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[dupe] Musk Faces U.S. Contempt Claim for Violating Accord with SEC (bloomberg.com)
90 points by pulse7 21 days ago | hide | past | web | favorite | 79 comments




In fairness, musk is obviously contemptful of the sec, and public market norms/institutions generally.

He should probably find a way to exit as Tesla ceo, imo. Being a public company CEO doesn't suit him.

He built a car company from a cold start, made good cars, and pushed EVs forward by a good many years. We're now at the point where most major manufacturers make EVs. People are willing to buy them. Range is getting sufficient. Plans to start banning ICE cars next decade are getting serious.

Job done, and done well. Get a CEO that does platitudes to run Tesla.

Go do spaceX, boring companies, hyperloop... plenty of stuff to do. Plenty of money. Plenty of private investors willing to fund muskco projects.

This Elon Musk Vs the stock market stuff is not going to be fun for anyone.


The best thing for SpaceX would be for Musk to continue to have minimal operational involvement


I have been a Tesla shareholder since 2016, and I find Elon has been very inspirational, but I agree. I think that Elon is too much of a micromanager. He seems to be trying to control everything at Tesla, and it's backfired multiple times. Gwynne Shotwell is doing a fine job running SpaceX. In my opinion, Elon should focus on the engineering side of things (e.g. BFR development) and let other people do the management and public relations.


It is a tough pill for someone like Musk to swallow. Having seeing your companies grow to such heights in part because of hard work you made and the brand value that your name has created.

It will be interesting to see the compromise he might be willing to take


I wholeheardtedly agree. He should definitely focus on SpaceX.

Lots of stuff to solve there. They need to optimize falcon 9 reusability (24hr turnaround is possible), get starlink up and running, Starship and booster development, ISRU development for Mars.


Musk strikes me as a pitchman more than anything else; good at outlining a vision to laypersons and investors, but usually absent from the kitchen. The problems you've listed don't seem to be things Musk could meaningfully contribute to.

Musk is quite clearly a "like"-addict (public adulation addict, really), and those problems sound like long stretches of boring work that doesn't put cameras in his face or likes on his tweets.


> He built a car company from a cold start

FWIW Musk was an A round investor who took over as CEO after the founder was fired a few years later.


I agree with everything except the implication of this (so overall good comment!)

> In fairness, musk is obviously contemptful of the sec

Being contemptful of the sec (or even the justice system) isn't a crime, despite the name "contempt of court" means "disobeying a court order" not "being contemptful". Thought crime isn't a thing.


> In fairness, musk is obviously contemptful of the sec

I'm 99% sure that this is a joke and the original commenter doesn't think having contempt for the SEC is a crime


It goes toward state of mind and that matters for crimes. If he gave every indication that he agreed with the settlement and was trying to comply, this could be seen as an accidental oversight. But given his statements on the sec, it’s hard to read this as anything other than an intentional violation.


I know, but I also think there's a deep-ish meaning that is literal. Contempt of court is, historically and functionally, about contempt... which breeds disobedience. Respect has its own implications.. including obedience, in certain contexts.

Also, I was just writing it because it sounded good att.


I don't necessarily agree with some of the adulation for his accomplishments, but ... I totally agree that he is not a great fit for running Tesla. In my opinion they should try and get Alan Mulally to run the show.


Yeah, I like that line "contempt of SEC". That is really what it feels like the SEC wanted to charge him with.


If you read the layperson defniition, but the legal one applicable to any legislative or judicial body is defined as:

"... the offense of being disobedient to or disrespectful toward a court of law and its officers in the form of behavior that opposes or defies the authority, justice and dignity of the court"

now that's kind of a mix of breaking the rules and being a general dick, but the point is that to respect the intent institution you need to both respect its judgements and its identity. Musk may or may not be violating the former but is definitely failing the later.

You may not agree with this but that's how our institutions work. As for "thought crime" that doesn't apply once you open your mouth and share it with everyone else.


Speech, like thought, is well protected. Saying "the courts are useless entities and I do not respect them" is well protected.

Apart from the first amendment, I think your missing the "and" in your quote. It's required that you "oppose or defy" the "authority of the court"... I.e. violate an order.

PS. The SEC is not the courts. Musk has been rather clear that he does in fact have respect for the courts...

