In re GTT Communications

UNITED STATES OF AMERICA 
Before the 
SECURITIES AND EXCHANGE COMMISSION 
SECURITIES ACT OF 1933 
Release No. 11241 / September 25, 2023 
 
SECURITIES EXCHANGE ACT OF 1934 
Release No. 98491 / September 25, 2023 
 
AAER Release No. 4459 / September 25, 2023 
 
ADMINISTRATIVE PROCEEDING 
File No. 3-21708 
 
In the Matter of 
 
GTT Communications, Inc.  
 
Respondent. 
 
 
ORDER INSTITUTING CEASE-AND-
DESIST PROCEEDINGS PURSUANT TO 
SECTION 8A OF THE SECURITIES ACT 
OF 1933 AND SECTION 21C OF THE 
SECURITIES EXCHANGE ACT OF 1934, 
MAKING FINDINGS, AND IMPOSING A 
CEASE-AND-DESIST ORDER  
  
I. 
 
 The Securities and Exchange Commission (“Commission”) deems it appropriate that cease-
and-desist proceedings be, and hereby are, instituted pursuant to Section 8A of the Securities Act 
of 1933 (“Securities Act”) and Section 21C of the Securities Exchange Act of 1934 (“Exchange 
Act”), against GTT Communications, Inc. (“GTT” or “Respondent”).   
 
II. 
 In anticipation of the institution of these proceedings, Respondent has submitted an Offer 
of Settlement (the “Offer”) which the Commission has determined to accept.  Solely for the 
purpose of these proceedings and any other proceedings brought by or on behalf of the 
Commission, or to which the Commission is a party, and without admitting or denying the findings 
herein, except as to the Commission’s jurisdiction over it and the subject matter of these 
proceedings, which are admitted, Respondent consents to the entry of this Order Instituting Cease-
and-Desist Proceedings Pursuant to Section 8A of the Securities Act of 1933 and Section 21C of 
the Securities Exchange Act of 1934, Making Findings, and Imposing a Cease-and-Desist Order 
(“Order”), as set forth below.   

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III. 
 On the basis of this Order and Respondent’s Offer, the Commission finds
1
 that:  
Summary 
 
1. GTT made materially misleading statements and omissions relating to Cost-of-
Revenue (“COR”)
 
in certain 2019 and 2020 Exchange Act annual, quarterly, and current reports.  
COR, referred to by GTT in public filings as Cost of Telecommunications Services, represents 
direct costs incurred by GTT in providing telecommunications services to its customers and is 
GTT’s largest operating expense.  
2. GTT grew rapidly through a series of acquisitions in 2017 and 2018, but struggled 
to integrate the newly-acquired companies into GTT’s systems.  As a result, two key operational 
systems – GTT’s Client Management Database (“CMD”) and its third-party bill processing system 
(the “BPS”) – started to show a persistent and growing discrepancy between actual invoices 
received through the BPS that related to COR and GTT’s expectation of what COR should be 
based on underlying supplier contracts in CMD.  This discrepancy, which was widely known 
within GTT, was a clear sign that GTT’s COR accounting methodology was not working properly 
and that GTT had data integrity issues.   
3. GTT’s accountants and operations staff investigated the cause of the discrepancy, 
but there was no effective way to compare the data in the two systems.  Further, given the volume 
of transactions following the acquisitions, GTT did not have the resources to review its COR 
invoices manually for proper classification and validity.  By at least mid-2018, GTT knew that it 
did not have sufficient information systems or resources to record and report COR accurately and 
fairly following the 2017 and 2018 acquisitions.  Despite that knowledge, GTT failed to implement 
and maintain policies and procedures designed to provide reasonable assurance that the COR 
reflected in GTT’s financial statements was based on reasonable support.  There also was a 
knowledge disconnect between GTT’s operations employees, who managed the company’s COR-
related data, and the accounting employees, who used that data to record and report COR.  Both 
groups were confused as to the other’s role:  operations did not fully appreciate how accounting 
used the data they provided, and accounting did not fully understand what the data reflected and its 
limitations.  Consequently, GTT’s conduct fell below the standard of care of a reasonable, 
similarly situated company.   
4. As a result, GTT failed to disclose material facts concerning certain unsupported 
adjustments to COR, which caused the statements that GTT made concerning COR to be 
misleading in light of the circumstances.  These adjustments concerned COR-In-Advance (i.e., pre-
paid expense) and COR vendor disputes and were reported in GTT’s Forms 10-Q for the quarters 
ended September 30, 2019, and March 31, 2020, and in GTT’s Form 10-K for the fiscal year ended 
December 31, 2019, and in related earnings releases on Forms 8-K.  GTT also made material 
 
1
  The findings herein are made pursuant to Respondent’s Offer of Settlement and are not 
binding on any other person or entity in this or any other proceeding.   
 

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omissions in its 2019 Form 10-K concerning uncertainties involving certain receivables from 
vendors subject to disputes that were recorded in its financial statements that rendered statements it 
made misleading.  Consequently, and as described in more detail below, GTT violated Sections 
17(a)(2) and (3) of the Securities Act.  GTT also violated Sections 13(a), 13(b)(2)(A) and 
13(b)(2)(B) of the Exchange Act and Rules 12b-20, 13a-1, 13a-11, 13a-13, and 13a-15(a) 
thereunder.  
Respondent 
5. GTT Communications, Inc., a Delaware corporation headquartered in Virginia, was 
a publicly traded multinational telecommunications and internet service provider at all relevant 
times.  GTT’s stock was registered under Section 12(b) of the Exchange Act and was listed on the 
New York Stock Exchange (“NYSE”) until July 21, 2021, when it was delisted.  On November 9, 
2021, GTT filed a Form 15 terminating its registration under Section 12(g) of the Exchange Act 
and notifying the Commission that its duty to file reports under Section 15(d)(1) of the Exchange 
Act had been suspended for that fiscal year because it had fewer than 300 holders of record of each 
class of securities registered under the Exchange Act.  GTT and certain of its affiliates filed 
prepackaged Chapter 11 bankruptcy cases on October 31, 2021, and GTT emerged as a private 
company on December 30, 2022.   
Facts 
Following Several Acquisitions, Two GTT Operating Systems Used to Account  
for COR Showed a Persistent Discrepancy Between Expected and Actual Expense 
6. GTT grew rapidly between 2017 and 2018, completing eight acquisitions that more 
than doubled GTT’s revenue and expense.  Many of the acquired companies were private, 
distressed companies located outside the United States that used different operating and accounting 
systems than GTT and that lacked robust internal controls.  GTT’s employees were overwhelmed 
by the increased volume of data and transactions following the acquisitions and they struggled to 
successfully integrate certain of these newly acquired companies into GTT’s systems, including 
CMD and its BPS.   
7. CMD was an internally developed platform that GTT used to manage its contracts 
with networks, clients, and suppliers.  GTT used CMD to bill customers for services provided, to 
manage the inventory necessary to provide the contracted-for services, and to estimate the 
expenses associated with providing the services.  CMD contained estimates of GTT’s anticipated 
COR derived from information about third-party vendor inventory used to fulfill services to its 
customers.   
8. GTT used its BPS, which was specifically designed for the telecommunications 
industry, to process vendor invoices that underlay COR. The BPS received the majority of invoices 
electronically directly from the telecommunications vendors.  The BPS processed the vendor 
invoices and pulled information, such as the service period and underlying charge type, into a 
useable format for GTT operations employees to review and approve or reject in summary form.  

