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‘It Was Sell At All Costs’: How AT&T’s Sales Staff Created Fake Accounts For DirecTV Now

This article is more than 3 years old.

In July 2018, Julia Morris walked out of the AT&T store in Burlingame, California, with a Motorola prepaid phone. The 54-year-old graphic designer had lost her iPhone 7 two weeks prior, and when the AT&T sales representative suggested she buy a temporary phone while she waited for her insurance company to send her a check for a new one, she handed over her credit card—and didn’t think of the transaction again.

That is, until June the following year, when she noticed AT&T had charged her credit card $330 for 11 months of DirecTV Now, an AT&T streaming service she knew nothing about and had never used. “I definitely never signed up for it,” she says. “I barely even watch TV at all anymore.” After months of bouncing between customer service personnel, Morris says she still hasn’t gotten a refund. “It’s just infuriating at this point.”

Across the country, customers were stuck with similar surprise signups as DirecTV Now, launched in 2016 after AT&T acquired satellite giant DirecTV, added 1.3 million subscribers in two years. According to interviews with 25 current and former retail employees in nine states, some customers who visited one of AT&T’s 16,000 company-owned and authorized franchise locations unknowingly walked away with a DirecTV Now subscription.

While sales representatives often canceled these new signups before a recurring charge hit a customer’s credit card, in certain cases—such as Morris’—they didn’t. The issue was so widespread that AT&T secretly launched a nationwide internal investigation in 2017, according to documents from the probe reviewed by Forbes, and the company fired employees found to have engaged in unethical practices.

AT&T spokesman Jim Greer acknowledged that Morris did not set up the account, but declined to comment further, citing customer privacy concerns. After this story was published, AT&T’s president of Customer Care reached out to Morris and took down her credit card information for a potential refund.

The schemes went unnoticed by the public until September 2019, when a group of AT&T shareholders sued the company for allegedly reporting inflated subscriber numbers that resulted from these temporary signups. AT&T, which made $181.2 billion in revenue in 2019, moved to dismiss the lawsuit, calling the allegations meritless, and a judge will soon rule whether the case will move forward. A similar lawsuit filed in New York’s State Supreme Court was dismissed in May, but the narrow ruling did not decide whether employees used dishonest sales practices. Instead, the judge ruled that even if AT&T was aware of dubious DirecTV Now signups, the company wasn’t required to disclose it on a specific financial form because the service didn’t have a big enough impact on its overall business when it first launched.

The lawsuits are just one of several challenges arising from AT&T’s controversial $48.5 billion acquisition of DirecTV in 2014, which, along with the later acquisition of Time Warner, has left the company one of the most indebted nonfinancial firms in the world. AT&T CEO Randall Stephenson, who oversaw the DirecTV acquisition, stepped down in late April after the company was scrutinized by Wall Street for its acquisition strategy, which activist hedge fund Elliott Management called “questionable” last year.

AT&T employees told Forbes they created fake emails, offered unauthorized discounts in exchange for signups and lied to customers about phone plan pricing in order to sign up customers—often violating AT&T’s own guidelines—as they were pushed to meet steep sales goals from retail store managers. 

“It was sell at all costs—that’s how it was presented to us,” says Justin Keller, a former store manager in San Francisco who said his immediate sales director encouraged tactics such as using unofficial discounts to entice customers to sign up. “It was a threat,” he says. Keller says he was investigated for improper activity and was eventually cleared.

The complaints about DirecTV Now are familiar for telecommunications companies. AT&T and others have faced buyer outrage and Federal Trade Commission investigations over deceptive or otherwise slimy customer service and billing practices similar to the ones used to create DirecTV Now accounts for decades. The net result has damaged the reputation of cable, phone and internet providers, which generally rank below the banking and airline industry as among the most hated companies in America.

Greer says the Dallas-based company investigated “unusual sales activity around a product promotion” in 2017, publicly acknowledging the internal probe for the first time. The company “took several important steps to address it, including employee dismissals and reversing any unauthorized charges for affected customers,” he said. Greer pushed back on the charge that these actions pumped up subscriber numbers. “Our investigation confirmed that the activity did not have a material impact on our publicly reported results.”

