WASHINGTON (Reuters) – The U.S. Securities and Exchange Commission on Friday sued AT&T Inc. and three executives for allegedly disclosing non-public information to research analysts to avoid falling short of quarterly expectations in 2016.
AT&T allegedly learned in March 2016 that a stronger-than-expected drop in first-quarter smartphone sales would leave the company down on analysts’ estimates, so the chief financial officer of the phone company directed investor relations employees to “work analysts” to get them to lower their estimates, the SEC said in a lawsuit.
The SEC said investor relations executives Christopher Womack, Michael Black and Kent Evans made private phone calls to analysts at about 20 companies, which revealed non-public material information that violated securities laws.
AT&T denied the allegations in a lengthy statement posted online, stating: “AT&T not only publicly revealed this trend on several occasions before the analyst in question, but AT&T also made it clear that declining sales of phones had no material impact on their earnings. ”
The firm also said its main business is the sale of wireless services, and that AT&T does not mean a decrease in revenue from equipment.
Councilors Womack, Black and Evans did not immediately respond to requests for comment.
The SEC said the leaks caused analysts to lower their forecasts, allowing AT&T to report better-than-expected revenue when it announced quarterly results on April 26, 2016. AT&T shares rose 1.7% the next day.
The allegations would represent a violation of the regulation that prohibits companies from disclosing meaningful information to stock analysts without sharing it with the public, the SEC said. The lawsuit was filed in Manhattan.
Additional reports by Eric Beech in Washington and Jon Stempel in New York; Edited by Mohammad Zargham, David Gregorio and Sonya Hepinstall