
SEC Asks Manhattan Federal Court to Hold Elon Musk in Contempt - tysone
https://www.wsj.com/articles/sec-asks-manhattan-federal-court-to-hold-elon-musk-in-contempt-11551137500
======
spectramax
At this point, the board of directors should just demand deletion of his
Twitter account.

I admire Elon for his vision, and actually also admire his radical style
despite of its unpopular image - I watched the video where he smoked pot on
the radio show. It was a really amazing conversation about future of humanity.
He just needs to stop tweeting. You may say it’s fixing the symptom, but here
if we take Twitter away, he would stop yelling stupid FCC punishable things.

As a side note, Twitter has hardly done anything useful for the society. I
never got into twitter and never understood its value. Conversations are one
sided, blog posts are separated into incomprehensible chain of tweets, people
are insulting with no repercussion - it’s a giant echo chamber of loud people.
One thing it has done is to improve customer support by shaming companies
publicly, which is a really sad state of affairs.

~~~
Waterluvian
...Can a corporation demand an employee waive their right to speech as a
private citizen?

I think even if so, that's a terrible idea.

~~~
katabatic
This is true for every employee of every public company on the planet. We're
discussing it here because Mr. Musk thinks the rules don't apply to him.

~~~
mlindner
Sorry that's simply false. You have all your freedoms. You can get fired for
exercising them but that doesn't mean you don't have them. If the shareholders
wanted to fire Elon Musk they would, but they aren't so the SEC should butt
out of the issue.

~~~
elliekelly
_Every_ CEO of _every_ publicly traded company has _every_ company-related
tweet vetted by a company lawyer. What the SEC is asking of Musk here is
simply that he follow the industry-standard.

Let's not forget Musk owes a fiduciary duty to Tesla shareholders and his
tweets have repeatedly lost shareholders money _and_ induced people to
purchase shares on false/misleading information. That's securities fraud.

Source: Corporate & Securities Attorney. I was once the approver of many such
tweets. Though thankfully the people I worked with were exceedingly reasonable
in comparison to Musk.

Edit: Missed a word.

------
blhack
My knowledge of how publicly traded companies work is very limited, but:

Was what he said really that bad? He said:

>Tesla made 0 cars in 2011, but will make around 500k in 2019

And then later corrected himself with:

>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.

This seems like a pretty simple mistake to have made, and I have a tough time
assigning malice to it.

I like Elon. A lot. The news machine's constant thirst for scandal surrounding
him is a cancer on our society, and it worries me that it then effects people
who have the ability to enact their will with force: the judicial system.

edit: and it honestly just seems like an honest mistake. He likely is
constantly thinking of ways to improve the _weekly_ output of Tesla, and then
expanding that in his head to yearly production numbers.

>Tesla made 0 cars in 2011, but will make around [/be at the correct pace to
be making] 500k [a year] in 2019.

~~~
detaro
The legal point isn't if what he tweeted was "that bad" or not. It's that
after he got caught the last time, in the settlement to end the case he agreed
to have Tesla legal review all such tweets in the future to make sure he
doesn't do it again. He broke that agreement.

~~~
voodooranger
i believe elon’s argument is that the offending tweet didn’t need approval
because he believed that he was just restating a projection made on the
previous earnings call

~~~
afastow
The SEC saw that argument coming and shot it down completely in their filing:

> According to Tesla’s Policy, any edits to a pre-approved Written
> Communication or even releasing a verbatim pre-approved Written
> Communication more than two days after it has been pre-approved requires
> that the pre-approval be reconfirmed. Even if the exact substance of the
> 7:15 tweet had been pre-approved 20 days before, Musk cannot credibly claim
> that he thought he was not required to obtain pre-approval again under the
> plain terms of the Policy. In fact, the written communication in the 7:15
> tweet was not pre-approved 20 days earlier or at any time. Musk’s claim that
> he thought he was simply restating information from the January 30
> communications is not credible.

[https://www.documentcloud.org/documents/5750664-Show-
Cause.h...](https://www.documentcloud.org/documents/5750664-Show-Cause.html)
page 12

~~~
Dylan16807
This tweet was not an edit to a pre-approved communication. That rule is
irrelevant.

The argument is not "this tweet got approved before, so I can edit it however
I want". The argument is "the number is already public information, so I can
make a new post mentioning it".

~~~
sangnoir
> This tweet was not an edit to a pre-approved communication.

That is the problem, in a nutshell: it should have been pre-approved -
according to the FCC's interpretation of the settlement agreement.

~~~
Dylan16807
Maybe. But don't confuse different arguments about why. If the tweet needed
pre-approval, it's for a reason entirely different from this quote.

~~~
rory096
Whether or not it's a _valid_ argument, that does seem to be the SEC's
argument here.

~~~
Dylan16807
It's not the core of their argument, though. It's probably thrown in just in
case it could possibly be considered relevant.

