Case 1:21-cv-01951 Document 1 Filed 03/05/21 Page 1 of 30
`
`Richard R. Best
`Sanjay Wadhwa
`George N. Stepaniuk
`Alexander M. Vasilescu
`Victor Suthammanont
`Thomas Peirce*
`David Zetlin-Jones
`SECURITIES AND EXCHANGE COMMISSION
`New York Regional Office
`200 Vesey Street, Suite 400
`New York, New York 10281-1022
`(212) 336-5674 (Suthammanont)
`Email: SuthammanontV@sec.gov
`*Not Admitted in SDNY
`
`UNITED STATES DISTRICT COURT
`SOUTHERN DISTRICT OF NEW YORK
`
`
`SECURITIES AND EXCHANGE COMMISSION,
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`
`
`
`Plaintiff,
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`
`
`
`
`
`21 Civ. ____ ( )
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`ECF Case
`
`COMPLAINT
`AND JURY DEMAND
`
`
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`Plaintiff Securities and Exchange Commission (“Commission”), for its Complaint against
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`Defendants AT&T, Inc. (“AT&T”), Christopher C. Womack (“Womack”), Kent D. Evans
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`(“Evans”), and Michael J. Black (“Black”) (collectively, “Defendants”) alleges as follows:
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`SUMMARY OF THE ALLEGATIONS
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`In March and April of 2016, Defendant AT&T, aided and abetted by Defendants
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`1.
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`Womack, Evans, and Black, executives in its Investor Relations (“IR”) Department, repeatedly
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`violated Regulation FD (Fair Disclosure)—a Commission rule aimed at promoting investor
`
`
`AT&T, INC.,
`CHRISTOPHER C. WOMACK,
`KENT D. EVANS, and
`MICHAEL J. BLACK,
`
`
`-- against --
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`Defendants.
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`

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`Case 1:21-cv-01951 Document 1 Filed 03/05/21 Page 2 of 30
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`confidence in the integrity of the capital markets by prohibiting selective disclosures by issuers
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`of material nonpublic information to securities analysts, among others—by disclosing AT&T’s
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`projected and actual financial results during phone calls Womack, Evans, and Black held with
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`equity stock analysts from approximately 20 Wall Street firms on a one-on-one basis.
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`2.
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`In early March 2016, AT&T and its executives, including Womack, Evans, and
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`Black, learned that a steeper-than-expected decline in smartphone sales by AT&T would cause
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`its revenue for the first quarter of 2016 (“1Q16”) to fall short of analysts’ estimates. In fact,
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`AT&T’s “equipment upgrade rate” (i.e., the rate at which existing customers purchased new
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`smartphones) would be a record low for the company, with the result that AT&T’s consolidated
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`gross revenue was expected to fall more than $1 billion below the consensus estimate—that is,
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`the average of the forecasts for all analysts covering AT&T.
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`3.
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`Fearful of a revenue miss at the end of the quarter, AT&T’s Chief Financial
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`Officer instructed AT&T’s IR Department to “work[] the analysts who still have equipment
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`revenue too high.”
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`4.
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`In turn, the Director of Investor Relations (“IR Director”) instructed Womack,
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`Evans, and Black to speak to analysts privately on a one-by-one basis about their estimates in
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`order to “walk the analysts down”—i.e., induce analysts to reduce their individual estimates. The
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`goal was to induce enough analysts to lower their estimates so that the consensus revenue
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`estimate would fall to the level that AT&T expected to report to the public—i.e., AT&T would
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`not have a revenue miss, which would have been the company’s third consecutive quarterly miss.
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`5.
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`Between March 9 and April 26, 2016, Womack, Evans, and Black called
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`approximately 20 separate analyst firms and spoke to analysts in order to induce them to lower
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`their revenue estimate and thereby reduce the consensus estimate to the level that AT&T
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`Case 1:21-cv-01951 Document 1 Filed 03/05/21 Page 3 of 30
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`expected to report. During these calls, Womack, Evans, and Black intentionally disclosed
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`material nonpublic information regarding AT&T’s results to date. Depending on the firm and the
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`date of the call, Womack, Evans, and Black disclosed AT&T’s projected or actual equipment
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`upgrade rate, its projected or actual wireless equipment revenue amount (presented as a
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`percentage decrease compared with the first quarter of 2015), or both.
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`6.