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For purposes of recording and reporting COR, the BPS contained GTT’s expenses as reflected in 
the invoices received from the vendors.   
9. By the close of the second quarter 2018, a persistent and growing discrepancy 
existed between the amounts GTT was routinely paying in invoices as reflected in the BPS and the 
expected costs that were reflected in CMD.  This discrepancy between CMD and the BPS 
indicated that GTT’s accounting methodology was not working correctly and that its systems had 
data integrity issues.   
10. At various points in time, GTT’s accountants and operations employees 
investigated the cause of the discrepancy, but there was no effective way to compare the data in the 
two systems, which by 2019 were processing more than 600,000 COR transactions on a monthly 
basis.  Additionally, given the volume of data, GTT did not have the resources to review the 
invoices manually.     
GTT Failed to Implement and Maintain Policies and Procedures Designed to Provide 
Reasonable Assurance that COR Expense Adjustments Were Based on Reasonable Support 
11. After the discovery of the discrepancy between CMD and the BPS, GTT never 
resolved which data source should be used to record and report COR or which was more accurate.  
Certain members of GTT’s management favored CMD because it was GTT’s database of record 
and they believed it to be more accurate than the BPS.  Certain members of GTT’s accounting staff 
did not fully trust the accuracy of either CMD or the BPS. 
12. Additionally, there was an information disconnect between the operations and 
accounting staff.  There was a lack of understanding as to the other’s role, and the two groups did 
not effectively communicate concerning COR and the issues they were seeing.  Operations was 
responsible for maintaining the data in CMD and the BPS, while accounting was responsible for 
recording and reporting COR based on the data maintained by operations.  Accounting could not 
resolve the data discrepancy problem without the help of operations.  Further, operations did not 
fully appreciate how accounting used the data they provided, and accounting did not fully 
understand what the data reflected and its limitations. 
13. By mid-2019, GTT accountants and operations employees, as well as some 
members of senior management, knew that the only way to determine GTT’s actual COR was to 
link the data between CMD and the BPS at a granular level.  Until that exercise was completed and 
the systems were updated, they knew that GTT did not have a reliable data source on which to base 
the COR being recorded in the financial statements.   
14. Thus, it was widely understood within GTT that it did not have sufficient systems 
and resources to accurately record and report COR following its acquisitions.  Yet, despite 
knowing that it lacked both a reliable data source and the resources to manually review COR, GTT 
failed to implement and maintain policies and procedures designed to provide reasonable assurance 
that COR adjustments were based on reasonable support.  Rather, GTT’s operations and 
accounting employees continued to communicate ineffectively concerning COR, and GTT 

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continued to record adjustments to COR that lacked reasonable support, which fell below the 
standard of care of a reasonable, similarly situated company. 
GTT Made Unsupported Accounting Adjustments to COR in 2019 and 2020, Resulting in 
Materially Misleading Statements and Omissions in Its Public Filings 
15. As a result of GTT’s lack of policies and procedures to provide reasonable 
assurance that COR adjustments were based on reasonable support as well as the information 
disconnect between GTT’s operations and accounting employees regarding COR, GTT failed to 
disclose material facts concerning certain unsupported and highly uncertain adjustments to COR 
during the third quarter of 2019, fourth quarter of 2019 and the first quarter of 2020.  This rendered 
the disclosures made concerning COR and vendor disputes materially misleading in light of the 
circumstances.   
Third Quarter 2019 COR-In-Advance Adjustment 
16. First, in the third quarter of 2019, GTT accountants moved $5.6 million of expense 
from the income statement to COR-In-Advance (i.e., prepaid expense) on the balance sheet 
without reasonable support.  The adjustment increased prepaid expense and decreased COR on the 
financial statements reported in GTT’s Form 10-Q for the third quarter of 2019.  It was also 
included in the financial information reported in an earnings release furnished with GTT’s 
November 11, 2019, Form 8-K.  By that time, GTT accounting and operations employees were 
investigating, but had not determined the cause of, the discrepancy in COR reflected between 
CMD and the BPS.  Although they suspected the BPS was not properly processing certain invoices 
that covered future service periods and was thus potentially overstating COR, they had no 
reasonable basis to quantify the impact of this suspected shortcoming prior to the closing of the 
books for the third quarter of 2019.  GTT’s decision to record the $5.6 million adjustment was 
motivated by a desire to keep expenses consistent with CMD while it continued to investigate.  
Given the circumstances, GTT’s failure to disclose material facts concerning this unsupported 
adjustment, including that GTT could not confirm the validity or quantification of this adjustment 
prior to the close of the quarter, caused GTT’s disclosures concerning COR to be materially 
misleading.  The COR-In-Advance adjustment amount had a material impact on GTT’s third 
quarter financial statements by increasing GTT’s operating income by approximately 23% and 
decreasing its third quarter net loss before income taxes by approximately 17%. 
Fourth Quarter 2019 Bulk Disputes Adjustment 
17. Second, in the fourth quarter of 2019, GTT failed to disclose material facts 
concerning an unsupported $16 million vendor dispute adjustment, which rendered GTT’s 
disclosures concerning COR and vendor disputes materially misleading in light of the 
circumstances.  The adjustment reduced COR and was reflected in GTT’s 2019 Form 10-K, and in 
the related earnings release furnished with the March 2, 2020, Form 8-K.   
18. The adjustment lacked reasonable support because, as discussed below, it was 
based on unverified data.  During the fourth quarter of 2019, GTT undertook a massive project to 
link as many of the invoices in the BPS as possible to CMD and to dispute any invoices that could 

 6 
not be linked with the vendors.  These disputes came to be known internally as “Bulk Disputes,” 
and they differed from GTT’s normal course disputes (e.g., disputes based on specific vendor 
billing errors identified during GTT’s bill verification procedures), in volume, timing and rationale.   
19. GTT accountants calculated the $16 million adjustment based on preliminary 
invoice data and estimated “win rates” (i.e., the percentage of disputes that GTT expected to win) 
provided by operations.  Because GTT had no history with Bulk Disputes prior to the fourth 
quarter of 2019, GTT operations employees developed different estimated win rates for several 
sub-categories of the Bulk Disputes (e.g., services marked “disconnected” were assigned an 
estimated win rate of 68%, whereas services that could not be linked and required more research 
were assigned a win rate of 15%).  By contrast, GTT generally applied a single win rate based on 
historical results to all normal course disputes.  The adjustment was made before the actual filing 
of the Bulk Disputes. 
20. Following the booking of the $16 million adjustment, but prior to the filing of the 
2019 Form 10-K, the operations team provided the accounting team with updated data that 
reflected the actual disputes filed with the vendors, which was a smaller pool of invoices than the 
set of invoices upon which the adjustment was based.  When the GTT accountants applied the 
same estimated win rates to the updated data, the calculation yielded an adjustment amount of 
approximately $9.1 million as compared to the $16 million adjustment recorded in mid-January 
using the preliminary invoice data.  Although GTT had no prior experience with vendor disputes of 
this volume or nature, the employees believed that the win rate would rise as GTT exhausted 
efforts to link the invoices in the BPS to CMD.  The theory was that any remaining unlinked 
invoices were more likely to be erroneous given that GTT appeared to have no record of them.  
GTT employees did not think they had time to update the win rates to apply to the updated data 
prior to the filing of the Form 10-K.  Thus, although the accounting function knew or should have 
known that the $16 million entry was based on unverified data, that more accurate data was 
available, and that the fourth quarter financials had not yet been finalized, the $16 million 
adjustment was not updated to reflect the more accurate and up-to-date data reflected in the later 
calculation.   
21. Additionally, the 2019 Form 10-K included no meaningful disclosure regarding the 
Bulk Disputes adjustment.  Rather, GTT included its standard “Disputed Supplier Expenses” 
disclosure for normal course vendor disputes, which did not describe the $16 million adjustment 
amount or contain any disclosure concerning the Bulk Disputes.  The Bulk Disputes process 
differed from the normal course vendor disputes process in material ways and involved several 
subjective assumptions that were highly uncertain: (1) most of the invoices making up the Bulk 
Disputes had already been paid, requiring reimbursement or credit in the event of a win, whereas 
those in the normal course disputes process had not yet been paid; (2) many of the Bulk Disputes 
were being disputed simply because the underlying invoices in the BPS could not be linked to 
CMD, whereas the normal course disputes were based on some specifically identified flaw in the 
invoice; (3) these disputes were submitted using a “bulk” back-end process rather than through 
individual submissions entered by GTT personnel; and (4) GTT had no history on which to base 
the Bulk Disputes win rates whereas the normal course disputes were based on historical average 
win rates for that type of dispute.  Part of the Bulk Disputes adjustment was included as a $10.7 
million receivable from suppliers (under Prepaid Expenses and Other Current Assets), which 

