Mark Cuban Prodded Elon Musk of Tesla to settle SEC charges

Thursday night late, after Musk had originally waived an agreement to settle the charges against the Securities and Exchange Commission, one of his lawyers asked Mr. Cuban, owner of the Dallas Mavericks, to push Mr. Musk to reconsider his decision. with the call say.

Mr Cuban, who won a five – year battle against the SEC after accusing him of insider trading a decade ago, told Mr Musk that he "s been guilty of committing an insider 's offense about ten years ago. he should face a long legal battle that would take him away from the management of his company. Based on his own experience, Mr. Cuban informed Mr. Musk of the difficulties he had encountered in a multi-year dispute with the SEC, a person close to the situation said.

Mr. Cuban called at the request of Chris Clark, one of Mr. Musk's lawyers, who represented Mr. Cuban in his dispute with the SEC. He told Mr. Musk on the phone that a settlement would not be as detrimental as a clash with the organization.

"I explained where the SEC used dubious practices in my case and how it could expect the same thing," Cuban said in an email Wednesday night. "I asked him if he could name five people who had settled with the SEC, knowing that he could not name any."

Over the years, the SEC has refused to respond publicly to Mr. Cuban's attacks on the agency.

Mr. Cuban's appeal played a major role in changing Mr. Musk's attitude and helping to persuade him to accept the SEC's case, the people said.

Tesla did not comment immediately while Mr. Musk did not respond to requests for comment.

The insider's charges against Mr Cuban were dropped after a federal Texas jury ruled in his favor in 2013. The SEC had sued Mr Cuban in November 2008. The SEC said the The verdict would not "deter us from presenting and judging cases where we believe the defendants have violated federal securities laws".

In the past, Mr. Cuban criticized the SEC. In public statements, he criticized the agency's tactics, accusing him of "bad conduct on the part of the prosecutor" and claiming that the charges against him were based on political considerations.

The call marked a turning point in the 48-hour rollercoaster ride for Tesla investors regarding the charges brought before the SEC. Last Thursday, at 8 am, the SEC was to announce an agreement with Mr. Musk over the tweet of August 7, when one of his lawyers, Steven Farina, called the SEC to tell him that Mr. Musk had changed opinion. to the situation said. Mr. Farina declined to comment.

This is far from the first time a leader gives advice to a peer in a traffic jam. In 1994,

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Warren Buffett has called on the newly-appointed president of Kidder Peabody Group Inc. to advise him on the management of a troubled securities firm. Previously, Buffett was appointed interim chairman of Salomon Inc. in a bond trading scandal.

In the Musk case, SEC lawyers, who had already received approval from the five commissioners of the settlement agency, have gathered a new complaint and obtained the approval of the Action of the committee, which met that day to questions.

The SEC filed a lawsuit in a New York federal court following the closing of the stock market last Thursday, accusing Mr. Musk of knowingly making false and misleading statements to investors.

Early Friday morning, after the call of Mr. Cuban, the talks resumed. Mr. Musk's lawyers sent an email to the SEC enforcement directors to tell them that they wanted to talk again about the deal he had just abandoned. said people close to the situation.

The new agreement provided for Mr. Musk to relinquish his role as president of Tesla for three years instead of two, and to pay a personal fine of $ 20 million, rather than the $ 10 million fine in the previous regulation. In addition, Tesla has itself agreed to pay a fine of $ 20 million.

The settlement must be approved by a judge of the US District Court of Southern District of New York. On Thursday, US District Judge Alison Nathan asked Mr. Musk's and the SEC's lawyers to file a joint letter by Oct. 11 "explaining why the court had to approve the proposed consent judgment." Such settlements are systematically approved by the courts and the judge stated that his usual practice was to request a letter of justification.

The SEC had pushed the case with extraordinary speed. The regulator questioned Musk on August 29, and then called his lawyers with a settlement request on September 10, said the person.

Meanwhile, Mr. Musk's lawyers met with the SEC to try to persuade the agency not to file a complaint. The meeting took place just hours after Mr. Musk seemed to be taking a marijuana cigarette during a live interview broadcast on YouTube.

SEC lawyers have regularly stated that they must settle the matter by the end of September, when the federal fiscal year will end, according to people close to the investigation.

Write to Susan Pulliam at [email protected], Dave Michaels at [email protected] and Tim Higgins at [email protected]