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`On some of Black’s calls to analysts, he represented to the analysts that he was
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`conveying publicly available consensus estimates, when in fact he was providing AT&T’s own
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`internal projected or actual results. Black knew or recklessly disregarded that he was
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`misrepresenting the information he was conveying to analysts because he tracked AT&T’s
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`calculation of consensus estimates—none of which matched the information he provided on the
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`calls with analysts.
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`7.
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`Womack, Evans, and Black knew or recklessly disregarded that the information
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`that they provided to the analysts during these calls was both material and nonpublic. Among
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`other things, they knew that they were prohibited from selectively disclosing AT&T’s internal
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`revenue and related data to analysts, and they did so with the expectation that the analysts would
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`act on the information to substantially reduce the estimates they published for investors. Their
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`knowing or reckless conduct is also evidenced by, for example, Black’s efforts to disguise the
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`internal information he was presenting as “consensus,” the fact that the analysts’ initial estimates
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`deviated so far from AT&T’s projected and actual results that the group needed to call
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`approximately 20 separate firms to bring the consensus down to where AT&T could meet it, and
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`that they presented the equipment upgrade rate as a “record low” during some of these calls.
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`8.
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`The analyst firms that received these calls promptly adjusted their revenue
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`estimates, resulting in a reduced consensus revenue forecast for 1Q16 that AT&T beat when it
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`announced earnings on April 26, 2016, in a Form 8-K filed with the Commission.
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`VIOLATIONS
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`9.
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`By engaging in the conduct set forth in this Complaint, Defendant AT&T
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`violated, and Defendants Womack, Evans, and Black aided and abetted AT&T’s violations of,
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`Section 13(a) of the Exchange Act [15 U.S.C. § 78m(a)] and Regulation FD [17 C.F.R.
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`§ 243.100 et seq.] thereunder.
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`10.
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`Unless Defendants are permanently restrained and enjoined, they will again
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`engage in the acts, practices, and courses of business set forth in this Complaint, and in acts,
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`practices, and courses of business of similar type and object.
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`NATURE OF THE PROCEEDING AND RELIEF SOUGHT
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`11.
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`The Commission brings this action pursuant to the authority conferred upon it by
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`Sections 21(d)(1), (d)(3), and (d)(5) of the Exchange Act [15 U.S.C. §§ 78u(d)(1), (d)(3), and
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`(d)(5)] seeking a final judgment: (a) permanently restraining and enjoining AT&T, Womack,
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`Evans, and Black from engaging in the acts, practices, and courses of business alleged herein;
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`and (b) imposing civil monetary penalties on AT&T, Womack, Evans, and Black pursuant to
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`Section 21(d)(3) of the Exchange Act [15 U.S.C. § 78u(d)(3)].
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`JURISDICTION AND VENUE
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`12.
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`This Court has jurisdiction over this action pursuant to Sections 21(d) and (e), and
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`27 of the Exchange Act [15 U.S.C. §§ 78u(d), 78u(e), and 78aa]. Defendants, directly or
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`indirectly, made use of the means or instruments of transportation or communication in, and the
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`means or instrumentalities of, interstate commerce in connection with the transactions, acts,
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`practices, and courses of business alleged herein.
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`13.
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`Venue is proper in the Southern District of New York pursuant to Section 27 of
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`the Exchange Act [15 U.S.C. § 78aa]. Among other things, AT&T transacts business within this
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`district, including but not limited to providing services and operating retail establishments within
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`the district, and AT&T issues stock traded on the New York Stock Exchange, and Defendants
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`Womack, Evans, and Black made multiple telephone calls to stock analysts based in this district.
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`DEFENDANTS
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`14.
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`AT&T, a Delaware corporation headquartered in Dallas, Texas, is a
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`telecommunications company. AT&T’s stock is registered with the Commission pursuant to
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`Section 12(b) of the Exchange Act and is traded on the New York Stock Exchange under the
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`ticker “T.”
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`15. Womack, age 54, is a resident of Columbia, New Jersey, and an Executive
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`Director in AT&T’s IR Department. During the relevant period, Womack worked in AT&T’s
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`Bedminster, New Jersey office.
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`16.
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`Evans, age 64, is a resident of Brookhaven, Georgia, and an Associate Vice
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`President in AT&T’s IR Department. During the relevant period, Evans worked in AT&T’s
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`Atlanta, Georgia office, where AT&T’s Mobile Division is located.
