S.E.C. Wants Elon Musk Held in Contempt of Court for Tesla Post on Twitter

Elon Musk has put himself in authorized bother with a publish on Twitter. Again.

The Securities and Exchange Commission on Monday requested a federal courtroom to carry Mr. Musk, chief government of Tesla, in contempt of courtroom for violating a settlement that he and the corporate reached with the fee final 12 months. The S.E.C. stated Mr. Musk issued an up to date manufacturing outlook in a Twitter publish on final Tuesday with out first in search of approval from the corporate’s attorneys as required below the settlement.

It was the most recent in a collection of episodes, together with the one which led to the settlement, which have renewed questions on Mr. Musk’s judgment and the Tesla board’s skill to supervise his actions.

The fee sued Mr. Musk and Tesla final 12 months over a Twitter publish in which he stated he had “funding secured” to take the corporate personal at $420 a share. It turned out that the plan to take the corporate personal was in a way more embryonic state than his tweet indicated.

The settlement required the corporate to ascertain “mandatory procedures to oversee and preapprove Mr. Musk’s Tesla-related written communications” which may have materials data. Mr. Musk was required to step down as chairman, and he and the corporate paid $20 million every in fines. The board named one of its members as chairwoman and appointed two new unbiased administrators.

At the crux of the fee’s newest criticism are Mr. Musk’s current manufacturing claims.

In the post last Tuesday, Mr. Musk forecast that the electric-car company would make “around 500,000” cars in 2019, a big increase from a target of 400,000 set at the end of January. About four hours later, Mr. Musk corrected himself, saying Tesla would indeed deliver 400,000 cars this year.

“Meant to say annualized production rate at end of 2019 probably around 500k,” he wrote.

Tesla’s lawyers acknowledged in a letter to the S.E.C. on Friday that Mr. Musk’s tweets had not been reviewed before they were posted. They argued that he had believed that “the substance” of his post “had already been appropriately vetted, preapproved and publicly disseminated.”

In the fourth-quarter earnings report released on Jan. 30, Tesla said it was “targeting annualized Model 3 output in excess of 500,000 units sometime between Q4 of 2019 and Q2 of 2020.”

But in a motion filed Monday with Federal District Court in Manhattan, the S.E.C. said Mr. Musk had “violated the court’s final judgment by engaging in the very conduct that the preapproval provision of the final judgment was designed to prevent.” It added that Mr. Musk’s tweet about producing 500,000 cars this year “was inaccurate and disseminated to over 24 million people” — the number of followers Mr. Musk had on Twitter at the time.

Mr. Musk defended himself on Twitter later on Monday. He said the S.E.C. “forgot to read Tesla earnings transcript,” in which he forecast production of between 350,000 and 500,000 cars. “How embarrassing,” he wrote.

Rebecca Roiphe, a professor at New York Law School, said the commission’s action “is a fairly extreme step, but it is unsurprising, given that Musk seems so unconcerned not only about the agreement but about the policies behind the securities law.”

“This is not an innocuous tweet,” she added. “Insiders have to be careful about revealing misleading information to the public.”

Ms. Roiphe said the motion could set the stage for the commission to later seek Mr. Musk’s removal as chief executive if he further violated the agreement. The court could also decide to impose a fine, which is typical in civil cases such as this, or impose other restrictions on Mr. Musk’s use of Twitter and other social media.

The S.E.C. said in its motion that Mr. Musk had previously “not made a diligent or good faith effort to comply” with the settlement. The commission cited an interview that Mr. Musk gave to the CBS News program “60 Minutes,” broadcast in December, in which he said he did not respect the S.E.C. and acknowledged that he did not have all his tweets reviewed.

“Well, I guess we might make some mistakes,” he said in the interview. “Who knows?”

Earlier, in October, Mr. Musk mocked the S.E.C. on Twitter, calling it the Shortseller Enrichment Commission. He has long railed against hedge funds and other investors that bet that Tesla’s stock will decline by selling its shares short.

The day after Mr. Musk’s tweets about the company’s production goals appeared last week, Tesla’s general counsel, Dane Butswinkas, left the company. He had been in the job just two months and had previously represented Mr. Musk in the settlement negotiations with the S.E.C.

It is not clear whether Mr. Musk’s tweets played any role in that departure. The company said Mr. Butswinkas had decided to return to his law firm, Williams & Connolly, in Washington.

Source link Nytimes.com

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