to research analysts to avoid falling short of quarterly expectations in 2016.
AT&T allegedly learned in March 2016 a steeper-than-expected decline in first quarter smartphone sales would leave the company falling short of analysts’ estimates, so phone company’s chief financial officer told investor relations employees to “work the analysts” to get them to lower their estimates, the SEC said in a complaint filed in New York.
The agency said investor relations executives Christopher Womack, Michael Black, and Kent Evans made private, one-on-one phone calls to analysts at approximately 20 firms, disclosing material nonpublic information in violation of securities laws.
Counsel for AT&T, Womack, Black and Evans did not respond immediately to requests for comment. AT&T issued a statement:
“Not only did AT&T publicly disclose this trend on multiple occasions before the analyst calls in question, but AT&T also made clear that the declining phone sales had no material impact on its earnings,” it said.
The SEC said the leaks prompted analysts to lower their forecasts, enabling AT&T to report better-than-expected revenue when it announced quarterly results on April 26, 2016. AT&T’s share price rose 1.7% the next day.
Reporting by Chris Prentice and Eric Beech; Additional reporting by Jon Stempel in New York; Editing by Mohammad Zargham and David Gregorio