AT&T to Pay $6.25M to Settle Charges it Violated SEC’s Regulation FD
AT&T’s agreement to pay a $6.25 million civil penalty to settle SEC allegations it and three of its investor relations executives violated the commission’s fair disclosure regulation (Regulation FD) (see 2210170044) took more than a month of negotiation and preparation before the proposed final judgments could be presented to U.S. District Judge Paul Engelmayer for Southern New York for approval, according to documents filed Friday (docket 1:21-cv-01951). AT&T’s consent to its final judgment was signed Oct. 26 by Assistant General Counsel Joseph Tocco before a notary public.
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The three IR executives, Christopher Womack, Kent Evans and Michael Black, each agreed to pay a $25,000 fine within 30 days for their roles in conspiring to selectively disclose “material nonpublic information” during private, one-on-one calls to analysts at 20 Wall Street firms. The aim was to convince the analysts to lower their consensus forecast on AT&T’s Q1 2016 revenue amid lower than projected smartphone sales that quarter. AT&T and the three executives consented to their final judgments “without admitting or denying the SEC’s allegations,” said Victor Suthammanont, senior SEC trial counsel, in a letter to Engelmayer.
The scheme worked as intended, according to the SEC’s March 2021 complaint. The analyst firms that received the calls from Womack, Evans and Black “promptly adjusted their revenue estimates, resulting in a reduced consensus revenue forecast” for Q1 2016 that AT&T beat when it announced quarterly earnings in April 2016, it said. Had the three not intervened, AT&T would have incurred its third straight quarterly revenue miss, it said.
Then-Chief Financial Officer John Stephens initiated the scheme when he instructed the IR department to "work" the analysts who still had AT&T smartphone revenue projections too high, said the complaint, though it didn't cite Stephens by name and accused him of no personal wrongdoing. Efforts Monday to reach Stephens for comment were unsuccessful. He retired from AT&T in March 2021. Womack, Evans and Black still work for AT&T in IR, per their LinkedIn profiles.
The parties agreed to the final judgments after a Sept. 26 mediation conference before U.S. Magistrate Judge Jennifer Willis and after further negotiations “over the ensuing weeks,” Suthammanont told Engelmayer in the letter. Engelmayer had ordered the SEC and AT&T to submit a post-mediation joint status report by Oct. 17, but twice granted them extensions, once to Oct. 31 and again to Dec. 5.
AT&T agrees its final judgment “permanently restrains and enjoins” the company from violating Section 13(a) of the Securities Exchange Act and Regulation FD, said the consent signed by Assistant General Counsel Tocco. Similar terms are imposed on Womack, Evans and Black in their individual final judgments. AT&T agrees it won’t seek reimbursement or indemnification for payment of the $6.25 million penalty, including through any insurance policy, and it won’t seek a tax deduction or credit for the fine paid.
The settlement resolves only the claims asserted against AT&T in the March 2021 civil action, said AT&T’s consent. It acknowledges the SEC made “no promise or representation” about “any criminal liability that may have arisen or may arise from the facts underlying this action or immunity from any such criminal liability.” AT&T waives any claim of double jeopardy, it said.
AT&T agrees to refrain from making any public statement “denying, directly or indirectly, any allegation in the complaint or creating the impression that the complaint is without factual basis,” said the consent. AT&T agrees that if it breaches the agreement not to publicly deny the allegations, the SEC may petition the court to vacate the final judgment “and restore this action to its active docket,” it said.