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`17.
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`Black, age 56, is a resident of Bloomsbury, New Jersey, and a Finance Director in
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`AT&T’s IR Department. During the relevant period, Black worked in AT&T’s Bedminster, New
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`Jersey office.
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`BACKGROUND ON REGULATION FD
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`18.
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`Regulation FD prohibits issuers or persons acting on their behalf from disclosing
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`material nonpublic information to, among others, securities analysts, without disclosing that
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`information to the public. One of the primary purposes of Regulation FD is to prohibit issuers
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`from selectively providing nonpublic guidance to securities analysts regarding earnings
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`forecasts. In the adopting release for Regulation FD, for example, the Commission explained:
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`One common situation that raises special concerns about selective
`disclosure has been the practice of securities analyst seeking
`‘guidance’ from issuers regarding earnings forecasts. When an
`issuer official engages in a private discussion with an analyst who
`is seeking guidance about earnings estimates, he or she takes on a
`high degree of risk under Regulation FD. If the issuer official
`communicates selectively to the analyst nonpublic information that
`the company’s anticipated earnings will be higher than, lower than,
`or even the same as what analysts have been forecasting, the issuer
`will likely have violated Regulation FD. This is true whether the
`information about earnings is communicated expressly or through
`indirect “guidance,” the meaning of which is apparent though
`implied.
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`Regulation FD, Rule 100; Final Rule: Selective Disclosure and Insider Trading, Exchange Act
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`Rel. No. 43154, 65 Fed. Reg. 51, 721 (Aug. 15, 2000).
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`19. Where a selective disclosure of material nonpublic information is “intentional,” as
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`defined in Regulation FD, issuers must make a public disclosure simultaneously with the
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`selective disclosure.
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`20.
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`Stock analysts employed by financial institutions such as investment banks
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`publish estimated forecasts of AT&T’s and other issuers’ financial performance for the benefit of
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`their investor clients. Analysts forecast financial performance by considering market-wide and
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`industry-wide trends, public disclosures by issuers, and other research, including one-on-one
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`conversations with employees at issuers such as AT&T. Regulation FD prohibits the disclosure
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`Case 1:21-cv-01951 Document 1 Filed 03/05/21 Page 7 of 30
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`by the issuer of material nonpublic information during such discussions, absent a simultaneous
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`public disclosure of the same information.
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`21.
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`Financial-research companies aggregate analyst forecasts and report the average
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`as “consensus estimates.” When covering AT&T’s and other issuers’ quarterly and annual
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`financial results, news outlets and analysts compare the actual results to the consensus estimates.
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`When actual results fall short of analyst estimates, i.e., “miss consensus,” investors and markets
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`typically treat such results as negative news for the issuer.
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`FACTS
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`A.
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`AT&T’s IR Department
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`22.
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`As a public company, AT&T maintains an IR Department whose principal
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`function is to provide investors and analysts, among others, with accurate information
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`concerning the company’s affairs in order to assist investors and investment funds (i.e., “buy-
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`side”) and brokerage or institutional analysts (i.e., “sell-side”) in making informed decisions
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`regarding their potential AT&T investments and recommendations.
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`23. Within AT&T’s IR Department, Womack and Black were principally responsible
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`for communicating with sell-side research analysts who covered AT&T.
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`24.
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`Evans was a subject-matter expert for AT&T’s wireless business. His role was to
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`communicate with both buy-side investors and sell-side analysts about the wireless business and
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`to keep others in the IR department up to date about key trends within that business segment.
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`25.
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`As members of AT&T’s IR Department, Womack, Evans, and Black received
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`periodic training on Regulation FD and were familiar with its proscriptions against the selective
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`disclosure of material nonpublic information.
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`26.
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`The materials used in AT&T’s Regulation FD training provided to the IR
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`Department specifically informed the IR Department personnel that AT&T’s revenue and sales
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`of smartphones were types of information generally considered “material” to AT&T investors.
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`27.
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`Accordingly, Womack, Evans, and Black, while engaged in the conduct described
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`in this Complaint, knew or recklessly disregarded that the selectively disclosed information
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`concerning AT&T’s revenue and smartphone sales was material for purposes of Regulation FD.
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`B.
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`
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`AT&T’s Reduced Smartphone Sales Resulted in Fourth Quarter 2015 Revenue Miss
`
`(i)
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`28.
