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AT&T Was Charged With Spinning Stock Analysts About Upgrades Now SJ Denied

By Matthew Russell Lee, Patreon
BBC - Guardian UK - Honduras - ESPN

SDNY COURTHOUSE, Sept 8 – 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 and below.

On September 8, Judge Engelmayer denied AT&T's and the SEC's motions for summary judgment, calling this a rare such case that it heading to trial. From the decision:

From May 28: 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.

On December 1, Judge Engelmayer entered an amended case management plan, with motions  due by May 3, expert discovery by April 15.

On March 22, 2022, yet another schedule: "This Third Amended Civil Case Management Plan Order... Any joint stipulations of fact for summary judgment shall be filed by April 26, 2022. Any motions for summary judgment shall be made by the moving party on or before May 3, 2022, with any opposition filed by May 20, 2022 and any reply filed by May 31, 2022. May 3, 2022 shall be the deadline to file any motion to strike experts. May 20, 2022 shall be the deadline to file responses to any motions to strike experts. May 31, 2022 shall be the deadline to file any replies to any motions to strike experts. Counsel for the parties have conferred and their present best estimate of the length of trial is 15 days. (Signed by Judge Paul A. Engelmayer on 3/22/2022)."

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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