 7 
reflected GTT’s assumption at that time that two-thirds of the total Bulk Disputes were paid 
disputes, without identifying that amount as part of its “Disputed Supplier Expenses” disclosure. 
22. GTT’s failure to disclose material facts concerning the Bulk Disputes adjustment, 
including that the adjustment did not reflect the actual disputes filed or the most accurate and up-
to-date data available prior to the filing of the Form 10-K and that the Bulk Disputes process 
differed in several material ways from the normal course disputes as described above, rendered 
GTT’s disclosures concerning vendor disputes and COR materially misleading in light of the 
circumstances.  The Bulk Disputes adjustment amount had a material impact on GTT’s financial 
statements by increasing GTT’s 2019 operating income by approximately 15% and decreasing 
GTT’s net loss before income taxes by approximately 13%.   
23. Further, GTT failed to include any disclosure in its 2019 Form 10-K concerning the 
material implications of the uncertainties associated with the methods, assumptions, and estimates 
underlying the Bulk Disputes adjustment, as required by Item 303 of Regulation S-K.  Among 
other things, Item 303(a)(3)(ii) required disclosure of “any known ... uncertainties that have had or 
that the registrant reasonably expects will have a material favorable or unfavorable impact on net 
sales, revenues or income from continuing operations....”  GTT was required to objectively 
evaluate whether it reasonably expected uncertainties in the Bulk Disputes adjustment to have a 
material impact on the company’s liquidity, capital resources or results of operations and provide 
disclosure about that uncertainty if the impact is material.
2
  GTT failed to disclose that the 
assumptions it used to determine the Bulk Disputes adjustment, such as the win rates and the pool 
of invoices disputed (e.g., a large number of invoices were disputed simply because GTT could not 
find a record of them in CMD), were highly uncertain and it was reasonably likely the estimate 
could change because they had no historical experience upon which to rely to evaluate whether 
they would be successful in winning this type of dispute.       
First Quarter 2020 Bulk Disputes 
24. Finally, in the first quarter of 2020, GTT failed to disclose material facts concerning 
two unsupported adjustments totaling $19 million relating to a reassessment of the Bulk Disputes 
recorded in the fourth quarter of 2019 and additional disputes that had not been entered for the first 
 
2
  The Commission has articulated a two-part test for determining whether a known trend or 
uncertainty requires disclosure.  “Where a trend, demand, commitment, event or uncertainty is 
known, management must make two assessments: (1) Is the known trend, demand, commitment, 
event or uncertainty likely to come to fruition? If management determines that it is not 
reasonably likely to occur, no disclosure is required.  (2) If management cannot make that 
determination, it must evaluate objectively the consequences of the known trend, demand, 
commitment, event or uncertainty, on the assumption that it will come to fruition. Disclosure is 
then required unless management determines that a material effect on the registrant's financial 
condition or results of operations is not reasonably likely to occur.”  Management’s Discussion 
and Analysis of Financial Condition and Results of Operations, Securities Act Release No. 6835, 
43 S.E.C. Docket 1330, 1989 WL 1092885, at *6 (May 18, 1989). This test was reiterated in the 
2003 MD&A release (Release No. 33-8350) and in the 2020 MD&A release (Release No. 33-
10890).   

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quarter of 2020, which rendered GTT’s first quarter 2020 disclosures concerning COR and vendor 
disputes materially misleading in light of the circumstances.  The $19 million in adjustments 
reduced COR and were reflected in GTT’s Form 10-Q for the first quarter of 2020, and in the 
related earnings release furnished with the May 8, 2020, Form 8-K.   
25. By the end of the first quarter of 2020, very few of the Bulk Disputes had been 
resolved.  Therefore, GTT reassessed the amount still outstanding for the Bulk Disputes recorded 
in the fourth quarter.  Continuing to believe, despite having no reasonable basis, that the win rate 
would rise as the pool of unlinked invoices shrunk, GTT accounting employees increased the Bulk 
Disputes win rate several times over a short period in connection with updating the calculation for 
the first quarter of 2020.  Ultimately, the accounting team booked a reaccrual for the fourth quarter 
2019 Bulk Disputes of approximately $17 million, which was a $1 million increase over the 
original fourth quarter 2019 adjustment. 
26. In connection with calculating the reaccrual of the fourth quarter 2019 Bulk 
Disputes adjustment in the first quarter of 2020, GTT initially raised the win rates for certain sub-
categories of Bulk Disputes based on GTT’s exhaustive linking efforts.  However, the next day 
accounting decided GTT should apply the higher normal course disputes win rate of 62% to all the 
Bulk Disputes, regardless of sub-category, given that GTT had been pursuing the Bulk Disputes 
for a few months by that point, which again increased the adjustment amount.  Then, one day later, 
after consulting with an operations employee, accounting raised the win rate to 75% based on 
GTT’s linking efforts.  
27. A few days later, the same operations employee informed accounting that he 
thought they had agreed to use a 25% win rate for the Bulk Disputes, not 75%.  After further 
consideration, accounting changed the Bulk Disputes win rate back to the normal course disputes 
win rate of 62%, which resulted in an updated Bulk Disputes adjustment amount of approximately 
$17 million, or $1 million more than the fourth quarter 2019 estimate.  Despite continuing to 
believe that the best operational estimate for the Bulk Disputes win rate was 25%, the operations 
employee did not protest the use of the normal course disputes win rate because he believed it to be 
an accounting judgment and outside of his area of expertise.  
28. Separately, GTT also recorded a Bulk Disputes adjustment for the first quarter of 
2020.  GTT believed that many of the billing issues identified in the fourth quarter of 2019 
continued in the first quarter of 2020.  GTT attempted to identify the same charges during the first 
quarter of 2020 that had not otherwise been disputed through the BPS for that period.  GTT’s 
accounting staff recorded an incremental adjustment to account for their estimate of those disputes 
using a 75% win rate.  This resulted in a reduction of COR of approximately $18 million in the 
first quarter of 2020.    
29. There was no reasonable basis to apply the normal course disputes win rate or 
higher to the Bulk Disputes: (1) there were numerous differences between the Bulk Disputes and 
the normal course disputes; and (2) GTT had not received enough results to provide any guidance 
that the win rate for the Bulk Disputes, many of which concerned invoices that had already been 
paid, would be similar to the normal course disputes, most of which had not yet been paid.  GTT’s 
failure to disclose material facts concerning these adjustments, including that GTT applied the 