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`Overview of Wireless Equipment Revenue Reporting by AT&T
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`AT&T reported the revenue it derived from the sales of smartphones to cellular
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`subscribers in its financial statements filed with the Commission on Forms 10-Q and 10-K, as
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`well as in earnings releases filed on Forms 8-K, as wireless equipment revenue.
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`29. When AT&T reported its wireless equipment revenue in its quarterly earnings
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`releases, it provided as a comparison the percentage increase or decrease from the same quarter
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`of the prior year, e.g., 1Q16 against the first quarter of 2015 (“1Q15”).
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`30.
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`AT&T publicly disclosed the rate at which its subscribers upgraded their
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`smartphones through AT&T (i.e., the “postpaid upgrade rate”) in “Investor Briefing”
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`publications that it released contemporaneously with the earnings releases and documents that it
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`filed with the Commission. AT&T made the Investor Briefings available on its website.
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`Factors Resulting in Decreased Wireless Equipment Revenue for AT&T in 2015
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`Beginning in 2015, a series of factors caused a reduction in wireless equipment
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`(ii)
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`31.
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`revenue.
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`32.
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`First, within the two years prior to 1Q16, AT&T changed the business model by
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`which it sold smartphones to subscribers. Whereas it previously subsidized the purchase of a
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`smartphone by offering its customers significant discounts on the purchase price of the phone,
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`Case 1:21-cv-01951 Document 1 Filed 03/05/21 Page 9 of 30
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`AT&T began charging its customers full price for phones, payable over time in installments.
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`Customers paying full price for a phone (for example, $600 for a $600 phone instead of $200 for
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`the same phone under the previous subsidized model) were more likely to hold onto that phone
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`longer, resulting in customers trading in their phones for upgrades less frequently.
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`33.
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`Second, in late 2015, the newest version of one manufacturer’s smartphone
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`offered fewer improvements over the previous model than prior new versions, diminishing the
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`trade-in demand that typically accompanied that manufacturer’s previous phone releases.
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`34.
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`Third, smartphone manufacturers began offering leasing and other installment
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`payment programs for their phones directly to wireless consumers. As a result, customers were
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`more likely to buy their phones from these manufacturers, as opposed to through AT&T, than
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`they were in the past.
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`35.
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`Analysts covering AT&T failed to appreciate the magnitude of the effect these
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`trends would have on AT&T’s wireless equipment revenue. In the fourth quarter of 2015
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`(“4Q15”), AT&T’s reported revenue fell $600 million short of analysts’ consensus estimate, due
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`in large part to analysts’ overestimation of AT&T’s wireless equipment revenue. AT&T’s
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`reported revenue also fell below the consensus estimate in the first and third quarters of 2015.
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`36.
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`During AT&T’s 4Q15 earnings call on January 26, 2016, AT&T’s CFO
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`emphasized the above-referenced trends, noting their contribution to AT&T’s diminished
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`wireless equipment revenue and telegraphing the likelihood that these impacts would persist into
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`future quarters. The CFO observed that AT&T’s revenue growth in the fourth quarter of 2015
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`was hampered by “lower equipment sales, as customers chose to hold onto their phones longer.”
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`He also highlighted the growing number of customers that were choosing to bring their own
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`device to AT&T for network hook-ups (for which AT&T recognizes no wireless equipment
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`Case 1:21-cv-01951 Document 1 Filed 03/05/21 Page 10 of 30
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`revenue), observing that the 4Q15 saw 700,000 such subscribers—up from 90,000-100,000 on
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`average prior to AT&T’s introduction of its installment payment program for smartphones, and
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`from 300,000-400,000 per quarter for most of 2015.
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`37.
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`Negative headlines generated by AT&T’s 4Q15 revenue miss in January 2016
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`caused consternation within AT&T’s IR department.
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`38.
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`For example, the IR Director, who was located in Dallas, Texas, urged his team to
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`take steps to avoid another revenue miss in the following quarter (i.e., 1Q16), writing in an email
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`to Womack: “Chris, we have a tendency to focus on EPS and have recently missed the mark on
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`consolidated revenue. We need to make sure our story gets consensus trued up for both EPS as
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`well as revenue.” When Womack responded with an analysis of analysts’ revenue estimates for
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`2016 showing that the consensus revenue estimate for 1Q16 was higher than AT&T’s internal
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`forecast at the time, the IR Director replied: “We will have to nip 1Q in the bud, otherwise we
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`will be in the same spot we’ve been the last few quarters, i.e. missing revenue.”
