Risk & Compliance

Judge Signs Order for Musk to Respond to SEC Contempt Motion

The Tesla chief needs to explain why he had not violated a settlement agreement that required him to get approval before sending company related tw...
Lauren MuskettFebruary 26, 2019
Judge Signs Order for Musk to Respond to SEC Contempt Motion

The Securities and Exchange Commission has filed a motion in federal court that would require Tesla CEO Elon Musk show why he should not be held in contempt for violating a settlement deal that required him to get approval before sending tweets about the company.

On February 19, Musk tweeted that Tesla would produce “around” 500,000 cars in 2019. Shortly after sending the tweet, he clarified.

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“Meant to say annualized production rate at end of 2019 probably around 500k, ie 10k cars/week. Deliveries for year still estimated to be about 400k.”

U.S. Judge Alison Nathan signed the order, which gives Musk until March 11 to respond.

“Defendant Elon Musk shall submit to this Court by March 11, 2019, briefing to show cause, if any, why he should not be found in contempt of the Court’s Final Judgment,” the order said.

Nathan, in October, approved Musk’s settlement with the SEC under which he was required to resign as Tesla’s chairman. He also agreed to pay a $20 million fine and set up controls and procedures related to his tweets.

The day after Musk’s latest tweet, Tesla General Counsel Dane Butswinkas announced he was leaving after two months at the company.

“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 its court filing.

Musk, in response, tweeted, “SEC forgot to read Tesla earnings transcript, which clearly states 350k to 500k. How embarrassing…”

He also tweeted, “Something is broken with SEC oversight.”

Last summer, Musk ran afoul of regulators after suggesting on Twitter that he was considering taking Tesla private at $420 per share and that funding was “secured.”

Tesla shares were down 3% after the SEC filing. They had recovered by early afternoon.

Image: Flikr/Tesla Owners Club Belgium