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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  • identicon
    Anonymous Coward, 10 Mar 2021 @ 8:55am

    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.

    I wonder if the SEC went to AT&T before the lawsuit and said "we suspect this happened. Show us it didn't or lawsuit." That there's now a lawsuit suggests AT&T couldn't or wouldn't give evidence to clear themselves. Because really, if stuff was disclosed, it would seem to me to be pretty easy to show it was disclosed fairly, and if stuff wasn't disclosed, then why would the SEC think that it was?

    reply to this | link to this | view in chronology ]

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

      Re:

      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).

      reply to this | link to this | view in chronology ]

  • This comment has been flagged by the community. Click here to show it
    icon
    Koby (profile), 10 Mar 2021 @ 9:08am

    Record High Revenue

    the company got billions in tax breaks for doing effectively nothing.

    Those tax breaks resulted in the government collecting more money in taxes than ever before, thanks to the Laffer Curve effect. Putting the tax breaks into place was a very smart move. Socialists get so jealous when that happens.

    reply to this | link to this | view in chronology ]

    • identicon
      Anonymous Coward, 10 Mar 2021 @ 10:26am

      Re: Record High Revenue

      What is a socialist?

      You seem to be amazed at what can influence tax revenues, did you participate in any economics instruction?

      The government getting high revenue is not necessarily a good thing, why do you assume it is?

      reply to this | link to this | view in chronology ]

      • icon
        Koby (profile), 10 Mar 2021 @ 11:47am

        Re: Re: Record High Revenue

        The government getting high revenue is not necessarily a good thing, why do you assume it is?

        I agree that it is not necessarily a good thing. Governments are addicted to spending, and higher tax intake will not ameliorate the situation. However, socialists typically frame a loss of tax revenue as a bad thing. Thus, a tax cut is considered to be detrimental. But what if companies could enjoy a lower tax rate, and it would also result in higher government revenue at the same time? This would be considered a win-win, regardless of where you stand on the spending issue.

        So with that said, I do assume that the author is demonizing tax cuts. If the author would like to clarify, and state "AT&T receiving a tax break is bad because a tax break will likely lead to higher government revenue, and I would prefer to see the government starved of revenue instead", a position that I don't personally take, then I would take back my assumption.

        reply to this | link to this | view in chronology ]

        • identicon
          Anonymous Coward, 10 Mar 2021 @ 1:30pm

          Re: Re: Re: Record High Revenue

          "socialists typically frame a loss of tax revenue as a bad thing"

          I have not run into this framing, perhaps I read different material which did not mention it. Any reasonable politician, regardless of party affiliation, who is responsible for budgetary concerns would be alarmed at a short fall in revenue causing the need to borrow more. Why would a "capitalist", or any other "ist" not be concerned?

          "a tax cut is considered to be detrimental."

          A tax cut for the super rich and a tax increase for the poor (thanks donald) is certainly not a good idea for the economy in general. I can not imagine a situation where it would, can you?

          It's not tax cuts or tax increases that are a problem, it is who is required to pay said taxation and how much is left for them to live on.

          I do not care if a pizza cost an additional five cents because the pizza joint is forced to supply its employees with healthcare insurance assistance. I do not want to eat a pizza prepared by employees that do not get sick leave or healthcare.

          reply to this | link to this | view in chronology ]

        • icon
          PaulT (profile), 11 Mar 2021 @ 1:37am

          Re: Re: Re: Record High Revenue

          "However, socialists typically frame a loss of tax revenue as a bad thing"

          Well, yeah, lower tax revenue means that the government is less able to pay for things, which is a problem when much of US industry is geared toward refusing to pay people a living wage and forcing them to depend on government programs.

          "Thus, a tax cut is considered to be detrimental"

          A tax cut for the wealthy is considered a bad thing because trickle down economics is proven bullshit. A consumer driven economy is better driven by the poor spending more money (and they will, since most people spend most of what they earn) than it is by handing it to existing billionaires.

          "But what if companies could enjoy a lower tax rate, and it would also result in higher government revenue at the same time? This would be considered a win-win"

          It would. Can you document any instances of this actually happening?

          reply to this | link to this | view in chronology ]

          • icon
            Toom1275 (profile), 12 Mar 2021 @ 1:18am

            Re: Re: Re: Re: Record High Revenue

            A tax cut for the wealthy is considered a bad thing because trickle down economics is proven bullshit.

            Same with the Laffer Curve.

            reply to this | link to this | view in chronology ]

    • identicon
      Anonymous Coward, 10 Mar 2021 @ 11:30am

      Re: Record High Revenue

      How do you know that the increase in tax revenue can be directly attributed to these tax breaks?

      reply to this | link to this | view in chronology ]

      • identicon
        Anonymous Coward, 10 Mar 2021 @ 11:32am

        Re: Re: Record High Revenue

        And also, if there is a direct link, does the increase in tax revenue exceed the amount lost by the tax breaks, creating a net positive effect?

        reply to this | link to this | view in chronology ]

    • icon
      James Burkhardt (profile), 10 Mar 2021 @ 11:38am

      Re: Record High Revenue

      I'm really going to need to see a citation on that claim. Adjusted for inflation, 2018 revenues were lower than 2017 revenues. 2018 revenues were significantly below estimates made before the Tax Cuts and Jobs Act, indicating that growth did not replace lost revenue.

      The nature of our economy and its growth and inflation means that most years we will collect more taxes than the year prior, meaning most years more taxes are collected then had ever been collected before. That statistic means nothing.

      What we know is that we came in 8% short of projections for income tax collection made before the TCJA. The bulk of that shortfall came from a 40% shortfall in corporate income tax revenue compared to estimates.

      As was noted at the time, the tax cuts required super-charged economic growth to balance out, seen as highly unlikely for an economy that had already had one of the longest sustained periods of growth in american history. We did not see that growth and comparing Budget estimates to actual results shows that fact clearly.

      reply to this | link to this | view in chronology ]

    • icon
      PaulT (profile), 11 Mar 2021 @ 1:20am

      Re: Record High Revenue

      "Those tax breaks resulted in the government collecting more money in taxes than ever before"

      Citation needed.

      reply to this | link to this | view in chronology ]

  • identicon
    Anonymous Coward, 10 Mar 2021 @ 10:46am

    Wait til you see how 'hollow' AT&T is inside due to years and years of executives stealing everything that wasn't nailed down, and pumping billions to offshore accounts.

    AT&T is due for a major collapse once this goes public, and we see the scale of the internal embezzlement. This is why AT&T have pulled back on so many services. They use the savings to prop-up other parts of the company where everything is effectively gone.

    It's just a question of which executive breaks ranks and flees abroad first which will start the ball rolling.

    reply to this | link to this | view in chronology ]


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