Edit: And to be clear I'm not saying Musk isn't guilty of contempt of court, is just has nothing to do with being contemptful of the SEC (except perhaps his motive).


> Plans to start banning ICE cars next decade are getting serious.

This made me think: many cities already ban cars from their centers, but perhaps a better policy would be to ban ICE cars? Air quality and noise levels could improve dramatically, but the impact on commerce wouldn't be as harsh perhaps?


A lot of air quality problem in cities comes with tyres and brakes. This is why the air quality is so bad in metro stations even though thzy are fully electrical as well.

In addition, the policies against car are not only pollution related but quality of life related and urbanism. This is why in many places in Europe you can't build open air parking in cities anymore, it just takes too much of the public space and if yoj want life in the cities you need to be able to walk easier.


Electric cars hardly use their brakes at all due to regenerative braking, so that problem is solved too.


They use them less and regen primarily alleviates the need for brakes to perform speed modulation when cruising. They're still used for stopping and a bad driver or rapid deceleration will still put excessive wear on brakes.


> regen primarily alleviates the need for brakes to perform speed modulation when cruising

This isn't true for me. Maybe it depends on the strength of regen in your car, but 90% of my deceleration when stopping is handled by regen. I only use brakes under 5 MPH in most circumstances. And I wouldn't say I'm a timid driver.


How do you know when your car engages the brakes vs using regen? Are you taking your foot off the accelerator and then waiting until the very last moment to step on the brake pedal?

I know that Tesla's have aggressive regen, I own one, but it doesn't bring you to a complete stop so you're using brakes at every full stop.


Yes, I normally do not press the brake pedal until I have already decelerated to about 5 MPH, when regen basically stops. I know that some cars automatically apply the brakes as part of regen to make the transition smoother but I'm pretty sure the Model 3 does not.


That's a long run out. I try to avoid annoying people behind me by doing that.


I don't think the main reason for banning cars from city centers was to reduce noise and improve air quality, it was to reduce congestion. Noise and air quality improvements were a nice side benefit.


I'm not sure the noise would get any better. Electric cars are forced to have fake noise at low speeds because pedestrians and cyclists have been conditioned to rely on hearing traffic around them, which leads to accidents when that noise isn't present.


> Electric cars are forced to have fake noise at low speeds because

...blind people exist.


Thus far the fake noise is closer to crickets than an engine. I have no doubt though that we'll see EVs that make noise for the sake of being seen (i.e. Harleys and Trucks)


London's new draconian rules / tariffs, at least, only apply to ICE engines.


I think it's likely, gradually at various levels of government.


It's another data point in support of: don't go public if you want to do anything innovative.


Innovative as in fake a buyout offer, get censured by the SEC, and then violate that agreement? I mean, that isn't exactly how I would use the word, but ok.


Imagine you have a private company. Somebody comes to you with a big fat acquisition offer and you get excited, but it's obviously not anywhere near inked yet. You send a celebratory e-mail to your investors and your option-holding employees that basically boils down to "we gonna get some bling bling!" Then the deal just totally vaporizes.

This is probably what happened. In a private company the CEO might get some egg on their face, but that's it. In a public company this could be illegal.

Elon is not the type of person who functions well in the heavily bureaucratized and regulated type of environment.

BTW I am not totally letting him off the hook, just saying that maybe staying away from environments like the public stock markets is a good idea if you don't want a bureaucratic culture.


> Imagine you have a private company. Somebody comes to you with a big fat acquisition offer and you get excited, but it's obviously not anywhere near inked yet. You send a celebratory e-mail to your investors and your option-holding employees that basically boils down to "we gonna get some bling bling!" Then the deal just totally vaporizes.

A couple of major points:

One, Tesla is not a private company. They are a public company with an actively traded stock. The price of the stock moved significantly based on this information being revealed, and people who were short might have been subjected to margin calls causing them to close out their position, and new longs might have invested in the stock on the assumption that an acquisition at $420 a share would take place. This people have real harm due to Musk's irresponsibility, and they are exactly the kind of people the SEC exists to protect.

Two, you say that is probably what happened very confidently here without any evidence. There isn't a single investor that has come forward and said that they were the one planning to facilitate this transaction, which is surprising, because the universe of institutions that can fund a $50 billion buyout is incredibly small. Most likely whatever Musk might have been referring to in his infamous "funding secured" tweet was even less material than you describe.

