Teslas Elon Musk meets SEC in hearing offensive costs (updates)

The day after the release of the Tesla Q1 Vehicle Delivery and Production Report, CEO Elon Musk led to a Manhattan settlement to meet the liability against the Security and Exchange Commission (SEC). The SEC accused Musk of violating the settlement conditions with the agency when the CEO tweeted on February 19 that Tesla will produce around 500k of vehicles in 2019, echoing one of his Q4 2018 revenue numbers statements.

Musk came to the throne in Thursday in light spirits. Tesla director told reporters that he respects the US legal system, smiles at cameras. "I have great respect for the judicial system, and I think the judges of the American system are excellent," said Musk. When asked by the veteran CNBC reporter Phil LeBeau if he feels the same about the SEC, Musk laughed and went ahead.

SEC's arguments

The courtroom was packed as Elon Musk, and the SEC's legal team met before US District Judge Alison Nathan. Each page gets 45 minutes to express its arguments. The agency first, represented by SEC lawyer Cheryl Crumpton, who immediately claimed that Musk "innocently tweeted out information that did not actually exist (credit to Matt Robinson from Bloomberg who is currently running a Live Blog of the Hearing) . "

Explain further, Crumpton stated that the requirement that Musk receive prior approval for his tweets was" the heart of relief "that the government had sought as part of the settlement. The SEC lawyer also noted that it has become quite clear "in recent weeks" that Musk does not intend to comply with last year's settlement terms. Crumpton added that the agreement does not require each tweet to be pre-approved, provided the information in the posts was not relevant. "The communication we are talking about here is very, very different," she said.

The SEC lawyer also pointed the blame to Tesla, who allegedly failed to control the conduct of his CEO. "Tesla's behavior is also troubled by the SEC . This court ordered Tesla to carry out a mandatory pre-approval process, but they are apparently fine with Mr. Musk making his own procedure. Tesla still does not seem willing to exercise any meaningful control over the CEO's performance, "Crumpton replied.

Judge Nathan asked the SEC lawyer if Musk would need approval for tweets that repeated information that had already been described. The judge went through various hypothetical relationships with the SEC lawyer, such as repeating previous guidance. "We're not always saying yes or always to it. It depends on the answer," said Crumpton.

"This is a material statement no matter how you cut it, and it was a violation of not getting it pre-approved," added Crumpton

For his alleged breach of his settlement, the SEC lawyer requested the right to give Musk a number of increasing fines if he continues to break the order, and Crumpton also stated that the SEC wants the court to order Musk to report each month on compliance. of the settlement. "We want the court to tell them that this must be observed as it is written," said SEC lawyer.

Answer from Tesla's team team

When the SEC completed its argument, it was time for Elon Musk's legal team to argue for their points. Tesla lawyer John Hueston stated that "it is very clear that Mr. Musk retained discretion in politics. The policy means that the tweet is subject to a fact-based determination by Mr. Musk. "The Tesla lawyer also stated that Musk's decision to decide what important information was negotiated." That's exactly what Tesla negotiated for and got, "Hueston said.

Tesla's lawyer also claimed that the SEC is currently suffering from Be shocked that Musk gets to decide what's important information and what's not, but that's exactly what the order says. "They agreed to take out languages ‚Äč‚Äčthat say everything has to be approved. It must be a monitoring process and it is a monitoring process. They are not happy with it today, he said.

Musk's legal team stated that it is not a clear enough standard to use the fresh use of contempt. Instead, Hueston stated that the SEC would have tried to work things with Elon Musk and Tesla before taking the case to court. "What the SEC should have done was approach in good faith and try to work things out," said the Tesla lawyer. Judge Nathan pointed out that her intention is "not only to invite it but to order it." The judge also added that she would tell the parties to make a new deal incorporating SEC's concerns.

Addressing Musket's Advice, Judge Nathan asked about a scenario where the CEO will be in violation of the terms of his settlement with the SEC. When the Tesla lawyer noted that he could not think of one, the judge replied: "You are not very imaginative."

Still his points, Hueston noted that the 1[ads1]5 mail order tweets quoted by the SEC as evidence of Musk's violation of his settlement show that the agency believes "apparently contempt may fall upon him for things he tweets," even though the information had already been revealed. "They have not shown that evidence of non-compliance is clear and convincing. This is not someone who in any case says he does not care about processes and procedures. Some are trying their best to follow and have been diligent," says Tesla. The lawyer (credit to Bloomberg s Chris Dolmetsch for the update).

SEC's Rebuttal

The SEC lawyer returned and said the agency did not rush into his request that Musk held contempt at all. "It's not that we rushed to court on the first opportunity. There have been a number of tweets over time. "Crumpton added that the SEC assumed that Musk would abide by the terms of his settlement despite his statements in 60 minutes where he explicitly stated that he did not respect the SEC.

The hearing canceled

After the SECs feedback, Judge Nathan argued that compliance with court orders is not optional, nor is it a game, whether you are a "small potato or a big fish." She also noted that government lawyers must take all necessary steps to get a solution before they invokes contempt before adding that she has "serious concern that what I am deciding here, the problem will not be finally resolved."

Judge Nathan ordered the two parties to arrange a meeting and send a letter to the court within Two weeks, the parties will be required to indicate whether or not they have signed an agreement.If no agreement is reached, Elon Musk's legal team and SEC will hear from her with time.

The hearing was interrupted afterwards In a statement after the hearing, Musk stated that he was "very impressed with Judge Nathan's analysis."

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