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Businesses Government The Courts

Elon Musk Pulled Out of Settlement With SEC At Last Minute (cnbc.com) 198

Sources have shared some new details with CNBC relating to the recent SEC charges against Tesla CEO Elon Musk. Yesterday, U.S. securities regulators sued Musk for allegedly making false statements related to his abandoned efforts to take Tesla Motors private. Now, according to CNBC, Tesla and the SEC were close to a no-guilt settlement but Elon Musk pulled out at the last minute. From the report: Under the deal, Musk and Tesla would have had to pay a nominal fine, and the CEO would not have had to admit any guilt, the sources said. However, the settlement would have barred Musk as chairman for two years and would require Tesla to appoint two new independent directors, CNBC's David Faber, citing sources. Musk refused to sign the deal because he felt that by settling he would not be truthful to himself, and he wouldn't have been able to live with the idea that he agreed to accept a settlement and any blemish associated with that, the sources said. Musk called the SEC's allegations "unjustified" and that he acted in the best interests of investors. "Tesla and the board of directors are fully confident in Elon, his integrity, and his leadership of the company, which has resulted in the most successful U.S. auto company in over a century. Our focus remains on the continued ramp of Model 3 production and delivering for our customers, shareholders and employees," said Tesla's board of directors in a statement.
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Elon Musk Pulled Out of Settlement With SEC At Last Minute

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  • Gutsy move (Score:3, Funny)

    by Anonymous Coward on Friday September 28, 2018 @08:04PM (#57393136)

    Rockets.
    Slick Cars. (in space)
    Big Drills.
    Flamethrowers.
    Playing Chicken with the SEC.

    Do I see a thrill junkie?

    • Re:Gutsy move (Score:5, Interesting)

      by saloomy ( 2817221 ) on Friday September 28, 2018 @08:59PM (#57393344)

      He must have evidence that he discussed the price ($420) with someone who agreed to buy the exiting stock at that price. My guess is he shows a letter of intent, memorandum of understanding, or at least a confirmation email from them to the SEC (and the public), and he gets a slap on the wrist because the SEC will say "funding secured must mean it's in an escrow account", or something like that. If he's got nothing, he should have taken the deal.

      I do wonder if they are trying to bar him from taking SpaceX public (since he would be restricted in his seat at public companies).

      • any ?'s
      • by Anonymous Coward

        Either that or he is a fucking idiot obsessed with trying to hurt short sellers and completely oblivious to his responsibilities as CEO

        or maybe the SEC is all pedos

      • A rational actor should have taken the slap on the wrist unless they have overwhelming evidence, evidence that isn't public. People aren't rational actors. Elon Musk sure as heck doesn't make comservative decisions after carefully calculating the benefits and risks - he goes all in on crazy stuff that just might work.

        Literal moonshots are Elon's stock in trade. That's not a BAD thing, or a GOOD thing, it's simply Elon's thing.

        • by DeBaas ( 470886 ) on Saturday September 29, 2018 @03:36AM (#57394164) Homepage

          over a decade ago I got a traffic ticket that was (in my view) bullshit. I didn't take it to court since, as a contractor, the hours lost would have cost me a lot more than the fine. Years later I can still feel pissed about that ticket.

          You're probably right that taking the settlement would have been the rational thing to do. But I do understand him.

          • Re: (Score:2, Interesting)

            by djinn6 ( 1868030 )
            The problem is, what Elon allegedly did is in fact illegal. Unlike in your case, the cost to send SEC the evidence is nothing compared to the cost of a settlement. So if he had any evidence that could exonerate him, he would've already used them, then SEC wouldn't have bothered charging him in the first place.
            • by DeBaas ( 470886 ) on Saturday September 29, 2018 @04:45AM (#57394314) Homepage

              Except when the SEC and Musk/Tesla disagree on if the evidence exonerates him. They probably did provide the evidence and just disagree on what that means to the case.
              The fact that the offered settlement is so far from what the SECs demands, suggests to me that the SEC isn't so sure about their case.

              • > The fact that the offered settlement is so far from what the SECs demands, suggests to me that the SEC isn't so sure about their case.

                I'm trying to figure out what you mean by this sentence?
                The SEC offered a settlement, which Musk took, then changed his mind. It sounds like you're saying that what the SEC offered "is so far from what the SEC demands", which doesn't make any sense.

                If you meant what the demand of people generally, they demad that people follow the law.

                Are you trying to say the settlement

                • by DeBaas ( 470886 )

                  What I meant is the difference between the settlement and what the SEC seeks for in court.
                  To me the difference between two years vs being barred from being a director/officer for any publicly traded company is quite big. But I guess this is usual in the US. Probably works well to scare people out of trying your luck in court

                  • Yes, to encourage settlements they settle for less than they'd ask for in court. If they didn't, it would bw foolish for anyone to settle.

