SEC asks judge to hold Elon Musk in contempt

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SEC asks judge to hold Tesla chief Elon Musk in contempt for violating deal
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27 February, 2019

Following the SEC's filing, Tesla shares fell by as much as 5.4 per cent as of Monday in NY.

Although the Tesla CEO corrected his mistake, the SEC claims Musk "once again published inaccurate and material information about Tesla to his over 24 million Twitter followers", according to court papers filed Monday.

Musk sent a follow-up tweet a few hours later indicating that the company will actually deliver just 400,000 cars this year. The SEC is alleging that he didn't have any oversight or approval tweeted that Tesla will make 500,000 cars in 2019, or any tweets since the settlement.

The next day, the SEC asked the company whether the tweets had been reviewed before being published. He could face a variety of penalties, with the stiffest being that he will be barred from running Tesla or any other public company for a period of time, said Mr Charles Elson, director of the John L. Weinberg Centre for Corporate Governance at the University of Delaware. The regulator called for Musk to be held in contempt for violating a previous judgment related to his penchant to tweet info that runs afoul of securities rules. The stock was already down 10 per cent this year through the close of regular trading.

When Tesla's designated securities counsel who monitors Musk's Twitter account saw the tweet, the attorney immediately arranged to meet with Musk at the carmaker's Fremont, California, plant.

"Musk has thus violated the Court's Final Judgment by engaging in the very conduct that the preapproval provision of the Final Judgment was created to prevent", wrote the SEC in its motion filed on Monday in federal court in Manhattan.

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In a December interview with "60 Minutes", Musk said none of his tweets had been censored since the settlement, and that only those that could cause Tesla stock to move would need to be reviewed.

Musk agreed to step down as Tesla's chairman, and both he and Tesla agreed to pay $20 million civil fines. The terms of the agreement require the CEO not to post controversial tweets, which could influence investors' attitudes, without pre-approval by the company's management.

That's not exactly what Musk said in the first tweet.

The SEC also pointed out that during the same interview, Musk declared: 'I want to be clear. "Who knows?" He added: "Nobody's flawless".

It asked the court to enter an order to show why Musk should not be held in contempt of the court's 2018 judgment.

Musk went on to say that "I do not respect the SEC ..."


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