 9 
normal disputes win rate or higher despite having no results history to support such a win rate and 
despite the material differences between these disputes and the normal course disputes, rendered 
the disclosures made concerning COR and vendor disputes in the first quarter of 2020 materially 
misleading. 
30. The $19 million in Bulk Disputes reassessment and additional amount for disputes 
not yet entered in the first quarter of 2020 had a material impact on GTT’s first quarter 2020 
financial statements by increasing GTT’s operating income by almost 200% and decreasing GTT’s 
net loss before income taxes by 18%.  
December 2020 Restatement Announcement 
31. On December 22, 2020, GTT disclosed in a Form 8-K that its previously issued 
consolidated financial statements for the years ended December 31, 2019, 2018 and 2017, and the 
quarter ended March 31, 2020, should no longer be relied upon and that it intended to file restated 
consolidated financial statements.  In connection with closing its books for the second quarter of 
2020, GTT identified several issues related to the recording and reporting of COR and commenced 
an internal investigation.  GTT also disclosed that it was evaluating the impact of the identified 
errors on GTT’s internal control over financial reporting and disclosure controls and procedures 
and that the company expected to report a material weakness in internal control over financial 
reporting and report that its disclosure controls and procedures were ineffective.   
32. GTT subsequently spent more than a year and tens of millions of dollars in an 
attempt to correct its filings, but ultimately suspended its efforts to restate due in part to the 
complexity of reconciling the two operational systems that were producing inconsistent 
information relevant to the calculation of COR.  When GTT emerged from bankruptcy on 
December 30, 2022 as a private company owned by certain of its former creditors, GTT used 
“Fresh-Start Reporting,” which allows companies to present their assets, liabilities, and equity as a 
new entity on the day the company emerges from bankruptcy under Chapter 11 of the United 
States Bankruptcy Code.   
Materiality 
33. Reasonable investors would have considered the misleading statements and 
omissions described above to be important in making investment decisions concerning GTT’s 
securities during the relevant period.  
GTT Offered and Sold Securities During the Relevant Period 
34. GTT offered and sold securities through its employee stock purchase plan, which 
transactions were registered on Form S-8, during the relevant period, and received proceeds from 
such sales.   

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GTT’s Disclosure Controls and Procedures and Internal Control 
Over Financial Reporting Failures 
35. Rule 13a-15(a) under the Exchange Act requires issuers such as GTT to maintain 
disclosure controls and procedures, as defined in Rule 13a-15(e), and internal control over 
financial reporting, as defined in Rule 13a-15(f).  Rule 13a-15(e) defines “disclosure controls and 
procedures” to include “controls and other procedures of an issuer that are designed to ensure that 
information required to be disclosed ... is recorded, processed, summarized and reported” within 
the time periods specified in the Commission’s rules and forms.  Rule 13a-15(f) defines “internal 
control over financial reporting” as a process to “provide reasonable assurance regarding the 
reliability of financial reporting and the preparation of financial statements” in accordance with 
GAAP, and includes policies and procedures that provide reasonable assurance that transactions 
are recorded as necessary to permit the preparation of the financial statements in accordance with 
GAAP.   
36. As described above, GTT lacked controls and procedures designed to ensure that 
GTT’s COR adjustments – especially the Bulk Disputes adjustments, which involved a new and 
highly uncertain process – were based on reasonable support and that material information 
concerning those adjustments was reported in GTT’s Exchange Act reports.  GTT also lacked 
controls or procedures designed to provide reasonable assurance that COR was recorded and 
reported in the proper periods.  Further, GTT failed to maintain internal control over financial 
reporting because, with respect to its COR adjustments, GTT lacked a process to provide 
reasonable assurance regarding the reliability of financial reporting and the preparation of financial 
statements, as well as lacked policies and procedures that provided reasonable assurance that its 
COR adjustments were recorded as necessary to permit the preparation of financial statements in 
accordance with GAAP. 
Violations 
 
37. As a result of the conduct described above, GTT violated Sections 17(a)(2) and 
17(a)(3) of the Securities Act.  Section 17(a)(2) prohibits any person from obtaining money or 
property in the offer or sale of securities by means of any untrue statement of a material fact or any 
omission to state a material fact necessary in order to make the statements made, in light of the 
circumstances in which they were made, not misleading.  Section 17(a)(3) of the Securities Act 
prohibits any person from engaging in any transaction, practice, or course of business which 
operates or would operate as a fraud or deceit upon the purchaser.  Negligence is sufficient to 
establish violations of Sections 17(a)(2) and 17(a)(3).  Aaron v. SEC, 446 U.S. 680, 697 (1980).  
38. As a result of the conduct described above, GTT violated Section 13(a) of the 
Exchange Act and Rules 13a-1, 13a-11, 13a-13, and 12b-20 thereunder, which require every issuer 
of a security registered pursuant to Section 12 of the Exchange Act to file with the Commission 
annual, current, and quarterly reports as the Commission may require, and mandate that Exchange 
Act reports contain such further material information as may be necessary to make the required 
statements not misleading. 

 11 
39. As a result of the conduct described above, GTT violated Sections 13(b)(2)(A) and 
13(b)(2)(B) of the Exchange Act.  Section 13(b)(2)(A) of the Exchange Act requires issuers with a 
security registered pursuant to Section 12 of the Exchange Act to make and keep books, records, 
and accounts which, in reasonable detail, accurately and fairly reflect the transactions and 
dispositions of the assets of the issuer, and Section 13(b)(2)(B) of the Exchange Act requires such 
issuers to, among other things, devise and maintain a system of internal accounting controls 
sufficient to provide reasonable assurances that transactions are recorded as necessary to permit 
preparation of financial statements in accordance with GAAP.   
40. As a result of the conduct described above, GTT violated Rule 13a-15(a) under the 
Exchange Act, which requires that every issuer of a security registered pursuant to Section 12 of 
the Exchange Act maintain disclosure controls and procedures as defined in Rule 13a-15(e) under 
the Exchange Act and that such issuers maintain internal control over financial reporting as defined 
in Rule 13a-15(f) under the Exchange Act.  
GTT’s Cooperation and Remedial Efforts 
41. In determining to accept the Offer, the Commission considered remedial acts 
promptly undertaken by Respondent and cooperation afforded the Commission staff.  
42. GTT promptly self-reported to the Commission and provided substantial 
cooperation, including by, among other things, providing multiple presentations concerning the 
findings from its internal investigation, including presentations made before it had reached final 
conclusions about the nature and scope of the relevant issues; identifying key documents and 
witnesses; promptly making documents and witnesses available; and facilitating testimony from 
former employees.   
43. Further, GTT voluntarily undertook affirmative remedial measures in response to 
the issues discovered, which included attempting to rebuild its COR accounts, replacing certain 
members of management, its board of directors, and its auditor, and overhauling its accounting 
function, including its policies and procedures relating to COR.   
IV. 
 In view of the foregoing, the Commission deems it appropriate to impose the sanctions 
agreed to in Respondent’s Offer. 
 
 Accordingly, it is hereby ORDERED that: 
 
 A. Pursuant to Section 8A of the Securities Act and Section 21C of the Exchange Act, 
Respondent GTT cease and desist from committing or causing any violations and any future 
violations of Sections 17(a)(2) and (3) of the Securities Act and of Sections 13(a), 13(b)(2)(A), 
13(b)(2)(B) of the Exchange Act, and Rules 12b-20, 13a-1, 13a-11, 13a-13, and 13a-15(a) 
thereunder.  
 

 12 
 B. Respondent acknowledges that the Commission is not imposing a civil penalty in 
part based upon its cooperation in a Commission investigation and/or related enforcement 
action.  If at any time following the entry of the Order, the Division of Enforcement (“Division”) 
obtains information indicating that Respondent knowingly provided materially false or misleading 
information or materials to the Commission, or in a related proceeding, the Division may, at its 
sole discretion and with prior notice to the Respondent, petition the Commission to reopen this 
matter and seek an order directing that the Respondent pay a civil money penalty.  Respondent 
may contest by way of defense in any resulting administrative proceeding whether it knowingly 
provided materially false or misleading information, but may not: (1) contest the findings in the 
Order; or (2) assert any defense to liability or remedy, including, but not limited to, any statute of 
limitations defense. 
 By the Commission. 
 