Three, I would also describe this as irresponsible and unethical in a private company as well. If you started telling your employees that their shares are worth $420 a share and will soon be as good as cash, then one of them decides to buy a house on the knowledge that his net worth can take the added mortgage relatively easily, you should feel bad about misleading them.

> BTW I am not totally letting him off the hook, just saying that maybe staying away from environments like the public stock markets is a good idea if you don't want a bureaucratic culture.

There have been plenty of innovative CEOs who have existed in public companies. I don't think "don't tweet out securities fraud" is really too high a hurdle for someone to meet that it will impede the innovation at their company.


He can be innovative and ... not get in a fight with the SEC.


I like to think Elon Musk, and Clarence Saunders (the Piggly Wiggly guy) have a lot in common. I hope Elon learns from Saunders magnificent story. You can be smarter than Wall Street, but wall street has the NYSE, and the SEC on their side.


> Being a public company CEO doesn't suit him.

That's one perspective, and the other perspective is that despite his public company CEO flaws, he's still overall very suited. I don't personally know which of the two is truer. Most HN readers probably aren't in a position to know if someone is a good public company CEO, maybe you are. But it seems worth noting that saying that someone isn't suited from their job likely comes from a position of knowing far less about what it means to be suited at their job than they (Musk) know, with the exception of the highly public aspects of their job.

So most people can say that he doesn't seem that suited at the highly public aspects of being a public company CEO, but he may be so well suited to the other aspects that those aspects massively dominate, making him overall an excellent public company CEO.


Matt Levine: https://www.bloomberg.com/opinion/articles/2019-02-26/elon-m...

"You can’t put Elon Musk in jail; he has a whole company for drilling tunnels! Let’s be fair to Musk: On the one hand, absolutely, he has been going around saying that he does not respect the law and is going to ignore the SEC and a court order, but on the other hand he has also been going around saying that he’s got a big drill. Also rocket ships, submarines, flamethrowers, possibly flying cars, basically the whole arsenal of supervillain technology. The message is not just “I do not care about the law”; it is also “and you can’t stop me bwahahaha.”


I don't see how he can reasonably defend himself in this situation. His tweet was both material and inaccurate. Tweeting material information without clearance is obviously against his settlement. Yet, if TSLA's price signals anything, it'd be that he's in no danger.


> Yet, if TSLA's price signals anything, it'd be that he's in no danger.

Or Tesla is in no danger. Musk still might be.


Seek counseling for your twitter addiction. Delete it. You don't need it. You will be better for it in every way, Mr. Musk.


I think you vastly underestimate the amount of value Musk's twitter account produces for him.

Tesla is in the business of selling luxury products. They live or die by people wanting to buy them. Musk's twitter account appears to be one of the primary marketing channels.

SpaceX is in the business of

- Getting regulatory approvals

- Acquiring engineering talent cheep.

- Selling things to taxpayers and rich people

They live or die by politicians and potential hires liking them - billionaires who want a trip to the moon help too. Like with Tesla Musk's twitter account is one of the primary marketing channels.

Don't think he's the only one doing this, here is Tory Bruno (ULA CEO)'s reddit account: https://www.reddit.com/user/ToryBruno/comments/


I've also listened to him in numerous interviews basically stating he is addicted to it. He's tried to control it in various ways. He can't. I'm not blaming him or saying he's weak, just that he himself realizes he has a problem and should take the next logical step since self-censoring doesn't seem to work for him. The stakes are pretty high for not complying.

I understand your points. I don't think any of his companies would suffer if he wasn't the one making announcements. Stop talking about production. Hype all of the cool revolutionary tech you create all you want - just don't attribute it or mention the business side of things, especially when they are speculative. State facts, after they are facts..."we said it would be x production for 2019, and well, here we are at the end of the year we blew that away!!" or something factual.

If he doesn't get a handle on it, he will lose it. That won't be good for anyone, except for competitors.

I don't think Elon's use of Twitter is as useful of a tool for him in 2019 compared to when he started. There is plenty of buzz about his companies.

I have tremendous respect for him. I absolutely don't want to see him fail, or see it fail because of something trivial like not being able to stop yourself from tweeting certain things that are off limits. There's too much on the line.


Your comment is slowly graying out, but this is the simplest and most obvious solution. Of course, once Twitter is eliminated I think we'll discover that it was the symptom and not the cause.


