SAN FRANCISCO - Tesla Inc TSLA.O Chief Executive Elon Musk shot back against U.S. securities regulators on Monday, arguing in a filing that his recent tweet about the electric vehicle maker's production volume did not violate his fraud settlement and he cannot be held in contempt.
Musk’s “single, immaterial” tweet to his more than 24 million Twitter followers claiming the electric vehicle-maker would produce around 500,000 cars in 2019 also complied with company’s communication policy for senior executives, a condition of the settlement, lawyers for the Tesla chief wrote in a filing in federal court in Manhattan.
The U.S. Securities and Exchange Commission had asked the court to hold Musk in contempt, saying his Feb. 19 tweet violated a September fraud settlement barring him from sharing material information about Tesla on social media without the company’s pre-approval.
“This contempt action, following Musk’s sincerely-held criticism of the SEC on 60 Minutes, also reflects concerning and unprecedented overreach on the part of the SEC,” the filing said.
In December, Musk said in a “60 Minutes” interview that: “I do not have respect for the SEC.”
The settlement between Musk, Tesla and the SEC resolved an SEC lawsuit over claims Musk made on Twitter in August that he had “funding secured” to take Tesla private at $420 per share. The SEC called those tweets “false and misleading” and a go-private deal never materialized.
As part of that settlement, Musk stepped down as the company’s chairman and he and Tesla agreed to pay $20 million each in fines.
The renewed public battle between Tesla’s chief executive and the top U.S. securities regulator adds pressure on Musk, the public face of Tesla, who is struggling to make the company profitable after cutting the price of its Model 3 sedan to $35,000.
Tesla has backed off a plan to close all its U.S. stores and said it will instead raise prices of its higher-end vehicles by about 3 percent on average.
In the filing, Musk’s lawyers said his tweet was a “proud and optimistic restatement of publicly disclosed information.”
Musk corrected his tweet four hours later to say that the “annualized production rate” at year-end 2019 would probably be about 500,000, with deliveries expected to be about 400,000.
Moreover, Musk has exhibited self-censorship in dramatically reducing the volume of tweets since the settlement, they wrote, adding that the SEC’s request, if granted, would raise free speech issues.
“This self-censorship is reflective of his commitment to adhering to the Order and avoiding unnecessary disputes with the SEC,” they wrote in the filing.
Musk called the regulator the “Shortseller Enrichment Commission” on Twitter after the settlement, and tweeted that “something is broken with SEC oversight” just one day after the agency started pursuing the contempt order.
Legal experts have said the SEC could now pursue multiple avenues, including a higher fine, imposing further restrictions on Musk’s activities or removing him from Tesla’s board or helm.
Tesla published a new communications policy in December for senior executives as part of the settlement. It called for Tesla’s general counsel and a newly designated in-house securities law attorney to pre-approve any written statements about Tesla that could be material.
A disclosure controls committee, made up of board members Brad Buss, Antonio Gracias and James Murdoch, was tasked with overseeing compliance with the new policy.
Reporting by Alexandria Sage in San Francisco, and Rama Venkat and Subrat Patnaik in Bengaluru; Additional reporting by Sonam Rai in Bengaluru; Editing by Meredith Mazzilli and Lisa Shumamker
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