 
Vanessa A. Countryman 
Secretary 

UNITED STATES OF AMERICA 

Before the 

SECURITIES AND EXCHANGE COMMISSION 

SECURITIES ACT OF 1933 

Release No. 11241 / September 25, 2023 

 

SECURITIES EXCHANGE ACT OF 1934 

Release No. 98491 / September 25, 2023 

 

AAER Release No. 4459 / September 25, 2023 

 

ADMINISTRATIVE PROCEEDING 

File No. 3-21708 

 

In the Matter of 

 

GTT Communications, Inc.  

 

Respondent. 

 

 

ORDER INSTITUTING CEASE-AND-

DESIST PROCEEDINGS PURSUANT TO 

SECTION 8A OF THE SECURITIES ACT 

OF 1933 AND SECTION 21C OF THE 

SECURITIES EXCHANGE ACT OF 1934, 

MAKING FINDINGS, AND IMPOSING A 

CEASE-AND-DESIST ORDER  

  

I. 

 

 The Securities and Exchange Commission (“Commission”) deems it appropriate that cease-

and-desist proceedings be, and hereby are, instituted pursuant to Section 8A of the Securities Act 

of 1933 (“Securities Act”) and Section 21C of the Securities Exchange Act of 1934 (“Exchange 

Act”), against GTT Communications, Inc. (“GTT” or “Respondent”).   

 

II. 

 In anticipation of the institution of these proceedings, Respondent has submitted an Offer 

of Settlement (the “Offer”) which the Commission has determined to accept.  Solely for the 

purpose of these proceedings and any other proceedings brought by or on behalf of the 

Commission, or to which the Commission is a party, and without admitting or denying the findings 

herein, except as to the Commission’s jurisdiction over it and the subject matter of these 

proceedings, which are admitted, Respondent consents to the entry of this Order Instituting Cease-

and-Desist Proceedings Pursuant to Section 8A of the Securities Act of 1933 and Section 21C of 

the Securities Exchange Act of 1934, Making Findings, and Imposing a Cease-and-Desist Order 

(“Order”), as set forth below.   



 2 

III. 

 On the basis of this Order and Respondent’s Offer, the Commission finds1 that:  

Summary 

 

1. GTT made materially misleading statements and omissions relating to Cost-of-

Revenue (“COR”) in certain 2019 and 2020 Exchange Act annual, quarterly, and current reports.  

COR, referred to by GTT in public filings as Cost of Telecommunications Services, represents 

direct costs incurred by GTT in providing telecommunications services to its customers and is 

GTT’s largest operating expense.  

2. GTT grew rapidly through a series of acquisitions in 2017 and 2018, but struggled 

to integrate the newly-acquired companies into GTT’s systems.  As a result, two key operational 

systems – GTT’s Client Management Database (“CMD”) and its third-party bill processing system 

(the “BPS”) – started to show a persistent and growing discrepancy between actual invoices 

received through the BPS that related to COR and GTT’s expectation of what COR should be 

based on underlying supplier contracts in CMD.  This discrepancy, which was widely known 

within GTT, was a clear sign that GTT’s COR accounting methodology was not working properly 

and that GTT had data integrity issues.   

3. GTT’s accountants and operations staff investigated the cause of the discrepancy, 

but there was no effective way to compare the data in the two systems.  Further, given the volume 

of transactions following the acquisitions, GTT did not have the resources to review its COR 

invoices manually for proper classification and validity.  By at least mid-2018, GTT knew that it 

did not have sufficient information systems or resources to record and report COR accurately and 

fairly following the 2017 and 2018 acquisitions.  Despite that knowledge, GTT failed to implement 

and maintain policies and procedures designed to provide reasonable assurance that the COR 

reflected in GTT’s financial statements was based on reasonable support.  There also was a 

knowledge disconnect between GTT’s operations employees, who managed the company’s COR-

related data, and the accounting employees, who used that data to record and report COR.  Both 

groups were confused as to the other’s role:  operations did not fully appreciate how accounting 

used the data they provided, and accounting did not fully understand what the data reflected and its 

limitations.  Consequently, GTT’s conduct fell below the standard of care of a reasonable, 

similarly situated company.   

4. As a result, GTT failed to disclose material facts concerning certain unsupported 

adjustments to COR, which caused the statements that GTT made concerning COR to be 

misleading in light of the circumstances.  These adjustments concerned COR-In-Advance (i.e., pre-

paid expense) and COR vendor disputes and were reported in GTT’s Forms 10-Q for the quarters 

ended September 30, 2019, and March 31, 2020, and in GTT’s Form 10-K for the fiscal year ended 

December 31, 2019, and in related earnings releases on Forms 8-K.  GTT also made material 

 
1  The findings herein are made pursuant to Respondent’s Offer of Settlement and are not 

binding on any other person or entity in this or any other proceeding.   

 



 3 

omissions in its 2019 Form 10-K concerning uncertainties involving certain receivables from 

vendors subject to disputes that were recorded in its financial statements that rendered statements it 

made misleading.  Consequently, and as described in more detail below, GTT violated Sections 

17(a)(2) and (3) of the Securities Act.  GTT also violated Sections 13(a), 13(b)(2)(A) and 

13(b)(2)(B) of the Exchange Act and Rules 12b-20, 13a-1, 13a-11, 13a-13, and 13a-15(a) 

thereunder.  

Respondent 

5. GTT Communications, Inc., a Delaware corporation headquartered in Virginia, was 

a publicly traded multinational telecommunications and internet service provider at all relevant 

times.  GTT’s stock was registered under Section 12(b) of the Exchange Act and was listed on the 

New York Stock Exchange (“NYSE”) until July 21, 2021, when it was delisted.  On November 9, 

2021, GTT filed a Form 15 terminating its registration under Section 12(g) of the Exchange Act 

and notifying the Commission that its duty to file reports under Section 15(d)(1) of the Exchange 

Act had been suspended for that fiscal year because it had fewer than 300 holders of record of each 

class of securities registered under the Exchange Act.  GTT and certain of its affiliates filed 

prepackaged Chapter 11 bankruptcy cases on October 31, 2021, and GTT emerged as a private 

company on December 30, 2022.   

Facts 

Following Several Acquisitions, Two GTT Operating Systems Used to Account  

for COR Showed a Persistent Discrepancy Between Expected and Actual Expense 

6. GTT grew rapidly between 2017 and 2018, completing eight acquisitions that more 

than doubled GTT’s revenue and expense.  Many of the acquired companies were private, 

distressed companies located outside the United States that used different operating and accounting 

systems than GTT and that lacked robust internal controls.  GTT’s employees were overwhelmed 

by the increased volume of data and transactions following the acquisitions and they struggled to 

successfully integrate certain of these newly acquired companies into GTT’s systems, including 

CMD and its BPS.   

7. CMD was an internally developed platform that GTT used to manage its contracts 

with networks, clients, and suppliers.  GTT used CMD to bill customers for services provided, to 

manage the inventory necessary to provide the contracted-for services, and to estimate the 

expenses associated with providing the services.  CMD contained estimates of GTT’s anticipated 

COR derived from information about third-party vendor inventory used to fulfill services to its 

customers.   

8. GTT used its BPS, which was specifically designed for the telecommunications 

industry, to process vendor invoices that underlay COR. The BPS received the majority of invoices 

electronically directly from the telecommunications vendors.  The BPS processed the vendor 

invoices and pulled information, such as the service period and underlying charge type, into a 

useable format for GTT operations employees to review and approve or reject in summary form.  



 4 

For purposes of recording and reporting COR, the BPS contained GTT’s expenses as reflected in 

the invoices received from the vendors.   

9. By the close of the second quarter 2018, a persistent and growing discrepancy 

existed between the amounts GTT was routinely paying in invoices as reflected in the BPS and the 

expected costs that were reflected in CMD.  This discrepancy between CMD and the BPS 

indicated that GTT’s accounting methodology was not working correctly and that its systems had 

data integrity issues.   