I feel that way about all social media, not just isolating Twitter. Social seemed to make narcissism accepted as the norm, and encouraged it.


Narcissism is a hell of a drug


This is a partial transcript of the Q4 2018 earnings call. There is a strong case to be made that the information was not market moving.

Operator

Thank you. Our next question is from Colin Rusch with Oppenheimer.

Colin Rusch

Thanks so much. Can you talk a little bit about the geographic dispersion for the guidance for 2019, where you're expecting the Model 3s to sell through as well as the other models?

Elon Musk

Well, I think we did, actually. Yes, it's clear in our letter.

Deepak Ahuja

We indicated in Q1, we will start delivering Model 3s in Europe and China. And we also shared a chart showing the potential market size for midsized premium sedans in North America, Europe and Asia, suggesting those markets could be even bigger. So I think that gives a good sense of where we'll be. And we'll launch the right-hand drive version at some point to go to the other markets.

Elon Musk

Yes. Maybe in the order of 350,000 to 500,000 Model 3s, something like that this year.


What generally happens moving forward? Let's assume he's "guilty" across the board. So two instances of misleading the market, along with violating a settlement.

Is there a fine? For him and the company? Does he get removed from the board? I don't think jail is likely but, maybe?


It will depend on the judge and circumstances, but given that Elon didn't seem to be fazed by a $20 million fine last time, I could easily see a much larger fine this time.


Well, people have been jailed for less. My personal guess is they will try to disqualify him from being an officer of a public company.


It seems that the more a high-profile individual spends time in social media like Musk the higher the odds of making a misstep. Shareholders may want to keep a closer eye on highly 'media' active CEOs.


Was curious what their take was but had to bail on the site- what a horrible experience even with uBlock


With Privacy Badger and Firefox's Tracking Protection, I have no issue with Bloomberg pages. Reading View (F9) improves on this even further, and just shows me the text.


I thought this comment was being overly-dramatic but after clicking on the link it is exactly that bad.


https://outline.com/tHvr8P

(I got "We've detected unusual activity from your computer network" with a captcha.)


The muted overlay is so obnoxious and distracting. Am I missing the x button or is there really no way to close it?


Safari reader mode helps a lot on sites like Bloomberg if you're on a Mac.


And if you hold down on the reader icon, it gives you the choice to always go straight to reader mode when on [insert site].


Press F9 when you're on Firefox to get a good reading experience.


I have a Chrome bookmarklet specially for Bloomberg. Instant relief with a single click:

javascript: document.getElementById('paywall-banner').remove(), document.getElementsByClassName('right-rail')[0].remove(), document.getElementsByClassName('left-column')[0].remove(), document.getElementById('navi').remove(), document.getElementsByClassName('zipr-recirc')[0].remove()


Bloomberg is one of those sites I have flagged for domain-wide application of a readability addon.


This one feels a bit witch-hunty, the "500k" number he tweeted wasn't meant to be some new accurate prediction, but a reiteration of their public position, to make a general point about how quickly they've grown over the years.


One of the burdens for securities fraud is "materiality" - whether a "reasonable investor" would have viewed the relevant information "as having significantly altered the total mix of information made available."

Analysts were generally projecting 400k cars delivered. Musk, the CEO, the ultimate insider, suddenly reveals that Tesla will sell 25% more cars than people outside expected. I think it's fair to say that if that came as a press release from the company, the mix of information certainly would have changed and people would buy the stock.

The SEC agreement was that he would pre-clear any material tweets with a lawyer. He said in a TV interview that he wouldn't get his tweets pre-cleared, and said "I want to be clear. I do not respect the SEC. I do not respect them.” And then he tweeted material information on Tesla.

I think it's pretty fair to call that contempt of court!


Keep in mind that both the statement and the correction came while the markets were closed. This isn't about market manipulation.

This is about whether or not he intentionally crossed an arbitrary line by vaguely restating previous official company statements in an unofficial manner without complying with company policy on said utterance.


Right, this is about contempt of court, not actual fraud, good point.

It sounds like you think "contempt of court" shouldn't matter. I think it should. It's hard to have a society with rule of law if people ignore court orders, even cool people like Elon.


Contempt of court matters, but it is also a high bar. It remains to be seen if the court will determine that a fellow saying "I love the courts, I'm sorry about the things that I said outside of trading hours" is in contempt.