                    Also with these kinds of things it's useful to watch out for phrasing like "facing up to five years". In that phrase, five years is rhe maximum penalty allowed under the law. That doesn't mean the prosecution would ask for the max. That's just the max they could ask for.

                    In this instance, Musk clearly and publicly said finding was secured at $420, and that seems to be a l

      • Re:Gutsy move (Score:4, Insightful)

        by ShanghaiBill ( 739463 ) on Friday September 28, 2018 @10:31PM (#57393576)

        If he's got nothing, he should have taken the deal.

        If he's got nothing, the deal shouldn't have been offered. "A nominal fine and no admission of guilt" is not appropriate for inexcusable misconduct at this level.

      • by Desler ( 1608317 )

        He must have evidence that he discussed the price ($420) with someone who agreed to buy the exiting stock at that price.

        Or he's just supremely arrogant.

      • Re: (Score:2, Interesting)

        by djinn6 ( 1868030 )
        If he had solid evidence, he would've used it already and the suit would've never happened. I think he's hoping for a better deal, maybe a bigger fine but less time banned from being CEO.
      • He must have evidence that he discussed the price ($420) with someone who agreed to buy the exiting stock at that price.

        It seems like news on this is all over the place. A while back I remember there being "proof" of who the investors were (Saudis). Then that turned out to be untrue. Then originally I saw this story represented as Musk never intended on taking a deal. Then it changed to he was working on a deal, and said no. And now I've seen another article pop up saying something about him having proof of a deal ($420) with some Saudis that he backed out of.

      • I do wonder if they are trying to bar him from taking SpaceX public (since he would be restricted in his seat at public companies).

        Unlikely. There's no reason for them to oppose such a move ... and it's unlikely anyway; there's absolutely no good reason for Elon to take SpaceX public at this point and everything he has said thusfar seems to indicate he has no desire to do so.

      • > He must have evidence that he discussed the price ($420) with someone

        Or else he's just nuts, and the Tesla Car Company is about to go bankrupt in 2019 due to poor leadership. It wouldn't be the first time that happened (Commodore, Atari, Lehman Brothers bank, Fisker Auto, etc)

    • by goombah99 ( 560566 ) on Saturday September 29, 2018 @12:24AM (#57393820)

      Trump wants charismatic industry leaders to kowtow.

      Read Mussolini's own writing. Trump did (really, he kept it in his bedside stand).

      At one point in time il Duce was revered by the world for the fascist economic miracle.

      Mussolini called it "corporatism". The governing paradigm is the state selects an elite set of corporate power brokers who receive favor, such as continuing to breath air, in return for supporting a benevolent patriacial dictatorship that masquerades as a democracy with a permenantly re-elected supreme leader.

      it actually worked well up until Mussolini decided to invade Ethiopia and hitler copped his game plan. Then it went to shit for him.

      Musk is the demo to all the other corporate charismatic leaders that you will pay if you don't kow tow to il Cheeto

      • by Megol ( 3135005 )

        That is not a correct description of corporatism nor fascism.

        • by Shinobi ( 19308 ) on Saturday September 29, 2018 @06:25AM (#57394454)

          Then you're wrong. Corporatism, with the corporate leaders as part of the power elite, was always one of the five pillars of fascism, and you saw it in Italy, in Spain, in Nazi Germany, in the various banana republics etc. However, due to ignorance, a lot of people in the 60's and later effectively redefined it to become something generic, basically anything they didn't agree with.

          • No, he's right, and you're wrong. From wikipedia:

            In 1881, Pope Leo XIII commissioned theologians and social thinkers to study corporatism and provide a definition for it. In 1884 in Freiburg, the commission declared that corporatism was a "system of social organization that has at its base the grouping of men according to the community of their natural interests and social functions, and as true and proper organs of the state they direct and coordinate labor and capital in matters of common interest".[4] C

            • the pope? Why not go back to how the Fascists defined corporativism.

              "Under fascist corporatism, sectors of the economy were divided into corporate groups, whose activities and interactions were managed and coordinated by the government. The idea was to split the difference between socialism and laissez faire capitalism, letting the state control and direct the economy from the top-down without itself owning the means of production. Mussolini's official title was "commander and chief of the economy" among

          • by Megol ( 3135005 )

            Corporatism is part of fascism however was not invented by fascists. The description is however the main problem, Mussolini and the others wanted to eliminate unions by forcing workers and employers to work together in a state-enforced system.
            Also unlike the German regime at the time Italian fascism wasn't a pure dictatorship - there were a council with considerable power. They voted to dispose of Mussolini for example, something unthinkable in the Reich where military and others swore an oath to Adolf Hitl

    • Do I see a thrill junkie?

