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The US securities authorities on Monday night countered the defense of Tesla's Tesla CEO's contempt of court by writing in court documents that he had flouted the order of a federal judge and that one of his arguments "borders on ridicule".
The Securities and Exchange Commission's lawyers, in a response to Musk, wrote that when the contempt motion was filed in February, Musk did not approve a single tweet from a company lawyer, violating thus the need for a court-approved transaction order.
The October settlement of securities fraud stems from Musk 's tweets in August over having the money to make Tesla private at $ 420 per share. But Musk did not get the necessary funding. Tesla and Musk were each fined $ 20 million and accepted governance changes that would see Musk removed to the presidency.
SEC lawyers, led by Cheryl Crumpton, responded to Musk's defense that he interpreted the settlement order as not requiring prior authorization, unless Musk only decides that Tweets make sense for investors. The agency said that Musk's argument that tweets on February 19 car production forecasts were not important information is almost ridiculous. "Its interpretation is inconsistent with the clear terms of the court's order and eliminates any meaning to its pre-approval obligation," the lawyers wrote.
US District Judge Alison Nathan in Manhattan will decide whether Musk is a contempt and whether he should be punished. The SEC stated that no hearing was necessary on the issue "as there appears to be no question of material fact disputed".
Last week, Musk's lawyers wrote that the February 19 tweet only reaffirmed previously approved statements about electric car production volumes. They wrote that the tweet, published after the markets closed, did not reveal any important information or alter the composition of the data available to investors.
The lawyers also accused the Securities and Exchange Commission of censorship and violating the rights of Musk's first amendment by imposing a prior restraint on his speech.
But SEC lawyers have written that submitting statements for approval does not mean that it is forbidden for Musk to speak. "As long as a statement submitted to pre-approval is not false or misleading, Tesla would no doubt approve its publication without prior constraint on Musk," they write. The SEC also wrote that Musk had waived any challenge to the first amendment order when he accepted it.
Musk's lawyers also argued that the SEC's contempt motion was an overbreadth that went beyond his authority. But the SEC said that the execution of the order was the responsibility of the judge, who had extensive powers to enforce court orders.
Monday's submission said the Feb. 19 tweet was different from the company's earlier public disclosures. In addition, Musk has regularly posted tweets containing "background information" about the company and its activities, the SEC said.
In a 13-word tweet dated Feb. 19, Musk said Tesla would produce about 500,000 vehicles this year, but this has not been approved by its "disclosure advice," the SEC said.
The attorney promptly reported and summoned Musk to the company's factory in Fremont, California, to help draft a correction. The company manufactures vehicles at 500,000 vehicles a year, but would not produce half a million by 2019.
In his response, Enron's former attorney, John C. Hueston, of Newport Beach, Calif., Said the settlement leaves Musk with "reasonable discretion" to determine whether his communications would require the following: 39, approval of the lawyer. In the case of the tweet of February 19, Musk determined that this was not the case.
Legal experts say that it is unlikely that Musk will be punished severely, but the commission wants to make it known that Musk violated the terms of the contract, in order to prepare for future violations.
The tweet was published and corrected after the closure of US markets, but experts say that regulators do not care much because the shares are exchanged almost at any time. Tesla's share has only increased by 1.10 USD, or less than 1%, the next day.
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