Attempts of the Securities and Exchange Commission (SEC) to nail Tesla CEO Elon Musk on contempt of court for his tweets have seen the CEO appearing in a fighting mode.
The lawyers of Musk on Monday argued that the SEC was over-reaching and infringing on Musk’s right of free speech borne by First Amendment rights and alleged that the regulator was trying to frame him in contempt of court case.
Musk’s team refuted the SEC charge that Musk had been less diligent in his conduct. They said the CEO had been vigilant enough to cut the volume of monthly Tesla-related tweets to half immediately after the 2018 SEC settlement relating to his tweets.
The lawyers also alleged that SEC was vindictive to the Tesla chief for his comments during the “60 Minutes” television interview.
They said SEC using the interview as a base for moving contempt of court smacked of censorship and retaliation.
Musk was given time until Monday to explain why contempt of court proceedings should not be initiated against him, for his Feb. 19 tweet that contravened the terms of the pact with the SEC.
In its notice to Musk, SEC noted that his tweet violated a September agreement on being vigilant on tweets and prior approval so that Tesla investors are not misled with disinformation.
What did the Feb tweet say?
On the evening of February 19, 7:15 pm Eastern Time Musk Tweeted, “Tesla made 0 cars in 2011, but will make around 500k in 2019.”
A few hours later—Musk himself corrected it and tweeted, “Meant to say annualized production rate at the end of 2019 probably around 500k, i.e. 10k cars/week. Deliveries for the year still estimated to be around 400k.”
SEC took cognizance of the February tweet and held it as a breach of the settlement made with Tesla and Musk in September 2018.
Musk was censored by SEC for his tweet made on August 7 that said he planned taking Tesla private and had the “funding secured.” But soon revealed that he did not have that funding and “Tesla would stay public.”
Taking note of the attempt to mislead investors, SEC asked Musk to quit his role as Tesla’s chairman and directed both Musk and Tesla to pay $20 million as fine.
In the agreement that followed, it was decided that the CEO’s tweets about Tesla would be reviewed by a team of lawyers before publishing.
Musk told the “60 Minutes” program of CBS in December 2018 that he does not respect the SEC and only those tweets require pre-approval that deal with Tesla’s stock price.
The SEC cited the interview as an instance of contempt of court noting that “Musk has not made a diligent or good faith effort to comply” with the terms of the settlement with it.
Pre-approval for tweet was not required
The bone of contention is “pre-approval” of the tweet. Tesla’s lawyers argued that nobody pre-approved Musk’s tweet in question as it was innocuous and carried information that was already there in the public domain.
They said information on production numbers had been made public during the earnings call, and they were also mentioned in the end-of-year financial results. Further, the numbers were also submitted to SEC in a filing.