      You may be seeing the early stages of a post-Spruce Goose Howard Hughes.

  • But now probably forced out from ANY executive position in the company. No CEO, COB, director, nada. Just a shareholder with no control of the company... I guess this is outsmarting the shorts?
    • There is no chance that that would happen in this case. The trial judge could do it, I wouldn't put it past anybody at that level, but it would get tossed on appeal. That's just a negotiating tactic, not a real punishment.

      • by LynnwoodRooster ( 966895 ) on Friday September 28, 2018 @08:18PM (#57393180) Journal
        Check out Albert Dunlap and John Schiller, both permanently banned from holding an executive position in publicly traded companies due to fraud and fiscal issues (like stock manipulation). They can, and have, gotten CEOs and senior executives banned from holding director positions - and Musk is running a big risk of that happening to him.
        • by Anonymous Coward

          You are comparing Elon Musk, who may have or have not exaggerated how "secure" his funding was in that tweet, which might have made a few shorters (i.e. gamblers not interested in health of companies) close their positions, to people who went into serial fraud for personal gains.
          At the same time, no-one from those that caused the last recession had any kind of punishment...

          • Wait, you mean Musk didn't attack the shorts for personal gain? Really? The guy who rails against shorts (who wouldn't be an issue if he could actually make a profit) didn't attack them for personal gain, or personal satisfaction?

            And you must have missed the 35 who went to jail [cnn.com] for the 2008 meltdown, and the dozens of CEOs forced out from their positions...

    • Kinda. It would not be a forever thing, but banned from being a C-level guy at any publicly traded company? Very possible.

      Note that he could still be a consultant, or a less-then-C-level-guy, but that's not exactly the kind of role he likes, is it?

  • Musk has good ideas. His companies do some cool shit.

    He is loosing it.

    He should have taken this deal.

    -no admission of wrongdoing.
    -minor (for a billionaire) fine.
    -step down as chairman (can remain as president/CEO) for 2 years.
    -appoint 2 independent board members.

    That is not a bad deal. It is a very slight slap on the wrist.

    Of course, there will be a different deal negotiated... but in the mean time the company is suffering due to the publicity generated by this misstep.

    • by DanDD ( 1857066 ) on Friday September 28, 2018 @08:36PM (#57393252)

      I disagree. Board members can be beyond villainous, well into truly evil territory.

      Tesla will be better off in the long term without more hostile board members, even if it means being without Elon. The cult of personality is an intoxicating thing, but there are a lot of good people at Tesla and elsewhere who want it to succeed. Tesla can succeed without Elon if they must, but I wouldn't count him out just yet.

      For reference, see the history of the Aptera [wikipedia.org] electric vehicle. It had great potential, but the appointed board members killed it.

      • by Anonymous Coward on Friday September 28, 2018 @08:42PM (#57393270)

        electric vehicle. It had great potential

        You're saying they resisted implementing some good ideas? Maybe they weren't amped up enough for success. They are no longer part of current events though, so it hardly matters.

        • You made me choke on my coffee and droplets are condensing all over my monitor.

          You really should conduct yourself better.

    • by Ranger ( 1783 )

      He is loosing it.

      As in loosing his bowels?

      Yeah, he should've taken the deal.

  • Random Thoughts (Score:5, Interesting)

    by Zobeid ( 314469 ) on Friday September 28, 2018 @08:49PM (#57393296)

    First, IANAL. With that said...

    This is a civil action, not a criminal one. Thus, even if he loses Musk does not become a felon and (I'm pretty sure) doesn't lose the security clearance that he needs for his SpaceX activities.

    The SEC can ban him from serving as CEO or chair of a publicly traded company; they can remove him from top spot at Tesla, but not from SpaceX which is privately held.

    Contrary to what many imagine, Tesla would not implode without Elon Musk. He probably thinks it would, because monumental ego, but he's wrong. Tesla is already set up to be a gold mine, a money-printing machine. It's not just the Model 3 that's on track to be profitable, but also the utility-scale battery storage systems. They haven't got a lot of press, haven't generated much drama, but since the facility in Australia proved wildly successful, demand for those is going to explode.

    If this investigation causes the stock to tank, I'll call it a great opportunity to buy in.

    • More Random Thoughts (Score:5, Interesting)

      by Zobeid ( 314469 ) on Friday September 28, 2018 @08:54PM (#57393320)

      Forgot to add...

      I believe the SEC will also need to prove that Musk *intended* to manipulate the stock price with his dumb tweet. (There's no law against just being dumb.) I don't think Musk actually was trying to manipulate the stock, and how they're going to make they're argument I'm not sure. This may not be the slam-dunk that some people expect.

