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Elon Musk said the Securities and Exchange Commission had "virtually wrong at all levels" to want to convict him for contempt of court after allegedly violating the settlement agreement reached by both parties last year. The claim was part of the new arguments put forward by Musk and his lawyers on Friday in a recent exchange between Tesla's chief executive and the federal agency.
On Feb. 25, the SEC asked a federal judge to convict Musc in defiance of power because one of Tesla's CEO's tweets on February 19 might have been contrary to the terms of the settlement. In the tweet in question, Musk said Tesla would manufacture "about 500,000 cars" in 2018, which, according to the SEC, goes against the official guidance given by the company on Jan. 30. Musk even released a correction a few hours later, which the SEC later determined because Tesla's attorney responsible for monitoring Musk's tweets felt that it needed to be changed.
The settlement was reached last September after the SEC sued Musk for securities fraud after tweets he sent in August over the privatization of Tesla. Musk said at the time that he had "obtained funding" to make the move, but the SEC's own investigation revealed evidence that this was false. Musk was forced to leave his position as president of Tesla and was fined $ 20 million.
This is not everything. Musk agreed to monitor his public communications on Tesla – including his tweets. More specifically, Musk is expected to submit "prior approval of any such written communication containing, or likely to contain, information intended for the Company or its shareholders", according to the by-law. In other words, if Musk is about to tweet something that could affect Tesla's share price (and its shareholders), he is supposed to have it executed by a designated internal lawyer.
This specific part of the regulation is what lies behind the current dispute. Musk again asserted today that the language of the colony allowed him to determine whether his tweets on Tesla would be material or not. Depending on how the Musk team reads the terms of the settlement, it is "imposed on the executive to make an initial decision in good faith as to whether a tweet must be previously approved."
The SEC interprets the regulation much more strictly and believes that Musk takes a too loose approach. After initially claiming that the tweet of Feb. 19 was a violation, the commission said last Monday that "Musk's uncontrolled and deceptive tweets on Tesla are behind the charges against the SEC, and the charges against the SEC have been high. Pre-approval requirement was designed to protect against Musk's reckless drive towards the front. "
But today's record reveals that disagreement over what Musk might be tweeting apparently goes back before the SEC accuses Mr. Musk of securities fraud. Musk's lawyers included e-mails and drafts of the original settlement filed on Friday that Musk reportedly refused. The documents show that the SEC originally wanted all of Musk's public statements on Tesla – including tweets – to be approved prior to publication, whether or not they are meaningful to the stock price and the shareholders of the company. .
This became a "stumbling block during negotiations," Musk's lawyers said Friday. They write how they explained to the SEC at the time that "Musk's ability to communicate with customers about Tesla products is critical to Tesla's success and that it would not accept Tesla's statements being made." previously approved on a large scale.
Musk finally rejected the initial settlement, which also called for a two-year ban on the president and a $ 10 million fine. The SEC promptly filed a lawsuit against him, demanding the ban of all executive or director positions. Musk settled two days later under more difficult conditions, but with new wording regarding the approval of his tweets.
Musk also argued that the Feb. 19 tweet was not important to Tesla's stock price for several reasons. He added that the production figure of 500,000 cars corresponded to an assertion he had made during a telephone conversation with investors on January 30, which is true, although he had also proposed different estimates for 2019. Tesla has not responded to repeated requests. is correct. He also said that the tweet of February 19 was "ambitious and optimistic" and that it did not cause any fluctuation in the stock price of the company because it was published after the close of trading on that day. The SEC asserted that it was a "post hoc" streamlining.
Last week, the judge in charge of the case said that both parties would have until March 26 to ask the court to hold a hearing on contempt of court. The SEC refused last Monday, saying his case had been pleaded. Musk's lawyers have apparently not asked for anything yet; we have asked them for clarification and will update this post if we have new answers.
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