------
minimaxir
SEC filing: [https://www.documentcloud.org/documents/5750664-Show-
Cause.h...](https://www.documentcloud.org/documents/5750664-Show-Cause.html)

~~~
berberous
The last two pages (pp. 11 and 12) are a great example of why you shouldn't be
an arrogant dumbass towards the government. The SEC quotes his 60 minutes
interview with Leslie Stahl where he says he doesn't respect the SEC. While I
think the SEC has a legitimate grievance here, I'm also guessing this is
partly vindictive. Play stupid games...

And I say all that as a big supporter of Elon generally.

~~~
CPLX
It goes to intent.

Typically the law tries to at least somewhat take into account intent, like if
someone omits something from a filing by accident or in a deliberate attempt
to conceal, for example.

Pointing out his statements demonstrates that he's aware of the rules and is
choosing not to respect them. That's usually a sign that someone should be on
the higher end of the typical punishment range for a given act.

~~~
Derek_MK
Especially in the case of contempt of court. The whole reason why you'd hold
someone in contempt is if they are willfully not doing what the court says.
The SEC is telling the court "Look, he's literally here talking about how he
doesn't respect us. He's willingly doing this."

------
burlesona
To me, the real shame is that he wasn’t able to _actually_ take Tesla private
last year. He loves being the public mouth of his companies and clearly can’t
restrain himself from tweeting material information. Would be fine if Tesla
weren’t public :/

~~~
jaimex2
Yep. A deal with the devil they had to make to let Tesla be where it is today.

Musk should just talk about the tech instead of the numbers though. The SEC
are under pressure to bite Tesla for anything it does out of line.

------
DSingularity
Offending Tweet:
[https://twitter.com/elonmusk/status/1098009983931707393](https://twitter.com/elonmusk/status/1098009983931707393)

~~~
darkpuma
Was that particular tweet the offender, or the two subsequent tweets?

> _" Tesla made 0 cars in 2011, but will make around 500k in 2019"_

> _" 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."_

The article seems to suggest it was tweets about projected numbers.

Edit:

From the filing:

> _" On February 19, 2019, Musk tweeted, “Tesla made 0 cars in 2011, but will
> make around 500k in 2019.” Musk did not seek or receive pre-approval prior
> to publishing this tweet, which was inaccurate and disseminated to over 24
> million people. 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. "_

~~~
travisoneill1
So all he has to do is find a fall guy to say he approved it, and it will be
thrown out?

~~~
Rebelgecko
Tesla's legal already said they didn't approve the first tweet, but they
worked with him on the correction that was posted 4 hours later. Wonder if
that's why their general counsel quit again...

------
mjevans
This is where a software solution might actually help. As an example, I've
added some keywords to a script in my IRC client that if they exist the
message is stopped by my client.

In Elon Musks' case this should be Tesla (and probably some other court
mandated muzzles) and should be on their Twitter clients, and other
"designated publication channels" that the ruling covers.

Why? Because remembering to not do things is a restraint that is extremely
mentally burdensome and thus difficult to get correct 100% of the time.

Also, this should probably apply to CEOs and other "public figures" as a
general practice they work with through their PR and marketing firms.

The fact that twitter and other platforms are closed only makes this
innovation more difficult to add to end user clients.

~~~
gamblor956
_Why? Because remembering to not do things is a restraint that is extremely
mentally burdensome and thus difficult to get correct 100% of the time._

When you're the CEO of a publicly traded company, getting paid millions in
stock comp to run that company, you don't get to use the excuse "it's mentally
burdensome". The whole reason they're in that position, getting paid those
obscene amounts, is that they're supposed to be able to handle the burden. If
they're not able to handle it, they should step aside for someone who can.

~~~
wmf
It has been demonstrated countless times that "just don't make mistakes" does
not work, has never worked, and will never work. The whole reason bureaucracy
exists is because people can't even be expected to consistently follow their
own rules, let alone rules that are imposed on them. Every publicly-traded
company has a process for shareholder communication but Elon Musk is just out
there tweeting whatever comes to his mind.

~~~
kelnos
This isn't a mistake. Musk is on record saying he doesn't respect the SEC,
suggesting he doesn't feel bound by his legal agreement with them. He does
this on purpose.

------
jijji
He should really have a public relations spokesman/spokeswoman for this type
of messages... Especially since this same situation already happened.

~~~
reustle
Not sure why you're being downvoted. I totally agree, anyone with that much
power and influence should want to make sure they are putting their best foot
forward at all times.

------
soheil
At least we got him to host meme review [1] before he goes to jail

[1]
[https://www.youtube.com/watch?v=zpWYQ1YtgnI](https://www.youtube.com/watch?v=zpWYQ1YtgnI)

------
yalogin
He said the same thing in that podcast he did recently. The podcast he did
with that company that says Tesla stock has multiple thousand upside.

------
kevin_b_er
So what's the potential punishment for this, assuming he's found in contempt?

~~~
jaimex2
A fine.

------
malshe
I am surprised by the number of people here as well as on Twitter confusing
between "annualized" and "annual". If I make 1% trading a stock in one day
then the annualized return is (1.01^365 - 1) * 100 = 3,678% but that's not the
annual return!