10. At various points in time, GTT’s accountants and operations employees 

investigated the cause of the discrepancy, but there was no effective way to compare the data in the 

two systems, which by 2019 were processing more than 600,000 COR transactions on a monthly 

basis.  Additionally, given the volume of data, GTT did not have the resources to review the 

invoices manually.     

GTT Failed to Implement and Maintain Policies and Procedures Designed to Provide 

Reasonable Assurance that COR Expense Adjustments Were Based on Reasonable Support 

11. After the discovery of the discrepancy between CMD and the BPS, GTT never 

resolved which data source should be used to record and report COR or which was more accurate.  

Certain members of GTT’s management favored CMD because it was GTT’s database of record 

and they believed it to be more accurate than the BPS.  Certain members of GTT’s accounting staff 

did not fully trust the accuracy of either CMD or the BPS. 

12. Additionally, there was an information disconnect between the operations and 

accounting staff.  There was a lack of understanding as to the other’s role, and the two groups did 

not effectively communicate concerning COR and the issues they were seeing.  Operations was 

responsible for maintaining the data in CMD and the BPS, while accounting was responsible for 

recording and reporting COR based on the data maintained by operations.  Accounting could not 

resolve the data discrepancy problem without the help of operations.  Further, operations did not 

fully appreciate how accounting used the data they provided, and accounting did not fully 

understand what the data reflected and its limitations. 

13. By mid-2019, GTT accountants and operations employees, as well as some 

members of senior management, knew that the only way to determine GTT’s actual COR was to 

link the data between CMD and the BPS at a granular level.  Until that exercise was completed and 

the systems were updated, they knew that GTT did not have a reliable data source on which to base 

the COR being recorded in the financial statements.   

14. Thus, it was widely understood within GTT that it did not have sufficient systems 

and resources to accurately record and report COR following its acquisitions.  Yet, despite 

knowing that it lacked both a reliable data source and the resources to manually review COR, GTT 

failed to implement and maintain policies and procedures designed to provide reasonable assurance 

that COR adjustments were based on reasonable support.  Rather, GTT’s operations and 

accounting employees continued to communicate ineffectively concerning COR, and GTT 



 5 

continued to record adjustments to COR that lacked reasonable support, which fell below the 

standard of care of a reasonable, similarly situated company. 

GTT Made Unsupported Accounting Adjustments to COR in 2019 and 2020, Resulting in 

Materially Misleading Statements and Omissions in Its Public Filings 

15. As a result of GTT’s lack of policies and procedures to provide reasonable 

assurance that COR adjustments were based on reasonable support as well as the information 

disconnect between GTT’s operations and accounting employees regarding COR, GTT failed to 

disclose material facts concerning certain unsupported and highly uncertain adjustments to COR 

during the third quarter of 2019, fourth quarter of 2019 and the first quarter of 2020.  This rendered 

the disclosures made concerning COR and vendor disputes materially misleading in light of the 

circumstances.   

Third Quarter 2019 COR-In-Advance Adjustment 

16. First, in the third quarter of 2019, GTT accountants moved $5.6 million of expense 

from the income statement to COR-In-Advance (i.e., prepaid expense) on the balance sheet 

without reasonable support.  The adjustment increased prepaid expense and decreased COR on the 

financial statements reported in GTT’s Form 10-Q for the third quarter of 2019.  It was also 

included in the financial information reported in an earnings release furnished with GTT’s 

November 11, 2019, Form 8-K.  By that time, GTT accounting and operations employees were 

investigating, but had not determined the cause of, the discrepancy in COR reflected between 

CMD and the BPS.  Although they suspected the BPS was not properly processing certain invoices 

that covered future service periods and was thus potentially overstating COR, they had no 

reasonable basis to quantify the impact of this suspected shortcoming prior to the closing of the 

books for the third quarter of 2019.  GTT’s decision to record the $5.6 million adjustment was 

motivated by a desire to keep expenses consistent with CMD while it continued to investigate.  

Given the circumstances, GTT’s failure to disclose material facts concerning this unsupported 

adjustment, including that GTT could not confirm the validity or quantification of this adjustment 

prior to the close of the quarter, caused GTT’s disclosures concerning COR to be materially 

misleading.  The COR-In-Advance adjustment amount had a material impact on GTT’s third 

quarter financial statements by increasing GTT’s operating income by approximately 23% and 

decreasing its third quarter net loss before income taxes by approximately 17%. 

Fourth Quarter 2019 Bulk Disputes Adjustment 

17. Second, in the fourth quarter of 2019, GTT failed to disclose material facts 

concerning an unsupported $16 million vendor dispute adjustment, which rendered GTT’s 

disclosures concerning COR and vendor disputes materially misleading in light of the 

circumstances.  The adjustment reduced COR and was reflected in GTT’s 2019 Form 10-K, and in 

the related earnings release furnished with the March 2, 2020, Form 8-K.   

18. The adjustment lacked reasonable support because, as discussed below, it was 

based on unverified data.  During the fourth quarter of 2019, GTT undertook a massive project to 

link as many of the invoices in the BPS as possible to CMD and to dispute any invoices that could 



 6 

not be linked with the vendors.  These disputes came to be known internally as “Bulk Disputes,” 

and they differed from GTT’s normal course disputes (e.g., disputes based on specific vendor 

billing errors identified during GTT’s bill verification procedures), in volume, timing and rationale.   

19. GTT accountants calculated the $16 million adjustment based on preliminary 

invoice data and estimated “win rates” (i.e., the percentage of disputes that GTT expected to win) 

provided by operations.  Because GTT had no history with Bulk Disputes prior to the fourth 

quarter of 2019, GTT operations employees developed different estimated win rates for several 

sub-categories of the Bulk Disputes (e.g., services marked “disconnected” were assigned an 

estimated win rate of 68%, whereas services that could not be linked and required more research 

were assigned a win rate of 15%).  By contrast, GTT generally applied a single win rate based on 

historical results to all normal course disputes.  The adjustment was made before the actual filing 

of the Bulk Disputes. 

20. Following the booking of the $16 million adjustment, but prior to the filing of the 

2019 Form 10-K, the operations team provided the accounting team with updated data that 

reflected the actual disputes filed with the vendors, which was a smaller pool of invoices than the 

set of invoices upon which the adjustment was based.  When the GTT accountants applied the 

same estimated win rates to the updated data, the calculation yielded an adjustment amount of 

approximately $9.1 million as compared to the $16 million adjustment recorded in mid-January 

using the preliminary invoice data.  Although GTT had no prior experience with vendor disputes of 

this volume or nature, the employees believed that the win rate would rise as GTT exhausted 

efforts to link the invoices in the BPS to CMD.  The theory was that any remaining unlinked 

invoices were more likely to be erroneous given that GTT appeared to have no record of them.  

GTT employees did not think they had time to update the win rates to apply to the updated data 

prior to the filing of the Form 10-K.  Thus, although the accounting function knew or should have 

known that the $16 million entry was based on unverified data, that more accurate data was 

available, and that the fourth quarter financials had not yet been finalized, the $16 million 

adjustment was not updated to reflect the more accurate and up-to-date data reflected in the later 

calculation.   

