The Securities and Exchange Commission (SEC) says that Elon Musk has not made a "good faith" effort to comply with the agreement that the two parties reached last year on fraud related charges. with his attempt to take Tesla privately, according to New Submission in Court. The SEC reiterated its request on Monday for Musk to be charged with contempt of court for a Feb. 19 tweet that the commission says is a "flagrant violation" of the agreement.
Last week, Musk stated that the SEC's contempt called for an "unconstitutional takeover" and said that the tweet in question did not contain information that would affect the price of Tesla's shares. The two parties and the court have until March 26 to decide whether to hold a hearing to air their differences. The SEC said Monday that it believes such a hearing is not necessary because the facts of the case are not in dispute.
At the heart of the SEC's argument is that Musk was supposed to have his public communications on Tesla – Tweets included – pre-approved by an internal lawyer appointed as part of the settlement agreement signed last September.
The SEC asked the court to disregard Musk for the February 19 tweet, where he said that Tesla will manufacture "around 500,000" cars in 2019. The commission says that this was "demonstrably material and inaccurate" because it opposed Tesla's own predictions for 2019, which were published at the end of January. But the commission also learned from Tesla that Musk's tweet had not been pre-approved by the in-house lawyer in charge of reviewing his public communications, which, he claims, violates the terms of the agreement.
It means to say an annualized production rate at the end of 2019, probably around 500k, that is, 10k cars / week. Deliveries per year are estimated at around 400k.
– Elon Musk (@elonmusk) February 20, 2019
In its presentation Monday, the SEC points to the fact that Tesla admitted, after the publication of that tweet, that the anonymous lawyer took "Immediate response" when working with Musk to issue a correction, implying that it was wrong and that Musk had not followed the rules of the agreement.
"If Musk had simply complied with the order of the Court and the Communications Policy of the Senior Executives ordered by the Tesla Court, the Designated Securities Advisor would presumably have caught his wrong statement in the front, and Musk did not I would have disseminated incorrect information about Tesla to 25 million people again, "the SEC wrote on Monday.
The objective of including this language in the agreement was to prevent Musk from tweeting comments that affected The price of Tesla's shares, as it did last August when it said it had " insured funds " to take Tesla privately at a price per share of $ 420. A subsequent investigation by the SEC found that Musk had only had superficial conversations with Saudi Arabia's sovereign wealth fund on raising the billions of dollars needed to achieve such a feat, and therefore was far from having secured funds when he published that tweet.
Musk finally abandoned the attempt to go private at the end of August. But the announcement temporarily increased the value of the company in the stock market and also cost traders who bet thousands of dollars on the price of Tesla shares. The SEC sued him for securities fraud, and the two parties quickly reached an agreement.
In addition to a fine of $ 20 million, and the removal of Musk from his position as president of Tesla, the SEC agreement ruled that any of its members Communications that could impact the company's actions should be approved. On Monday, the SEC said it was not just the Feb. 19 tweet that Musk was not approved, but all the tweets that were published about Tesla since the agreement went into effect in mid-December, including some especially from the Tesla refund. The policies, at the prices of the company, to their plans for the Gigafactory in China, and more.
"Musk's uncontrolled and deceptive tweets about Tesla were the ones that precipitated SEC charges, and the prior approval requirement was designed to protect against reckless behavior." For Musk in the future, "the commission wrote in its Answer on Monday. "Therefore, it is surprising to know that, at the time of submission [the request to hold Musk in contempt] Musk had not requested prior approval for only one of the numerous tweets about Tesla that he published in the months following the prior approval policy ordered by the Court, in effect. "
. The SEC is not just a test in the dark, either. Before asking the court to dismiss Musk, the commission had asked Tesla to explain what happened before and after the February 19 tweet. Tesla knew that the internal lawyer in charge of reviewing his communications did not approve any of his tweets, and only tried to work with Musk to correct potentially important statements after the fact.
The SEC tried to overthrow on Monday other arguments that Musk has presented against being considered despised. In his response presented last week, Musk argued that there was room in the language of the agreement for him to use his own discretion as to what information was important or not for the price of Tesla shares. On Monday, the SEC said Musk never specifically identified "any language in the order or the Tesla Policy that gives it such discretion."
And as for Musk's assertion that the SEC agreement could be considered a restriction on his right to freedom. speech – a point he made during an interview in December with 60 Minutes where he also said he "does not respect the SEC" – the commission argued Monday that submitting written statements for prior approval does not mean that Musk is forbidden to speak.
"Whenever a statement submitted for prior approval is not false or misleading, Tesla would likely approve its publication without any restrictions on Musk," the SEC wrote. "And if the proposed statement is false or misleading, then any restriction in Musk's speech would be constitutional, even if it were a state action."