Elon Musk Argues Regulators Overstepped in Tweet Contempt Quest
Lawyers for Tesla chief Elon Musk on Monday argued that US regulators overstepped their bounds by calling for him to be held in contempt for a tweet.
Musk had until the end of the day Monday to respond to an accusation by the Securities and Exchange Commission that he violated terms of a court-endorsed deal between him and the regulatory agency stating that he should avoid sending any tweet that could affect the price of Tesla shares.
His attorneys contended in a court filing that Musk did not violate the court’s order and that there is no basis to issue contempt sanctions against him. The SEC request that Musk be held in civil contempt “for a single, immaterial tweet that dutifully complied with the Order” is incorrect on the facts and on the law, the filing argued.
Musk merely put his “shorthand gloss” on Tesla production numbers consistent with information already public and in a manner that was “celebratory and forward-looking,” according to his attorneys. The legal response noted that the SEC quest for Musk to be held in contempt followed the entrepreneur’s “sincerely-held criticism of the SEC on 60 Minutes, ” a television news program, and “reflects concerning and unprecedented overreach on the part of the SEC.”
— Aleks Kins (@aleks_kins) March 12, 2019
Once-prolific Twitter user Musk has dramatically reduced his volume of tweets, according to the filing, which argued that stopping him from mentioning Tesla even in insignificant tweets would risk trampling on his free speech rights. Musk, 47, is a visionary and inventive boss but is also highly unpredictable, especially on social network Twitter, where he has often communicated in defiance of rules imposed on executives of publicly-traded companies.
On February 19, he tweeted that Tesla would make 500,000 cars in 2019 — up from the 400,000 that the company had estimated until then, as it grapples with production problems with the Model 3. Musk corrected himself four hours later, saying that Tesla would indeed produce about 400,000 cars this year: “Meant to say annualized production rate at end of 2019 probably around 500k.”
But that correction was not enough for a federal judge, who gave Musk two weeks to explain why he should be spared from being held in contempt for violating the agreement with the SEC. Last year, the SEC opened an investigation into Tesla and Musk after he tweeted that he planned to take Tesla private and already had the financing to do it — an assertion that proved false but nonetheless made investors who bet against the company lose millions.
To settle fraud charges stemming from the tweet, Musk had to resign as Tesla chairman, both he and the company had to pay $20 million fines, and the SEC demanded oversight of his social media use.