AT&T allegedly pressured employees to start fake DirecTV Now accounts to improve subscriber numbers ahead of its $85 billion acquisition of Time Warner, according to a lawsuit accusing the company of deceiving shareholders.
The lawsuit claims AT&T pushed employees to secretly add the streaming product to existing customer accounts without their knowledge.
It also claims AT&T told shareholders that DirecTV Now was growing while subscribers were leaving the platform.
The lawsuit comes less than a week after activist hedge fund Elliott Management announced a $3.2 billion stake in AT&T accompanied by a 23-page report criticizing the firm's previous purchases of Time Warner and DirecTV.
AT&T allegedly pushed employees to create fake DirecTV Now accounts to bolster subscriber numbers ahead of $85 billion acquisition of Time Warner, according to a lawsuit accusing the company of misleading shareholders.
The lawsuit, which was filed by a group of investors, claims AT&T knowingly told shareholders DirecTV Now was growing when subscribers were leaving the platform.
"Employees were taught and actively encouraged to convert activation fees that customers traditionally had to pay to upgrade their phones into DirecTV Now subscriptions by waiving the fee," the lawsuit said.
Executives in the sales department including Brian Shay, the president of sales and distribution, had knowledge of and supported the practice, according to the lawsuit.
The effort was also meant to help improve AT&T's position in merger talks with Time Warner, the lawsuit claims. The complaint says the merger was specifically billed as "building on Time Warner's HBO Now and the upcoming launch of AT&T's OTT offering DirecTV Now."
The lawsuit comes less than a week after activist hedge fund Elliott Management revealed a $3.2 billion stake in AT&T and published a 23-page report criticizing the company's leadership and its previous purchases of Time Warner and DirecTV Now.
Elliott said both Time Warner and DirecTV — AT&T's two largest acquisitions — were misguided and have damaged the company's value instead.
"AT&T has yet to articulate a clear strategic rationale for why AT&T needs to own Time Warner," the firm said. "While it is too soon to tell whether AT&T can create value with Time Warner, we remain cautious on the benefits of this combination."
Shares of AT&T are up 30.7% year-to-date through Monday's close.