My guess is that the SEC's definition and the court's definition will not agree.

Before disagreeing with this, go back and read the terms of the original settlement. A lot of people are talking smack (on both sides) about things that aren't even in that agreement.


I've only read the SEC's motion (https://assets.bwbx.io/documents/users/iqjWHBFdfxIU/ragxTxYi...). I haven't been able to track down the court's final judgement document in the settlement. That said, I don't agree with your portrayal here. The SEC's claim is just that Musk didn't pre-clear the tweet, which was a court-backed requirement in the settlement, which makes him in contempt of court.

The other stuff, like about the TV interview, is evidence that he's not acting in good faith, so the court shouldn't cut him slack here - or, in the motion's words, that he "has not made a diligent or good faith effort to comply with the provision of the Court’s Final Judgment requiring pre-approval of his written communications about Tesla. Less than two months after the Court entered its Final Judgment, Musk publicly indicated that he was not serious about compliance with this provision."


So you can be in contempt now if you don’t match what analysts are saying?

The definition of materiality you provided clears him as the numbers Musk tweeted are in the their quarterly report, so nothing new was learned.


> So you can be in contempt now if you don’t match what analysts are saying?

"Materiality" is weird, I agree! Matt Levine has a running line that "everything is securities fraud" these days.

To be clear, he is in contempt of the court order around materiality. In general, not matching what analysts say isn't contempt of court, of course.

> The definition of materiality you provided clears him as the numbers Musk tweeted are in the their quarterly report, so nothing new was learned.

I do not agree. The quarterly report says "our goal is to be able to produce 10,000 vehicles per week on a sustained basis. Barring unexpected challenges with Gigafactory Shanghai, we are targeting annualized Model 3 output in excess of 500,000 units sometime between Q4 of 2019 and Q2 of 2020."

The tweet said "“Tesla made 0 cars in 2011, but will make around 500k in 2019.”

Those are very, very different statements! Musk's tweet indicates dramatically higher production at the end of 2019.


Because of his previous statements, Musk is under a court-backed legal agreement with the SEC not to make such statements without getting pre-approval from company officials. This isn't just the SEC he's ignoring, it's the court. This is sales forecast and a 25% exaggeration of the real numbers, which on its own appears to be "misleading information" and he'd likely be in trouble with the SEC for it either way but by ignoring the court he's in double trouble.


Even re-iterating guidance that you issued a month ago is a material, as the government describes at length in the court filing.


I got a feeling we are going to find out Elon does a lot of lying.


I'd say he does a lot of bullshitting. That's pretty typical for any CEO type person.


Do you think Elon truly believed that full self driving capability would ever be enabled for the people who shelled out for the newer versions of the car (the one that added shitty cameras all around)? He knows it can’t be done safely without high FPS lidar and/or more compute on board. He doesn’t care. He’s pulling a Theranos.


Most CEOs bullshit by talking in broadly general terms so as not to get pinned down on any particular issue. Musk seems to make stuff up on a whim just to see what the Twitter feedback would be. Shocking to think that this is coming from a nearly 50-year old man.


>Shocking to think that this is coming from a nearly 50-year old man.

Is it though? Personality types are not something that changes with age. Maybe it gets toned down or more mellow with age, or it could get more extreme as they become more comfortable/confident in doing what ever trait it is. Pre-social, it might have only been notice by those in direct contact with an individual. Now, it's made visible to the entire online world. Musk is still younger than Trump, and he's not slowing down at his age either.


I guess the critical question will be: "If a public earnings report lists a number range, then a tweet mentions a possible number within that range (using 'may'), is that 'material information to investors'"?

I can see arguments to both sides. If anything though in the modern world of social media and the public's thirst for transparency, these kinds of stories can be seen as just an additional thing to think about before going public (obviously a very minor thing of course when making the decision, but still notable).


>s that 'material information to investors'"?

The guy went onto national television, implied he would not follow the court order, said he does not respect the SEC, then went ahead and broke the order. How is this even debatable?

And let's not pretend that Tesla isn't already under scrutiny for absurd forecasts (under the guise of uncertainty) that they do not reach.


Yes. Re-iterating guidance is still material. Elon currently has a full month more of non-public information about Tesla's current demand and production. For him to publicly say "this number is still true" even if it is already public, is a material event.




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