The drive to sign up customers for DirecTV Now stemmed from AT&T’s March 2014 acquisition of satellite TV provider DirectTV. Costing $48.5 billion in cash and stock plus the assumption of $18.6 billion in debt, the deal was, at the time, AT&T’s largest in its history. 

Looming in the background was the existential threat of cord cutters, young people who never purchase cable but instead stream services such as Netflix and YouTube. In the first two years after the acquisition, the number of households not paying for traditional TV increased 23%, according to eMarketer, while cable and satellite subscribers declined 3%. DirecTV growth was already beginning to peter out by the time AT&T bought it.

“Investors were kind of scratching their heads. Why would you buy the largest traditional video distributor if your goal was to blow up traditional video distribution?” Craig Moffett, the founder of research firm MoffettNathanson, says.

AT&T's answer to cord cutting was DirecTV Now. Launched in December 2016, the streaming service promised customers the ability to watch live TV over the internet for $35 a month, without a cable box or satellite dish. Because of its low price, investors knew it would never be profitable for AT&T, Moffett says, but it was important in creating the perception that AT&T wasn’t betting its future on a declining satellite business. “I think AT&T really wanted to own the narrative in terms of video,” Moffett says. Though how “material” DirecTV Now was to AT&T is subject to dispute, with the shareholder lawsuit claiming DirecTV Now was a core part of its business before the Time Warner merger.

At the same time, AT&T also began a push in retail stores across the country, ratcheting up pressure on both store managers and sales reps to get people to sign up for as many DirecTV Now accounts as possible, employees say. Greer dismissed perceived pressure employees may have felt as a “a terrible excuse from individuals who violated our code of conduct policies.”

Nathaniel Evanetz, a former sales representative at an AT&T store in the Philadelphia area, said employees were given a written warning if they didn’t show every single customer how DirecTV Now worked on their iPads. Even when sales reps pitched the service to customers, Evanetz said it was nearly impossible to meet quotas without “leveraging” AT&T’s promotions, or telling customers they could sign up for a month to get a free Apple TV or Amazon Firestick and then cancel before they got hit with a recurring charge.

While using discounts and freebies is standard practice for raising interest in a new product, sales representatives and managers across the country soon turned to more unscrupulous practices, including making up fake emails, say employees in California, Michigan, New York, Florida, Pennsylvania, Hawaii and Nevada.

Murtaza Amirzada, a sales rep in Fremont, California, between 2016 and 2018, says he would use a customer’s first and last name along with a random email domain to create fake emails to sign customers up for accounts. Another sales rep in the same store says he would use customer descriptors, such as “girlanddog@gmail.com.” Nearly every employee in the Fremont store made inauthentic emails, Amirzada and two other employees who worked there say.

Making up fake emails was possible, say all the employees Forbes spoke to, because DirecTV Now until mid-2019 did not use email verification, meaning that employees could use any random string of letters and numbers in the email field of the signup form.  In practice, that meant employees would offer customers a discounted product like a temporary phone or screen protector, but in reality, the salesperson was giving away the product for free and using the credit card to create a DirecTV Now account.

Amirzada says his managers authorized employees to create emails for customers who wanted multiple accounts for their family, offer marked-down items if customers signed up for DirecTV Now and instructed workers to cancel the accounts before the first month. But the situation spiraled out of control when employees figured out how to exploit the lack of email verification.

Amirzada would cancel his fake accounts within a month, so customers would never get a recurring charge. “Me, personally, I never did anything if it wasn’t favorable for the customer,” Amirzada says. “So I never felt guilty for doing something like that.” Yet the schemes breached AT&T’s code of conduct, which says the creation of fake emails amounts to “falsification of company records,” according to two former workers. 

In other instances, customers knew what they were signing up for, but employees would manipulate existing discounts or make under-the-table deals in order to cajole customers into signing up, which became common practice. A store manager in San Francisco says her boss instructed her to tell customers they could get 20% off a pair of Beats headphones if they signed up for DirecTV Now and canceled the next month, even though the headphones were on sale regardless. Three employees in Louisiana, Las Vegas and Hawaii said managers ordered employees to tell customers that all new phone plans came with DirecTV Now, while never mentioning that customers could get a cheaper plan without the service.

