By Matthew Russell Lee, Patreon
BBC - Guardian UK - Honduras - ESPN
SDNY COURTHOUSE, May 28 – AT&T and executives in its Investor Relations department have been sued by the SEC for selective disclosures to stock analysts at 20 Wall Street firms, in alleged violation of Regulation FD.
On May 28, U.S. District Court for the Southern District of New York Judge Paul A. Engelmayer held a proceeding. Inner City Press live tweeted it, here:
now a "reverse insider trading" case SEC v. AT&T Inc. et al, 21-cv-01951.
SEC says AT&T massaged stock analysts to lower their estimates, to not have to put out an 8-K. SEC says it will depose current AT&T CEO. Inner City Press will live tweet, thread below Matthew Russell Lee and 5 others
SEC lawyers says the IR department in AT&T decided to try to lower analysts' estimates by calling them one by one, to not be viewed as under-performing the estimates.
Judge Engelmayer calls it "bleeding out" the information. SEC agrees with the characterization. ]
Judge Engelmayer: What about document collection?
SEC: We got a number of documents but the scope of the periods, as goes to materiality, may extend... So we'll ask for more, to address their defenses. We think they'll hire experts. We too have hired experts.
Judge Engelmayer: What about discovery aimed at third parties like the analysts? SEC: Yes we have production from these broker-dealers. AT&T says the analysts don't support our case. Some of the info we teased out in the Wells process disputes that...
SEC: We find that the analysts are very close to the I.R. department. This is where there access is. They don't want to go against them. Judge Engelmayer: AT&T?
Richard Samson Krumholz representing AT&T: The SEC is criticizing truthful communications.
Krumholz for AT&T: No one has testified than any material non-public information was shared. These were not material metrics, and they were already public: upgrade rates, purchase of new phones. AT&T doesn't make phones. We're in the wireless business
AT&T: There was no startle value in the stock price. So the notion of the motive suggested by counsel is not accurate. None of the analysts though, Oh my God, we need to go to our compliance department.
Judge Engelmayer: Have you received discovery from the SEC? AT&T: We were allowed to come to their office and review transcripts and take notes. We were provided some of the analysts' testimony. We've seen snippets of analysts' notes. I wasn't that involved in that process.
Judge Engelmayer: So what is the scienter requirement?
AT&T: Recklessness. So we don't believe this is even a close call under Reg FD. 17 CFR 240...
Judge Engelmayer: Did you represent AT&T during the investigatory or Wells process? Lawyer: It wasn't me.
Judge Engelmayer: I think the proposed fact discovery period is too long.
Inner City Press will continue to report on this case.
The three individual defendants are Christopher C. Womack, Kent D. Evans and Michael J. Black.
The case is Securities and Exchange Commission v. AT&T Inc. et al., 21-cv-1951 (Engelmayer)
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