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`39.
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`The IR team held calls with analyst firms immediately following AT&T’s
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`earnings announcements as a matter of practice.
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`40.
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`Following the 4Q15 earnings announcement, the IR team anticipated questions
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`from sell-side analysts regarding the revenue pressures resulting from reduced smartphone sales.
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`In preparation for these questions, the IR Department, in consultation with AT&T’s corporate
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`communications team, prepared talking points stressing that “equipment revenue was impacted
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`by lower sales, fewer upgrades and higher BYOD [customers bringing their own devices to
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`AT&T],” noting further that “2015 [was] a unique year” because of the “lack of an iconic
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`handset,” and that “customers holding onto phones longer [was] impacting upgrade volumes.”
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`41.
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`By the end of February 2016, analysts had reduced their forecasts sufficiently to
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`bring the consensus revenue estimate in line with AT&T’s internal revenue estimate, then at
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`approximately $41.05 billion.
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`C.
`
`AT&T Projects Even Lower Wireless Equipment Revenue for 1Q16 and
`Has the CFO Make Public Remarks
`
`(i)
`
`42.
`
`AT&T Projects Lower than Expected Wireless Equipment Revenue for 1Q16
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`In early March 2016, AT&T’s IR Department learned that the company’s 1Q16
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`revenue would be even worse than anticipated.
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`43.
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`On March 7, the IR Director and Womack met with AT&T’s financial controller
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`to review AT&T’s actual results through February 2016. Those interim quarterly results, which
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`were nonpublic, showed that AT&T’s upgrade rate—the percentage of AT&T subscribers who
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`upgraded their handsets through AT&T—for the first two months was only 3.1%, putting AT&T
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`on pace for a record-low upgrade rate for the quarter, which would drive both wireless
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`equipment and total revenue well below consensus analyst expectations, i.e., the same
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`expectations the IR Department had helped establish in the calls with analysts following the
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`4Q15 earnings announcement.
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`44.
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`After receiving these actual quarter-to-date results and learning that wireless
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`equipment revenue and upgrade rates were on track to fall below analysts’ forecasts, AT&T
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`determined to make a public disclosure to manage market expectations.
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`45.
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`AT&T briefly considered issuing a Form 8-K to address, among other things, the
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`accelerating downward trend in its upgrade rate and wireless equipment revenue. It elected
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`instead, however, to have its CFO address the issue at an investor conference on March 9, 2016,
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`at which the CFO was already scheduled to speak.
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`(ii)
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`The CFO’s Remarks at an Investor Conference
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`46.
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`During the CFO’s remarks at the March 9 conference, which were webcast, the
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`CFO referred back to his comments from AT&T’s 4Q15 earnings release regarding the decline
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`in wireless equipment revenue and stated that he “would not be surprised” to see that trend
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`continue.
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`47.
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`The CFO gave no quantitative guidance about AT&T’s wireless equipment
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`revenue or any other metrics for 1Q16. Asked specifically by the conference host to do so,
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`AT&T’s CFO stated that he could “only talk about up through the fourth quarter” and repeated
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`the figures he relayed in January 2016 during AT&T’s 4Q15 earnings call.
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`48.
`
`AT&T did not publicly disseminate any additional guidance or information
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`regarding its 1Q16 upgrade rate or wireless equipment revenue at any other point prior to its
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`1Q16 earnings release on April 26, 2016.
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`49.
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`Those analyst firms that published updated revenue estimates following the
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`CFO’s March 9 remarks and before receiving the calls from Womack, Evans, or Black described
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`below did not sufficiently lower their revenue estimates to bring the consensus estimate in line
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`with AT&T’s internal expectations.
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`50.
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`Other analyst firms did not publish revised revenue estimates between the CFO’s
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`remarks and when they received the calls from Womack, Evans, or Black described below.
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`D.
`
`The IR Department’s Further Revenue Analysis and Planned Outreach to Analysts
`
`(i)
`
`The IR Department’s Ongoing 1Q16 Wireless Equipment Revenue Analysis Based
`on Actual Results to Date
`
`51.