In case of Tesla, I think the annualized target production of 500K cars was
calculated over 3 quarters (please feel free to correct me).

------
true_tuna
Can someone post a non wsj link?

~~~
detaro
[https://www.cnbc.com/2019/02/25/tesla-shares-fall-on-
report-...](https://www.cnbc.com/2019/02/25/tesla-shares-fall-on-report-sec-
asks-judge-to-hold-elon-musk-in-contempt-for-violating-deal.html)

------
ENGNR
Never go public. It's solely for the bean counters selling Pepsi and Coachella

------
jaimex2
Market knee jerked as usual. Good time to buy TSLA shares.

~~~
krferriter
The fact this is how our economy and retirement savings are structured is
absurd to me.

~~~
jaimex2
Thrown around the worlds largest casino as a facade for investment? Yep.

------
staticautomatic
I think the answer should be designating official channels like the company's
website or an SEC-managed site that you can post to. Everything else gets
designated non-official and carries a warning notice saying it's not official
so if you wanna trade on it or whatever you do so at your own risk.

~~~
jacques_chester
Such designations already exist.

Tesla designated Musk's twitter account several years ago.

~~~
staticautomatic
Where can I read more about this?

~~~
desdiv
Tesla's filed a SEC form 8-K[0] on 2013-11-05 that elevated both Musk’s and
Tesla’s Twitter accounts to Disclosure Channels:

>Tesla Disclosure Channels To Disseminate Information

>Tesla investors and others should note that we announce material information
to the public about our company, products and services and other issues
through a variety of means, including Tesla’s website, press releases, SEC
filings, blogs and social media, in order to achieve broad, non-exclusionary
distribution of information to the public. We encourage our investors and
others to review the information we make public in the locations below as such
information could be deemed to be material information. Please note that this
list may be updated from time to time.

>Interested in keeping up with Tesla?

>For more information on Tesla and its products, please visit: teslamotors.com

>For more information for Tesla investors, please visit: ir.teslamotors.com

>For the latest information from Tesla, including press releases and the Tesla
blog, please visit: teslamotors.com/press

>For additional information, please follow Elon Musk’s and Tesla’s Twitter
accounts: twitter.com/elonmusk and twitter.com/TeslaMotors

[0] [http://ir.tesla.com/node/13651/html](http://ir.tesla.com/node/13651/html)

~~~
staticautomatic
Thanks. In light of this, Musk deserves whatever's coming from the SEC.

------
jordz
Can the SEC really do this given the content of this tweet? Surely they can’t
seek approval for every tweet about Tesla? What if he says he’s driving home
from “the Tesla factory”. Does this count as a breach if he didn’t seek
approval?

~~~
javagram
Musk and his lawyers agreed to the terms of the settlement.

The only reason he had to settle in the first place was because he tweeted
false, market-moving information via twitter. Maybe Elon should have
considered the consequences then.

Why didn’t he just hand over his twitter password to a social media manager
and stop tweeting once he lost millions of dollars over the last tweet?

~~~
cmurf
Why didn't the lawyers and board require it?

~~~
sangnoir
The former work for him, and he controls the latter. The "independent" board
member Tesla added after signing the agreement was non other than Larry
Ellison

------
eduah
Guidance for this year was 350k - 500k. Elon said several times on the call
that he thought they could beat the 500k. This is a technicality on not
getting approval for a tweet that could _unreasonably_ be interpreted as
saying they are definitely hitting 500k 8 months from now. This is stupid.

[https://twitter.com/_jameshatfield_/status/11001772987230945...](https://twitter.com/_jameshatfield_/status/1100177298723094528)

~~~
jacques_chester
> _This is a technicality_

It's the law. That's how it works.

Especially _if you agreed to it_.

~~~
eduah
That is the point. He only violated it if you take the obviously wrong
interpretation that the 500k was a new material statement. It was not. The
agreement only covered new, material information, not repeating a previously
given the high-end estimate.

Also, note that the market was closed at the time of the tweet and the second
tweet clearing up any possible confusion, thus, having no impact on the stock.

~~~
afastow
No, he was required to get pre-approval even if he was repeating previously
released information verbatim. They probably wouldn't have caught him if he
was actually repeating it verbatim, but he still would have been breaking the
requirement to get pre-approval.

> According to Tesla’s Policy, any edits to a pre-approved Written
> Communication or even releasing a verbatim pre-approved Written
> Communication more than two days after it has been pre-approved requires
> that the pre-approval be reconfirmed. Even if the exact substance of the
> 7:15 tweet had been pre-approved 20 days before, Musk cannot credibly claim
> that he thought he was not required to obtain pre-approval again under the
> plain terms of the Policy. In fact, the written communication in the 7:15
> tweet was not pre-approved 20 days earlier or at any time. Musk’s claim that
> he thought he was simply restating information from the January 30
> communications is not credible.

[https://assets.documentcloud.org/documents/5750664/Show-
Caus...](https://assets.documentcloud.org/documents/5750664/Show-Cause.pdf)
12th PDF page (labeled 9 at bottom of page)

~~~
jacques_chester
You'll note "two days".