Some employees said they felt they had no choice. Anthony Luna, an employee in Las Vegas between 2005 and 2018, says in September 2017 he offered a customer a deal: Instead of putting down $1,335 as a deposit for three new phones, the customer could sign up for three DirectTV Now accounts and get the deposit waived.

Luna had wanted to waive the deposit without any strings attached, a typical practice to retain high-selling customers. But Luna’s manager told him he would only approve the deal if he got the customer to sign up for three DirecTV Now accounts. “Just make it happen,” Luna recalls his manager telling him.

The customer agreed because three DirecTV Now accounts still cost less than the $1,335 deposit. Luna used made-up emails to set up two of the accounts because the customer only had one email address. He helped cancel the accounts less than a month later—and was eventually fired for the transaction.

It’s unclear how much top executives inside of AT&T’s Dallas headquarters knew about the prolific use of unethical sales tactics, but employees say regional managers failed to inquire about red flags early on. Greer did not comment on if or when senior executives were alerted to issues surrounding DirecTV Now. 

One such red flag popped up in Las Vegas, where a sales director in January 2018 acknowledged in a sales meeting that one store had 100 DirecTV Now sign-ups one month and 103 cancelations the next, according to Luna and another employee present, and instead of auditing the location or asking more questions, the director praised the store.

As early as mid-2017—just six months after DirecTV Now launched—AT&T’s internal investigations team, which is tasked with responding to issues of theft and fraud, picked up on unusual behavior with DirecTV Now sign-ups. AT&T quietly began dispatching internal investigators to stores around the country. Armed with spreadsheets of every suspicious transaction, specialists in its asset protection group grilled employees on why no one was using the accounts and why they were canceled so quickly, sometimes on the same day they were created.

Over the course of the yearlong investigation, sales representatives and store managers linked to unethical sales were fired or disciplined, though AT&T declined to say how many. In Amirzada’s store in California, AT&T fired 17 employees, according to three people who worked here (Amirzada says he quit before he was fired). 

To customers and the outside world it was business as usual. Executives continued to tout the popularity of DirecTV Now—until the end of October 2018, when AT&T reported DirecTV Now additions had plummeted 86%, flummoxing Wall Street analysts who had seen brisk growth for more than a year. AT&T’s stock fell 8%, contributing to the company’s worst year since the 2008 financial crisis. John Donovan, then-CEO of AT&T’s communications unit, said DirecTV Now net adds declined because it scaled back promotions and raised prices from $35 per month to $40.

“I think that we and other people were a little surprised by the numbers,” JPMorgan analyst Philip Cusick told executives on AT&T’s October 2018 earnings call.

The drop in stock price caught the attention of two New York law firms, Labaton Sucharow and Pomerantz, which represent unions whose pensions are invested in blue-chip stocks like AT&T. With some chapters of the Iron Workers Union, Pittsburgh’s Steamfitters Union and a Teamster’s chapter in New York on board as lead plaintiffs, the firms filed a lawsuit against AT&T and CEO Stephens, accusing executives of lying to shareholders by concealing the investigation, making positive comments about DirecTV’s Now’s performance when in reality it “was sold at irrationally low prices and with heavy and improper promotional activity” and reporting what they allege are inflated subscriber numbers. The company asked a judge to dismiss the lawsuit in November, denying the allegations. In a motion to dismiss the lawsuit, AT&T argues the complaint never explained why it would benefit from temporarily inflating DirecTV Now subscriber numbers through practices it knew were “unsustainable.”

The company, now twice the size as it was in 2014 thanks to its $85.4 billion acquisition of Time Warner, eventually fixed loopholes employees exploited, including adding email verification. DirecTV Now continued to bleed subscribers as AT&T continued to raise its monthly price, losing 38% of its subscriber base from the end of 2018 to July 2019, when the service was officially rebranded as AT&T Now. 

 Even after the name has gone, the days of DirecTV Now’s high-pressure sales period are still fresh for some customers and ex-employees. 

“I was baffled that I got fired, that I was put into such a bad situation by them by being such a good employee and doing what they wanted me to do,” Luna said.

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