The Securities and Exchange Commission wants to subject Tesla CEO Elon Musk to escalating fines to muzzle him from revealing important information about his company without the approval of lawyers, an SEC attorney told a judge Thursday.
The attorney, Cheryl Crumpton, spoke about appropriate punishment after urging U.S. District Judge Alison J. Nathan to find Musk in contempt for violating a deal with the SEC that requires him to clear any tweets that could disclose important company information with lawyers first.
At the end of the hearing, the judge ordered both sides to try to negotiate a resolution over the next two weeks as she expressed reluctance to rule unless she must.
Nathan said court-supervised agreements must be obeyed.
“I don’t care if you are a small potato or a big fish,” Nathan said.
Musk sat at a Manhattan courtroom table with his lawyers as Crumpton told the judge to take the chief executive’s “wealth into account” as she imposed fines.
Crumpton said Musk had once claimed that a $20 million penalty he paid was worth it.
She said Nathan should impose fines “to make it not worth it.”
After Crumpton argued, attorney John Hueston told the judge the SEC had failed to show Musk had violated the deal. He said his client was “somebody trying his best to comply.”
“He actually does what he is told,” Hueston said.
The issue over Musk’s tweets stems from a settlement reached last year after Musk tweeted that he had secured the funding to take Tesla private at $420 a share — a substantial premium over the price at the time — when he did not. That tweet, last August, sent the company’s stock on a wild ride. The SEC says it hurt investors who bought Tesla stock after the tweet but before they had accurate information.
Musk later backed off the idea of taking the company private, but regulators concluded he had not lined up the money to pull off the deal.
The SEC says Musk blatantly violated the settlement in February when he tweeted about Tesla’s vehicle production without a lawyer’s approval.
Musk’s 13-word tweet on Feb. 19 said Tesla would produce around 500,000 vehicles this year. But the tweet wasn’t approved by Tesla’s “disclosure counsel,” and the SEC’s contempt-of-court motion filed that month said Musk had not sought a lawyer’s approval for a single tweet. Musk said his tweet about car production didn’t need pre-approval because it wasn’t new information that would be meaningful to investors. His attorneys said the SEC was violating his First Amendment rights to free speech.
Hueston said further restricting Musk’s ability to communicate about his company and imposing fines would “freeze his ability” to operate as an effective entrepreneur.
Published at Thu, 04 Apr 2019 23:26:01 +0000