FLASH: Tesla’s Elon Musk says it is up to him when to submit Tweets for company approval.
The US Securities and Exchange Commission is 2Xing down on the government’s demand to find the Tesla (NASDAQ:TSLA) CEO in contempt of a previous fraud settlement that required him to have the company pre-approve any tweets that could materially impact the automaker.
The ongoing public battle between Tesla’s CEO Elon Musk and the SEC putting heavy pressure on him, and he is the public face of the struggling company.
The SEC said a 19 February Tweet that Mr. Musk sent to his more than 24-M Twitter followers claiming the EV-maker would build around 500,000 cars in T 2019 was “a blatant violation” of the agreement.
The SEC asked Tesla in late February whether any of Mr. Musk’s Tweets had been pre-approved since that policy was adopted, according to the filing bit.ly/2HsMiUr in federal court in Manhattan.
Tesla responded, after more than 2 weeks, to say just: “No.”
“It is therefore stunning to learn that, at the time of filing of the instant motion, Musk had not sought pre-approval for a single one of the numerous tweets about Tesla he published in the months since the court-ordered pre-approval policy went into effect,” the SEC said in the filing.
The regulator last month alleged that Mr. Musk had violated a September settlement of fraud charges by tweeting material information about Tesla without pre-approval from the company.
In response, Mr. Musk had argued that his “single, immaterial” Tweet was in compliance with the settlement, and that the SEC’s push to find him in contempt infringed on his free speech.
Lawyers for Mr. Musk said the Tweet complied with the company’s communication policy for senior executives and was a “proud and optimistic restatement of publicly disclosed information.”
The SEC said in Monday’s filing that the pre-approval policy agreed in the settlement was designed to include a wide variety of his comments, not just those that were deemed material by the regulator’s standards.
The fraud settlement between Mr. Musk, Tesla and the SEC resolved a lawsuit brought by the regulator over claims Mr. Musk made on Twitter in August that he had “funding secured” to take Tesla private at 420/share. The SEC called those Tweets “false and misleading” and a go-private deal never materialized.
As part of that settlement, Mr. Musk stepped down as the company’s Chairman and he and Tesla agreed to pay $20-M each in fines.
Mr. Musk called the SEC the “Shortseller Enrichment Commission” on Twitter after the settlement, and tweeted that “something is broken with SEC oversight” just a day after the agency started pursuing the contempt order.
Legal experts have said the SEC could pursue multiple avenues, including a higher fine, imposing further restrictions on Mr. Musk’s activities or removing him from Tesla’s board and/or its helm.
Tesla published a new communications policy in December for senior executives as part of the settlement. It called for Tesla’s general counsel and a newly designated in-house securities law attorney to pre-approve any written statements about Tesla that could be material.
A disclosure controls committee, made up of board members Brad Buss, Antonio Gracias and James Murdoch, was tasked with overseeing compliance with the new policy.
The case is U.S. SEC v Elon Musk, U.S. District Court, Southern District of New York, No. 1:18-cv-8865-AJN-GWG
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