Tesla CEO Elon Musk denies violating SEC fraud settlement

Musk's lawyers said the SEC was broadly overreaching reaching with its request.

March 12, 2019, 3:16 AM

Attorneys for Tesla CEO Elon Musk said the Securities and Exchange Commission was broadly overreaching when it sought to hold him in contempt of court over a tweet he posted last month.

In documents filed Monday, the attorneys said Musk's Feb. 19 tweet was a restatement of prior disclosures and that it didn't violate a 2018 settlement with the SEC.

"Musk has dramatically reduced his volume of tweets generally and regarding Tesla in particular," the attorneys wrote in their response to the SEC. "This self-censorship is reflective of his commitment to adhering to the order and avoiding unnecessary disputes with the SEC."

"The 7:15 tweet was a celebratory, aspirational, and forward-looking statement on a topic that had been the subject of multiple written disclosures by Tesla," they added.

PHOTO: TEngineer and tech entrepreneur Elon Musk of The Boring Company listens as Chicago Mayor Rahm Emanuel talks about constructing a high-speed transit tunnel at Block 37 during a news conference, June 14, 2018, in Chicago.
Engineer and tech entrepreneur Elon Musk of The Boring Company listens as Chicago Mayor Rahm Emanuel talks about constructing a high-speed transit tunnel at Block 37 during a news conference, June 14, 2018, in Chicago.
Joshua Lott/Getty Images

The lawyers also accused the SEC of censorship and of violating Musk's First Amendment rights.

The SEC said Musk violated the terms of a September settlement with his "inaccurate" tweet last month about the company's manufacturing projections and asked a judge to hold him in contempt of court.

"Musk did not seek or receive pre-approval prior to publishing this tweet, which was inaccurate and disseminated to over 24 million people," the SEC said in a filing with the U.S. District Court for the Southern District of New York last month. "Musk has thus violated the court's final judgment by engaging in the very conduct that the pre-approval provision of the final judgment was designed to prevent."

The billionaire CEO shocked investors on Feb. 19 when he tweeted that the company would "make around" 500,000 vehicles this year, soaring past previous estimates.

Musk clarified the statement about four hours later with another tweet, saying he "meant to say" the company's annualized production rate would come in at around 500,000 vehicles for the year. He said deliveries for 2019 are still estimated at 400,000.

FILE- In this June 24, 2017, file photo, a Telsa Model 3 car recharges at a Tesla charging station at Cochran Commons shopping center in Charlotte, N.C. esla has cut $1,100 from the base price of its Model 3 car designed for the mass market. The elec
FILE- In this June 24, 2017, file photo, a Telsa Model 3 car recharges at a Tesla charging station at Cochran Commons shopping center in Charlotte, N.C. esla has cut $1,100 from the base price of its Model 3 car designed for the mass market. The electric car company now says on its website that the car starts at $42,900, still short of the target base price of $35,000. For $42,900 buyers will get a rear-wheel-drive Model 3 in black with Tesla’s lower-range battery that goes 264 miles per charge. (AP Photo/Chuck Burton)
The Associated Press
FILE - In this June 14, 2018, file photo, Tesla CEO Elon Musk speaks at a news conference in Chicago. Attorneys tell a federal judge that Tesla CEO Elon Musk shouldn't be found in contempt because he didn't violate a securities fraud settlement. The
FILE - In this June 14, 2018, file photo, Tesla CEO Elon Musk speaks at a news conference in Chicago. Attorneys tell a federal judge that Tesla CEO Elon Musk shouldn't be found in contempt because he didn't violate a securities fraud settlement. The attorneys wrote in documents filed Monday night, March 11, 2019, that a Feb. 19 tweet by Musk merely restated prior disclosures on electric car production volumes. (AP Photo/Kiichiro Sato, File)
The Associated Press

His attorneys said Musk "used his discretion" to determine that the tweet did not require pre-approval.

Musk agreed to "seek pre-approval of any written communications, including social media posts, that contained or reasonably could contain information material to Tesla or its shareholders," according to the filing.

The parties made the agreement last fall after Musk tweeted about a now-aborted plan to take the company private at $420 per share.

"Musk's tweets caused Tesla's stock price to jump by over six percent on August 7 and led to significant market disruption," the commission said in the filing. "Two days after the SEC filed its complaint against Musk, it reached settlement agreements with both Musk and Tesla."

"In turn, Tesla, as one condition of its settlement with the SEC, agreed to implement mandatory procedures to oversee and pre-approve Musk's Tesla-related written communications that reasonably could contain information material to the company or its shareholders," it added.

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