21. Additionally, the 2019 Form 10-K included no meaningful disclosure regarding the 

Bulk Disputes adjustment.  Rather, GTT included its standard “Disputed Supplier Expenses” 

disclosure for normal course vendor disputes, which did not describe the $16 million adjustment 

amount or contain any disclosure concerning the Bulk Disputes.  The Bulk Disputes process 

differed from the normal course vendor disputes process in material ways and involved several 

subjective assumptions that were highly uncertain: (1) most of the invoices making up the Bulk 

Disputes had already been paid, requiring reimbursement or credit in the event of a win, whereas 

those in the normal course disputes process had not yet been paid; (2) many of the Bulk Disputes 

were being disputed simply because the underlying invoices in the BPS could not be linked to 

CMD, whereas the normal course disputes were based on some specifically identified flaw in the 

invoice; (3) these disputes were submitted using a “bulk” back-end process rather than through 

individual submissions entered by GTT personnel; and (4) GTT had no history on which to base 

the Bulk Disputes win rates whereas the normal course disputes were based on historical average 

win rates for that type of dispute.  Part of the Bulk Disputes adjustment was included as a $10.7 

million receivable from suppliers (under Prepaid Expenses and Other Current Assets), which 



 7 

reflected GTT’s assumption at that time that two-thirds of the total Bulk Disputes were paid 

disputes, without identifying that amount as part of its “Disputed Supplier Expenses” disclosure. 

22. GTT’s failure to disclose material facts concerning the Bulk Disputes adjustment, 

including that the adjustment did not reflect the actual disputes filed or the most accurate and up-

to-date data available prior to the filing of the Form 10-K and that the Bulk Disputes process 

differed in several material ways from the normal course disputes as described above, rendered 

GTT’s disclosures concerning vendor disputes and COR materially misleading in light of the 

circumstances.  The Bulk Disputes adjustment amount had a material impact on GTT’s financial 

statements by increasing GTT’s 2019 operating income by approximately 15% and decreasing 

GTT’s net loss before income taxes by approximately 13%.   

23. Further, GTT failed to include any disclosure in its 2019 Form 10-K concerning the 

material implications of the uncertainties associated with the methods, assumptions, and estimates 

underlying the Bulk Disputes adjustment, as required by Item 303 of Regulation S-K.  Among 

other things, Item 303(a)(3)(ii) required disclosure of “any known … uncertainties that have had or 

that the registrant reasonably expects will have a material favorable or unfavorable impact on net 

sales, revenues or income from continuing operations….”  GTT was required to objectively 

evaluate whether it reasonably expected uncertainties in the Bulk Disputes adjustment to have a 

material impact on the company’s liquidity, capital resources or results of operations and provide 

disclosure about that uncertainty if the impact is material.2  GTT failed to disclose that the 

assumptions it used to determine the Bulk Disputes adjustment, such as the win rates and the pool 

of invoices disputed (e.g., a large number of invoices were disputed simply because GTT could not 

find a record of them in CMD), were highly uncertain and it was reasonably likely the estimate 

could change because they had no historical experience upon which to rely to evaluate whether 

they would be successful in winning this type of dispute.       

First Quarter 2020 Bulk Disputes 

24. Finally, in the first quarter of 2020, GTT failed to disclose material facts concerning 

two unsupported adjustments totaling $19 million relating to a reassessment of the Bulk Disputes 

recorded in the fourth quarter of 2019 and additional disputes that had not been entered for the first 

 
2  The Commission has articulated a two-part test for determining whether a known trend or 

uncertainty requires disclosure.  “Where a trend, demand, commitment, event or uncertainty is 

known, management must make two assessments: (1) Is the known trend, demand, commitment, 

event or uncertainty likely to come to fruition? If management determines that it is not 

reasonably likely to occur, no disclosure is required.  (2) If management cannot make that 

determination, it must evaluate objectively the consequences of the known trend, demand, 

commitment, event or uncertainty, on the assumption that it will come to fruition. Disclosure is 

then required unless management determines that a material effect on the registrant's financial 

condition or results of operations is not reasonably likely to occur.”  Management’s Discussion 

and Analysis of Financial Condition and Results of Operations, Securities Act Release No. 6835, 

43 S.E.C. Docket 1330, 1989 WL 1092885, at *6 (May 18, 1989). This test was reiterated in the 

2003 MD&A release (Release No. 33-8350) and in the 2020 MD&A release (Release No. 33-

10890).   



 8 

quarter of 2020, which rendered GTT’s first quarter 2020 disclosures concerning COR and vendor 

disputes materially misleading in light of the circumstances.  The $19 million in adjustments 

reduced COR and were reflected in GTT’s Form 10-Q for the first quarter of 2020, and in the 

related earnings release furnished with the May 8, 2020, Form 8-K.   

25. By the end of the first quarter of 2020, very few of the Bulk Disputes had been 

resolved.  Therefore, GTT reassessed the amount still outstanding for the Bulk Disputes recorded 

in the fourth quarter.  Continuing to believe, despite having no reasonable basis, that the win rate 

would rise as the pool of unlinked invoices shrunk, GTT accounting employees increased the Bulk 

Disputes win rate several times over a short period in connection with updating the calculation for 

the first quarter of 2020.  Ultimately, the accounting team booked a reaccrual for the fourth quarter 

2019 Bulk Disputes of approximately $17 million, which was a $1 million increase over the 

original fourth quarter 2019 adjustment. 

26. In connection with calculating the reaccrual of the fourth quarter 2019 Bulk 

Disputes adjustment in the first quarter of 2020, GTT initially raised the win rates for certain sub-

categories of Bulk Disputes based on GTT’s exhaustive linking efforts.  However, the next day 

accounting decided GTT should apply the higher normal course disputes win rate of 62% to all the 

Bulk Disputes, regardless of sub-category, given that GTT had been pursuing the Bulk Disputes 

for a few months by that point, which again increased the adjustment amount.  Then, one day later, 

after consulting with an operations employee, accounting raised the win rate to 75% based on 

GTT’s linking efforts.  

27. A few days later, the same operations employee informed accounting that he 

thought they had agreed to use a 25% win rate for the Bulk Disputes, not 75%.  After further 

consideration, accounting changed the Bulk Disputes win rate back to the normal course disputes 

win rate of 62%, which resulted in an updated Bulk Disputes adjustment amount of approximately 

$17 million, or $1 million more than the fourth quarter 2019 estimate.  Despite continuing to 

believe that the best operational estimate for the Bulk Disputes win rate was 25%, the operations 

employee did not protest the use of the normal course disputes win rate because he believed it to be 

an accounting judgment and outside of his area of expertise.  

28. Separately, GTT also recorded a Bulk Disputes adjustment for the first quarter of 

2020.  GTT believed that many of the billing issues identified in the fourth quarter of 2019 

continued in the first quarter of 2020.  GTT attempted to identify the same charges during the first 

quarter of 2020 that had not otherwise been disputed through the BPS for that period.  GTT’s 

accounting staff recorded an incremental adjustment to account for their estimate of those disputes 

using a 75% win rate.  This resulted in a reduction of COR of approximately $18 million in the 

first quarter of 2020.    

29. There was no reasonable basis to apply the normal course disputes win rate or 

higher to the Bulk Disputes: (1) there were numerous differences between the Bulk Disputes and 

the normal course disputes; and (2) GTT had not received enough results to provide any guidance 

that the win rate for the Bulk Disputes, many of which concerned invoices that had already been 

paid, would be similar to the normal course disputes, most of which had not yet been paid.  GTT’s 

failure to disclose material facts concerning these adjustments, including that GTT applied the 



 9 

normal disputes win rate or higher despite having no results history to support such a win rate and 

despite the material differences between these disputes and the normal course disputes, rendered 

the disclosures made concerning COR and vendor disputes in the first quarter of 2020 materially 

misleading. 

30. The $19 million in Bulk Disputes reassessment and additional amount for disputes 

not yet entered in the first quarter of 2020 had a material impact on GTT’s first quarter 2020 

financial statements by increasing GTT’s operating income by almost 200% and decreasing GTT’s 

net loss before income taxes by 18%.  

