U.S. SEC sues AT&T, executives for leaking information to analysts

The U.S. Securities and Exchange Commission has 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 that a steeper-than-expected decline in first quarter smartphone sales would leave the company falling short of analysts' estimates, so the phone company's chief financial officer directed investor relations employees to "work the analysts" to get them to lower their estimates, the SEC said in a court filing.

The SEC 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.

AT&T denied the allegations in a lengthy statement published online, noting: "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."

The firm also said its core business is selling wireless service, and a decline in equipment revenue is not material to AT&T. 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.