`
`On March 9, 2016, the same day as the CFO’s remarks, Womack internally
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`circulated a further analysis of what the first quarter upgrade rate and wireless equipment
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`revenue would be based on the first two months of actual results. Womack concluded that AT&T
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`would likely report a record-low upgrade rate of less than 5% and a wireless equipment revenue
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`decline of approximately 25% compared to the first quarter of 2015.
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`52. Womack continued to refine the analysis in consultation with Evans, the IR
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`Department’s wireless expert. On March 14, Womack sent an email to the rest of the team
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`conveying Evans’s determination that the upgrade rate would most likely be in the 5% to 5.25%
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`range, still a record low, and that the year-over-year decline in wireless equipment revenue
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`would be in the range of the high-teens to 20%.
`
`53.
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`Throughout the remainder of the quarter, which ended on March 31, 2016, the IR
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`Department, including Womack, Evans, and Black, received updated estimates of AT&T’s
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`financial results from AT&T’s financial controller, with the upgrade rate staying in a range of
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`4.7% to 5.2%.
`
`54.
`
`During March 2016, Evans obtained from the Mobile Division in AT&T’s Atlanta
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`office, where he was also based, material nonpublic information regarding the smartphone
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`upgrade rate and shared that information with Womack and Black.
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`55.
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`On April 8, 2016, the IR Department, including Womack, Evans, and Black,
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`received AT&T’s actual quarter-end results, confirming the company would report a record-low
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`equipment upgrade rate of 5% for 1Q16.
`
`56.
`
`At no time before AT&T’s April 26, 2016 earnings announcement were any of
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`the foregoing internal estimates or actual results disclosed to the public.
`
`(ii)
`
`57.
`
`The IR Department’s Plan to Induce Analysts to Lower Their Revenue Estimates
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`Following the CFO’s remarks at the March 9 conference, AT&T’s IR Department
`
`developed a plan to contact individual analyst firms whose estimates were higher than AT&T’s
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`projections. The purpose of this outreach was to get each analyst firm to lower its revenue
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`Case 1:21-cv-01951 Document 1 Filed 03/05/21 Page 14 of 30
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`estimate sufficiently to bring the resulting consensus estimate down to the level that AT&T
`
`expected to report.
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`58.
`
`AT&T and Womack, Evans, and Black understood that they needed the analyst
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`firms to lower their revenue forecasts by a total dollar amount that, in the aggregate, was large
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`enough to lower the consensus estimate to an amount AT&T could meet.
`
`59.
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`As Womack, Evans, and Black also understood, the IR Department’s outreach to
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`analysts and its objectives were a top priority at the company. For example, after receiving a
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`report on March 22, 2016, showing that analysts were still forecasting AT&T’s 1Q16 revenue to
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`be over $1 billion higher than AT&T’s internal estimate, the CFO stopped by the office of the IR
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`Director to make sure that his team was “working the analysts that still have equipment revenue
`
`too high.” The CFO was assured that it was the IR Department’s “top priority over the next few
`
`weeks.”
`
`60.
`
`AT&T’s IR Director, who supervised Womack, Evans, and Black, took steps to
`
`ensure that the IR team prioritized this analyst outreach and its objectives.
`
`61.
`
`At the IR Director’s request, Black prepared a chart for each analyst firm
`
`indicating: (a) its current first quarter revenue projection, and (b) which IR team member was
`
`responsible for contacting the analyst.
`
`62.
`
`The IR team updated the spreadsheet weekly to reflect analysts’ recent revenue
`
`adjustments and their impact on the consensus estimate.
`
`63.
`
`In addition, the IR Director held weekly calls to track the team’s progress in
`
`contacting analyst firms and the effect of the outreach on reducing the overall consensus revenue
`
`estimate.
`
`
`
`14
`
`

`

`Case 1:21-cv-01951 Document 1 Filed 03/05/21 Page 15 of 30
`
`E.
`
`The Selective Disclosures Made By Womack, Evans, and Black
`
`64.
`
`Pursuant to the IR Department’s plan to contact analyst firms, between March 9,
`
`2016 (after the IR Department learned that AT&T’s first quarter upgrade rate, wireless
`
`equipment revenue and consolidated revenue would be much lower than previously anticipated)
`
`through April 21, 2016 (five days before AT&T publicly reported its actual first quarter results),
`
`Womack, Evans, and/or Black held private, one-on-one phone calls with approximately 20 sell-
`
`side analyst firms covering AT&T.
