Movers and SHAKERS
Image Credit: Maurizio Pesce
Musk’s Lawyers Suggest a Rogue U.S. Agency is being Weaponized Against Him
Tesla CEO Elon Musk’s legal representatives say the Securities and Exchange Commission (SEC) is conducting ‘unfounded investigations’ on him and the EV company. In a letter, to a federal judge, Tesla’s lawyers accuse the regulator of not distributing a $40 million fine paid after a 2018 settlement to shareholders allegedly harmed over Musk’s Twitter posts.
The correspondence sent Thursday (February 16) accuses the SEC of conducting “unfounded investigations” of Mr. Musk and Tesla. The letter was addressed to the federal judge who oversaw the settlement. As a result, Tesla has essentially become what it sees as a whistleblower against the SEC.
Tesla and the SEC settled an enforcement action in 2018 that alleged that Musk had committed fraud by tweeting about a potential buyout of the company. Tesla paid $20 million to settle that case. Musk also personally paid $20 million. He also agreed to have his public statements on social media overseen by Tesla lawyers.
In correspondence sent to Tesla in both 2019 and 2020, the SEC said tweets Musk wrote regarding Tesla’s solar roof production volumes and its stock price hadn’t undergone the required preapproval and supervision. The communications involving the Commission are part of the tensions between the nation’s public market regulator and the founder of the $927 billion dollar car company. It should also be noted that after the settlement, Musk publicly mocked the SEC.
To date, the SEC hasn’t distributed the $40 million in fine money to those holding shares at the time of his 2018 tweets that claimed he planned to take Tesla private, according to the letter sent to the judge. The part of the agreement that was to be upheld by Tesla (in addition to the $40 million) is that company lawyers would preclear certain of the CEO’s tweets and other public statements. The SEC wants proof of adherence.
Tesla’s New Accusation
According to the letter signed by Tesla attorney Andrew Spiro, “The SEC seems to be targeting Mr. Musk and Tesla for unrelenting investigation largely because Mr. Musk remains an outspoken critic of the government.” The letter addressed to U.S. District Judge Alison Nathan in Manhattan, pointed out that if the Commission was concerned “the SEC has not once come before Your Honor to seek discovery concerning compliance under the consent decree,” the letter continues, “Instead, it has gone rogue, and unilaterally opened its own investigations.” Then Spiro accuses, “The SEC has conducted these investigations wholly outside of this court’s supervision.”
Tesla attorney Andrew Spiro’s letter suggests that Elon Musk and the company’s board regret settling and agreeing to the social-media oversight policy, and monetary portion, which Judge Nathan approved. Also, the company decided to resolve the lawsuit because it believed that fine money would go to Tesla shareholders. In the absence of, (according to Tesla), the SEC not keeping its part of the deal, and (according to the SEC) Tesla not adequately maintaining its part of the agreement, tensions may soon come to a head.
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