DETROIT (AP) — U.S. securities regulators countered Tesla CEO Elon Musk’s contempt-of-court defense Monday evening, writing in court papers that he brazenly disregarded a federal judge’s order and that 1 of his arguments “borders on the ridiculous.”
Lawyers for the Securities and Exchange Commission, in a response to Musk, wrote that when the contempt motion was filed in February, Musk had not had a single tweet authorized by a enterprise lawyer, violating a requirement of a court-authorized settlement order.
The October securities fraud settlement stemmed from tweets by Musk in August about getting the income to take Tesla private at $420 per share. But Musk didn’t have the funding secured. Tesla and Musk each and every had to spend $20 million in fines and agree to governance modifications that integrated Musk’s removal as chairman.
SEC lawyers led by Cheryl Crumpton wrote in a response to Musk’s defense that he interprets the settlement order as not requiring pre-approval unless Musk decides the tweets are meaningful to investors. The agency stated Musk’s argument that tweeting about car or truck production forecasts on Feb. 19 wasn’t material data is almost ridiculous. “His interpretation is inconsistent with the plain terms of this court’s order and renders its pre-approval requirement meaningless,” the lawyers wrote.
U.S. District Judge Alison Nathan in Manhattan will determine if Musk is in contempt and no matter whether he must be punished. The SEC stated no hearing is vital on the matter “because there seem to be no disputed challenges of material truth.”
Musk’s lawyers wrote final week that the Feb. 19 tweet merely restated previously authorized disclosures on electric car or truck production. They wrote that the tweet, which was published immediately after the markets closed, neither revealed material data, nor altered the mix of information obtainable to investors.
The lawyers also accused the Securities and Exchange Commission of censorship and of violating Musk’s Initial Amendment rights by imposing a prior restraint on his speech.
But the SEC lawyers wrote that submitting statements for approval does not imply Musk is prohibited from speaking. “As extended as a statement submitted for pre-approval is not false or misleading, Tesla would presumably approve its publication without having prior restraint on Musk,” they wrote. The SEC also wrote that Musk waived any Initial Amendment challenge to the order when he agreed to it.
Musk’s lawyers also argued that the SEC’s motion for contempt is an more than-attain that exceeds its authority. But the SEC stated enforcement of the order is up to the judge, who has broad powers to enforce court orders.
Also Monday, Musk lawyer, former Enron prosecutor John C. Hueston of Newport Beach, California, asked the court for permission to file an additional response to the SEC, this 1 by Friday.
In a 1-web page letter to the judge, Hueston stated the SEC raised new allegations in its reply, which he contends is improper. He referred to as the new assertions “unsupported” and asked to submit documentation about negotiations with the agency “which undermines the newly-presented interpretation the SEC sets forth in its reply.”
Monday’s filing stated the Feb. 19 tweet was distinctive from prior public disclosures by the enterprise. Also, Musk has on a regular basis published tweets with “substantive information” about the enterprise and its business enterprise, the SEC contended.
Musk’s 13-word Feb. 19 tweet stated that Tesla would create about 500,000 automobiles this year, but it wasn’t authorized by the company’s “disclosure counsel,” the SEC has stated.
The lawyer promptly realized it and arranged a meeting with Musk to create a correction. The enterprise would make automobiles at a price of 500,000 per year, but it wouldn’t create a half-million in 2019.
Musk’s response by Hueston stated that the settlement permits Musk “reasonable discretion” to ascertain if his communications would call for the lawyer’s approval. In the case of the Feb. 19 tweet, Musk determined that it did not.
Legal professionals say it is unlikely that Musk will be punished severely, but the commission desires to get on the record that Musk violated the terms, to prepare for any future violations.
The tweet was posted and corrected immediately after U.S. markets had closed, but professionals say regulators do not care significantly about that mainly because stocks are traded almost about the clock. Tesla’s stock rose by just $1.10, or much less than 1 %, the subsequent day.
Initially Posted on Huff Post