`
`65. Womack, Evans, and Black made these calls while in possession of AT&T’s
`
`internal, nonpublic quarter-to-date results, including the upgrade rate and wireless equipment
`
`revenue data, which was material information.
`
`66. Womack, Evans, and Black disclosed, among other things, AT&T’s internal
`
`upgrade rate and wireless equipment revenue data for the first quarter on these calls and
`
`otherwise communicated to the analysts, in sum and substance, that the analysts’ revenue
`
`estimates were above what AT&T was expecting to report and therefore needed to be reduced.
`
`67.
`
`As detailed in the following table, each of the twenty analysts issued revised
`
`research reports reducing their revenue estimates shortly after the calls, and almost all of them
`
`cited a record low upgrade rate and reduced wireless equipment revenue as the primary reasons,
`
`typically reducing their estimates of those metrics to the level AT&T was internally forecasting
`
`or knew it would report. Most of the analysts specifically cited an expected upgrade rate of 5%.
`
`68.
`
`The following table details (i) each analyst firm that received a call, (ii) the date
`
`of contact with AT&T’s IR Department and the employee who called, (iii) the date of the analyst
`
`firm’s revised estimate, (iv) the analyst firm’s revenue forecast at the time of the call, (v) the
`
`analyst firm’s updated forecast following the call with AT&T’s IR Department, and (vi) AT&T’s
`
`internal forecast or actual results as known to its IR Department.
`15
`
`
`
`

`

`Case 1:21-cv-01951 Document 1 Filed 03/05/21 Page 16 of 30
`
`Analyst Firm
`
`Date of Contact
`
`Estimates
`
`Revised
`Date of
`Estimates
`Revision
`AT&T Internal Estimates: 5-5.25% Upgrade Rate, High Teens to 20% YoY Decline Wireless
`Equipment Revenue, $39.612B Total Revenue
`Analyst Firm A
`3/9/2016
`3/22/2016
`(Womack)
`
`UG: 6.5%1
`ER: +0.2%2
`TR: $40.665B3
`UG: N/A
`ER: +3.5%
`TR: $41.115B
`UG: 6.2%
`ER: +8.1%
`TR: $40.616B
`
`UG: 5.0%
`ER: -22.9%4
`TR: $40.023B
`UG: N/A
`ER: -21.3%
`TR: $40.513B
`UG: 5.1%
`ER: -18.1%
`TR: $39.954B
`
`Analyst Firm B
`
`Analyst Firm C
`
`
`Analyst Firm D
`
`
`3/14/2016
`(Evans)
`
`3/9/2016
`(Womack)
`3/16/2016
`(Womack)
`3/17/2016
`(Womack)
`
`Analyst Firm E
`
`
`3/21/2016
`(Womack)
`
`Analyst Firm F
`
`3/22/2016
`(Black)
`
`3/31/2016
`
`3/18/2016
`
`3/21/2016
`
`3/22/2016
`
`3/30/2016
`
`UG: 6.5%
`ER: +10.8%
`TR: $41.035B
`UG: 7.0%
`ER: +5.0%
`TR: $41.375B
`UG: 6.5%
`ER: +7.5%
`TR: $41.486B
`UG: 9.0%
`ER: +17.5%
`TR: $41.753B
`
`UG: 5.2%
`ER: -19.8%
`TR: $39.969B
`UG: 6.0%
`ER: -20.1%
`TR: $40.510B
`UG: 5.0%
`ER: -15.0%
`TR: $40.294B
`UG: 5.0%
`ER: -20.2%
`TR: $40.180B
`
`UG: N/A
`ER: N/A
`TR: $42.357B
`UG: 6.6%
`ER: +18.2%
`TR: $42.245B
`UG: 6.8%
`ER: +12.2%
`TR: $40.944B
`
`UG: 5.0%
`ER: -17.0%
`TR: $40.248B
`UG: 5.0%
`ER: -16.3%
`TR: $41.349B
`UG: 5.0%
`ER: -8.5%
`TR: $40.566B
`
`Analyst Firm G
`
`
`3/28/2016
`
`3/31/2016
`
`3/17/2016
`(Womack)
`3/22/2016
`(Black)
`AT&T Internal Estimates: 4.7% Upgrade Rate, -11.5% YoY Decline Wireless Equipment
`Revenue, $40.296B Total Revenue
`Analyst Firm H
`3/24/2016
`
`(Black)
`
`Analyst Firm I
`
`
`Analyst Firm J
`
`
`3/30/2016
`(Black)
`
`3/30/2016
`(Black)
`
`4/11/2016
`
`4/7/2016
`
`
`1
`“UG” = Upgrade Rate
`2
`“ER” = Wireless Equipment Revenue (expressed as a percentage increase/decline year-
`over-year).