December 2020 Restatement Announcement 

31. On December 22, 2020, GTT disclosed in a Form 8-K that its previously issued 

consolidated financial statements for the years ended December 31, 2019, 2018 and 2017, and the 

quarter ended March 31, 2020, should no longer be relied upon and that it intended to file restated 

consolidated financial statements.  In connection with closing its books for the second quarter of 

2020, GTT identified several issues related to the recording and reporting of COR and commenced 

an internal investigation.  GTT also disclosed that it was evaluating the impact of the identified 

errors on GTT’s internal control over financial reporting and disclosure controls and procedures 

and that the company expected to report a material weakness in internal control over financial 

reporting and report that its disclosure controls and procedures were ineffective.   

32. GTT subsequently spent more than a year and tens of millions of dollars in an 

attempt to correct its filings, but ultimately suspended its efforts to restate due in part to the 

complexity of reconciling the two operational systems that were producing inconsistent 

information relevant to the calculation of COR.  When GTT emerged from bankruptcy on 

December 30, 2022 as a private company owned by certain of its former creditors, GTT used 

“Fresh-Start Reporting,” which allows companies to present their assets, liabilities, and equity as a 

new entity on the day the company emerges from bankruptcy under Chapter 11 of the United 

States Bankruptcy Code.   

Materiality 

33. Reasonable investors would have considered the misleading statements and 

omissions described above to be important in making investment decisions concerning GTT’s 

securities during the relevant period.  

GTT Offered and Sold Securities During the Relevant Period 

34. GTT offered and sold securities through its employee stock purchase plan, which 

transactions were registered on Form S-8, during the relevant period, and received proceeds from 

such sales.   



 10 

GTT’s Disclosure Controls and Procedures and Internal Control 

Over Financial Reporting Failures 

35. Rule 13a-15(a) under the Exchange Act requires issuers such as GTT to maintain 

disclosure controls and procedures, as defined in Rule 13a-15(e), and internal control over 

financial reporting, as defined in Rule 13a-15(f).  Rule 13a-15(e) defines “disclosure controls and 

procedures” to include “controls and other procedures of an issuer that are designed to ensure that 

information required to be disclosed … is recorded, processed, summarized and reported” within 

the time periods specified in the Commission’s rules and forms.  Rule 13a-15(f) defines “internal 

control over financial reporting” as a process to “provide reasonable assurance regarding the 

reliability of financial reporting and the preparation of financial statements” in accordance with 

GAAP, and includes policies and procedures that provide reasonable assurance that transactions 

are recorded as necessary to permit the preparation of the financial statements in accordance with 

GAAP.   

36. As described above, GTT lacked controls and procedures designed to ensure that 

GTT’s COR adjustments – especially the Bulk Disputes adjustments, which involved a new and 

highly uncertain process – were based on reasonable support and that material information 

concerning those adjustments was reported in GTT’s Exchange Act reports.  GTT also lacked 

controls or procedures designed to provide reasonable assurance that COR was recorded and 

reported in the proper periods.  Further, GTT failed to maintain internal control over financial 

reporting because, with respect to its COR adjustments, GTT lacked a process to provide 

reasonable assurance regarding the reliability of financial reporting and the preparation of financial 

statements, as well as lacked policies and procedures that provided reasonable assurance that its 

COR adjustments were recorded as necessary to permit the preparation of financial statements in 

accordance with GAAP. 

Violations 

 

37. As a result of the conduct described above, GTT violated Sections 17(a)(2) and 

17(a)(3) of the Securities Act.  Section 17(a)(2) prohibits any person from obtaining money or 

property in the offer or sale of securities by means of any untrue statement of a material fact or any 

omission to state a material fact necessary in order to make the statements made, in light of the 

circumstances in which they were made, not misleading.  Section 17(a)(3) of the Securities Act 

prohibits any person from engaging in any transaction, practice, or course of business which 

operates or would operate as a fraud or deceit upon the purchaser.  Negligence is sufficient to 

establish violations of Sections 17(a)(2) and 17(a)(3).  Aaron v. SEC, 446 U.S. 680, 697 (1980).  

38. As a result of the conduct described above, GTT violated Section 13(a) of the 

Exchange Act and Rules 13a-1, 13a-11, 13a-13, and 12b-20 thereunder, which require every issuer 

of a security registered pursuant to Section 12 of the Exchange Act to file with the Commission 

annual, current, and quarterly reports as the Commission may require, and mandate that Exchange 

Act reports contain such further material information as may be necessary to make the required 

statements not misleading. 



 11 

39. As a result of the conduct described above, GTT violated Sections 13(b)(2)(A) and 

13(b)(2)(B) of the Exchange Act.  Section 13(b)(2)(A) of the Exchange Act requires issuers with a 

security registered pursuant to Section 12 of the Exchange Act to make and keep books, records, 

and accounts which, in reasonable detail, accurately and fairly reflect the transactions and 

dispositions of the assets of the issuer, and Section 13(b)(2)(B) of the Exchange Act requires such 

issuers to, among other things, devise and maintain a system of internal accounting controls 

sufficient to provide reasonable assurances that transactions are recorded as necessary to permit 

preparation of financial statements in accordance with GAAP.   

40. As a result of the conduct described above, GTT violated Rule 13a-15(a) under the 

Exchange Act, which requires that every issuer of a security registered pursuant to Section 12 of 

the Exchange Act maintain disclosure controls and procedures as defined in Rule 13a-15(e) under 

the Exchange Act and that such issuers maintain internal control over financial reporting as defined 

in Rule 13a-15(f) under the Exchange Act.  

GTT’s Cooperation and Remedial Efforts 

41. In determining to accept the Offer, the Commission considered remedial acts 

promptly undertaken by Respondent and cooperation afforded the Commission staff.  

42. GTT promptly self-reported to the Commission and provided substantial 

cooperation, including by, among other things, providing multiple presentations concerning the 

findings from its internal investigation, including presentations made before it had reached final 

conclusions about the nature and scope of the relevant issues; identifying key documents and 

witnesses; promptly making documents and witnesses available; and facilitating testimony from 

former employees.   

43. Further, GTT voluntarily undertook affirmative remedial measures in response to 

the issues discovered, which included attempting to rebuild its COR accounts, replacing certain 

members of management, its board of directors, and its auditor, and overhauling its accounting 

function, including its policies and procedures relating to COR.   

IV. 

 In view of the foregoing, the Commission deems it appropriate to impose the sanctions 

agreed to in Respondent’s Offer. 

 

 Accordingly, it is hereby ORDERED that: 

 

 A. Pursuant to Section 8A of the Securities Act and Section 21C of the Exchange Act, 

Respondent GTT cease and desist from committing or causing any violations and any future 

violations of Sections 17(a)(2) and (3) of the Securities Act and of Sections 13(a), 13(b)(2)(A), 

13(b)(2)(B) of the Exchange Act, and Rules 12b-20, 13a-1, 13a-11, 13a-13, and 13a-15(a) 

thereunder.  

 



 12 

 B. Respondent acknowledges that the Commission is not imposing a civil penalty in 

part based upon its cooperation in a Commission investigation and/or related enforcement 

action.  If at any time following the entry of the Order, the Division of Enforcement (“Division”) 

obtains information indicating that Respondent knowingly provided materially false or misleading 

information or materials to the Commission, or in a related proceeding, the Division may, at its 

sole discretion and with prior notice to the Respondent, petition the Commission to reopen this 

matter and seek an order directing that the Respondent pay a civil money penalty.  Respondent 

may contest by way of defense in any resulting administrative proceeding whether it knowingly 

provided materially false or misleading information, but may not: (1) contest the findings in the 

Order; or (2) assert any defense to liability or remedy, including, but not limited to, any statute of 

limitations defense. 

 By the Commission. 

 

 

Vanessa A. Countryman 

Secretary