Elon Musk’s accusation of harassment countered by SEC

Tesla CEO Elon Musk. (REUTERS)
Tesla CEO Elon Musk. (REUTERS)

Summary

  • Regulator files letter with court saying its engagement with Tesla and its CEO is in line with 2018 settlement

The Securities and Exchange Commission pushed back Friday on Tesla Inc.’s allegation that regulators are harassing Chief Executive Officer Elon Musk over his compliance with a 2018 regulatory settlement.

That deal focused on claims that Mr. Musk misled investors with a tweet in 2018 about taking the electric-vehicle maker private. The judgment required Tesla to preclear some of Mr. Musk’s public statements, including tweets deemed material to shareholders.

Tesla said in a regulatory filing last week that the SEC had subpoenaed the company in November about compliance with the settlement. That subpoena relates to how Tesla oversaw Mr. Musk’s statements, but was issued as part of a newer investigation, not as a continuation of the earlier litigation, a person familiar with the matter said.

A Tesla lawyer on Thursday accused the SEC of harassing Mr. Musk with “serial investigations" of him or the company. “Enough is enough," lawyer Alex Spiro wrote. “Mr. Musk and Tesla write in the hope that the court can bring the SEC’s harassment campaign to an end."

In a letter filed Friday to a Manhattan federal judge, the SEC said its engagement with Tesla and Mr. Musk about how they comply with the policy is consistent with the expectations of the court overseeing the settlement.

“The commission’s enforcement staff have…sought to meet and confer with counsel for Tesla and Mr. Musk to address any concerns regarding Tesla and Mr. Musk’s compliance," Steven Buchholz, a senior SEC official in San Francisco, wrote in the letter.

Tesla’s stock, which closed Friday at $856.98, is down roughly 7% since Feb. 4, before the company disclosed the new SEC subpoena.

Mr. Musk, Tesla and the SEC have been skirmishing since 2018, when he landed in trouble over a tweet that regulators said was misleading. Mr. Musk wrote that he had “funding secured" to take Tesla private at $420 a share. After an investigation, the SEC said that Mr. Musk had never discussed such a going-private deal and that his statement, which caused Tesla’s stock to skyrocket, constituted fraud.

Mr. Musk and Tesla settled the SEC lawsuit by each agreeing to pay $20 million, and Mr. Musk stepped down as chairman. He also agreed to preclear tweets that were deemed material to Tesla shareholders with Tesla’s lawyers. A Manhattan federal court approved the policy, which covered a list of events, financial metrics and product announcements.

Within a year of settling with Mr. Musk and Tesla, regulators suspected that Mr. Musk had violated the pact with tweets about Tesla production numbers and the company’s stock price. SEC attorneys wrote Tesla in 2019 and 2020 asking why certain tweets weren’t cleared by company lawyers. Tesla pushed back, saying the statements weren’t covered by the court judgment.

Mr. Musk continued to antagonize the SEC, tweeting in July 2020: “SEC, three letter acronym, middle word is Elon’s."

Mr. Musk’s use of Twitter has remained controversial. Earlier this week he tweeted and later deleted a meme comparing Canadian Prime Minister Justin Trudeau to Adolf Hitler.

Now that the SEC has responded to Mr. Spiro’s letter, it isn’t clear what comes next. U.S. District Judge Alison Nathan has previously urged the two sides to negotiate their compliance disputes, rather than running back to court and asking her to fault the other side and issue sanctions.

Mr. Spiro also complained this week that the SEC still hasn’t distributed the $40 million in fine money to shareholders, which the regulator said it would do when it reached the settlement in late 2018.

Mr. Buchholz said in his response to the court that regulators have been working on a plan to share the money with investors. The method for doing so is complex, but the SEC expects to submit the plan by March, he wrote.

This story has been published from a wire agency feed without modifications to the text

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