`3
`“TR” = Total Revenue
`4
`At the time of the March 9 call with Analyst Firm A, AT&T was estimating that its
`wireless equipment revenues would decline by approximately 25% year-over-year.
`16
`
`
`
`

`

`Case 1:21-cv-01951 Document 1 Filed 03/05/21 Page 17 of 30
`
`Analyst Firm
`
`Date of Contact
`
`Analyst Firm K
`
`Analyst Firm L
`
`
`4/5/2016
`(Evans)
`
`4/1/2016
`4/6/2016
`
`Analyst Firm M
`
`
`4/6/2016
`(Womack)
`
`Estimates
`
`Date of
`Revision
`4/7/2016
`
`4/7/2016
`
`4/7/2016
`
`Revised
`Estimates
`UG: 4.7%
`UG: 6.5%
`ER: -17.2%
`ER: +.5%
`TR: $40.484B
`TR: $41.579B
`UG: 5.7%
`UG: 5.7%
`ER: -14.6%
`ER: +5.5%
`TR: $40.872B
`TR: $41.714B
`UG: 5.0%
`UG: 6.6%
`ER: -10.4%
`ER: +8.6%
`TR: $40.756B
`TR: $41.369B
`AT&T Actual Results: 5.0% Upgrade Rate, -6.5% YoY Decline Wireless Equipment
`Revenue, $40.535B Total Revenue
`Analyst Firm N5
`4/8/2016 (Black) 4/19/2016
`
`Analyst Firm O
`
`
`4/11/2016
`(Womack)
`
`Analyst Firm P
`
`
`Analyst Firm Q
`
`
`Analyst Firm R
`
`
`Analyst Firm S
`
`
`Analyst Firm T
`
`
`
`
`4/11/2016
`(Black)
`4/12/2016
`(Womack)
`4/5/2016 (Black)
`4/15/2016
`(Womack)
`4/12/2016
`(Black)
`4/20/2016
`(Black)
`4/15/2016
`(Evans)
`
`4/7/2016
`(Womack)
`4/21/2016
`(Womack)
`
`4/18/2016
`
`4/13/2016
`
`4/19/2016
`
`4/25/2016
`
`4/20/2016
`
`4/24/2016
`
`UG: N/A
`ER:N/A
`TR: N/A
`UG: 6.7%
`ER: -16.2%
`TR: $40.870B
`UG: 7.7%
`ER: +11.9%
`TR: $41.789B
`
`UG: N/A
`ER: N/A
`TR: $40.384B
`UG: 5.0%
`ER: -24.0%
`TR: $40.044B
`UG: 5.1%
`ER: -14.5%
`TR: $40.425B
`
`UG: N/A
`ER: 0.0%
`TR: $41.372B
`UG: N/A
`ER: +7.1%
`TR: $41.286B
`
`UG: N/A
`ER: +14.1%
`TR: $41.691B
`UG: N/A
`ER: 0.0%
`TR: $41.554B
`
`UG: 5.0%
`ER: -14.5%
`TR: $40.535B
`UG: N/A
`ER: -17.0%
`TR: $40.141B
`
`UG: 4.8%
`ER: -17.3%
`TR: $40.567B
`UG: N/A
`ER: -15%
`TR: $40.510B
`
`69.
`
`Described below are illustrative examples of the material nonpublic information
`
`that Womack, Evans, and Black selectively disclosed to specific analysts. Together with the facts
`
`
`5
`Analyst Firm N did not publish estimates of AT&T’s quarterly results prior to the first
`quarter of 2016.
`
`
`
`17
`
`

`

`Case 1:21-cv-01951 Document 1 Filed 03/05/21 Page 18 of 30
`
`set forth in the foregoing chart, the additional facts detailed below with respect to specific calls
`
`show that Womack, Evans, and Black knew or recklessly disregarded that the internal