      Furthermore, the SEC action may cause far more upheaval in Tesla's stock price and more harm to investors than the incident they are suing over. Is that really sensible? But you know, they want to make an example... They've said as much. This is about regulatory muscle-flexing and generating headlines.

      • I am also not a lawyer, but my understanding is that the SEC would only need to prove malicious intent to pursue a *criminal* action. For a civil action, simple negligence is sufficient - was the information false, and did the information alter the market? Both of those seem pretty clearly true - although Musk's rejection of the settlement makes a lot of sense if he has proof that funding was, in fact, secured.

        • by Anonymous Coward

          I suspect that funding was "secured". I think the Saudis were willing to give him everything necessary. But, he didn't want to end up with the Saudis essentially owning the company. He wanted a setup that minimized the Saudi ownership by transitioning enough of the other shareholders to some form of ownership and was not able to find a way to include all of those shareholders who wanted to remain because of other regulations limiting the number of investors in a private company.

          When he couldn't put together

      • When Musk said he had the financing lined up and a price of $420/share he was definitely lying. He knew the market would respond by bidding up the share price close to that level.

      • Forgot to add...

        I believe the SEC will also need to prove that Musk *intended* to manipulate the stock price with his dumb tweet. (There's no law against just being dumb.) I don't think Musk actually was trying to manipulate the stock, and how they're going to make they're argument I'm not sure.

        He's been waging a war against the shorts for ages, I think it's a pretty easy leap to make. As for proving it, I don't think there's quite enough public evidence, but with legal proceedings come a lot of ways of extracting the truth. Even something as simple asking a question can be enough since trying to lie your way out can cause way more trouble [wikipedia.org].

        This may not be the slam-dunk that some people expect.

        Furthermore, the SEC action may cause far more upheaval in Tesla's stock price and more harm to investors than the incident they are suing over. Is that really sensible? But you know, they want to make an example... They've said as much. This is about regulatory muscle-flexing and generating headlines.

        Part of the SEC's job is to make sure CEOs behave responsibly wrt their companies, making an example of someone publicly screwing with the stock price is kind o

      • I believe the SEC will also need to prove that Musk *intended* to manipulate the stock price

        Perhaps you should read this.

        https://www.law.cornell.edu/cf... [cornell.edu]

      • Keep in mind that it's Elon's job to know what he's doing. "Intent" can be hard to judge, but if somebody who knew what he was doing would have known that his actions (ie: the $420 a share tweet, plus claiming that the deal was so done that he only needed a shareholder vote), then the Judge is not gonna be kind to the multi-Billion$ CEO who claims he didn't intend to do that.

        Dude should have taken the settlement.

      • by Kjella ( 173770 )

        I believe the SEC will also need to prove that Musk *intended* to manipulate the stock price with his dumb tweet. (There's no law against just being dumb.) I don't think Musk actually was trying to manipulate the stock, and how they're going to make they're argument I'm not sure. This may not be the slam-dunk that some people expect.

        We never know people's true motives, they're simply inferred from their words and deeds. If you're caught with a smoking gun and your dead ex maybe you just wanted to threaten, not shoot. Maybe you wanted to shoot, but not hit. Maybe you wanted to hurt, but not kill. But when the only evidence is a dead body you'll be convicted for murder regardless. Musk made the tweet and the stock soared, that's means and opportunity. It's well known he hated shorts which is motive. The only viable defense he has is that

    • Thus, even if he loses Musk does not become a felon and (I'm pretty sure) doesn't lose the security clearance that he needs for his SpaceX activities.

      I don't know if he needs a clearance for SpaceX, but he could lose his clearance for making fraudulent statements. It's not just for committing crimes. If he was cheating on his wife (not that he's married) he could lose his clearance for that too

    • by MTEK ( 2826397 )

      Thus, even if he loses Musk does not become a felon and (I'm pretty sure) doesn't lose the security clearance that he needs for his SpaceX activities.

      Regarding his clearance, for his sake he better have answered the drug related questions on the SF86 truthfully. I like Musk, but he really knows how to shoot himself in the foot.

  • by DanDD ( 1857066 ) on Friday September 28, 2018 @09:46PM (#57393470)

    What happens if this SEC civil lawsuit brings down the Tesla stock price to the point where Musk and others are able to more easily take the company private? Will the SEC investigate itself for stock manipulation? A truly entertaining possibility.

  • I think I know why (Score:4, Interesting)

    by AlanObject ( 3603453 ) on Friday September 28, 2018 @10:03PM (#57393520)

    I think it was back in December we stockholders got asked to approve a whopping great compensation package for Musk. To collect it I think he had to stay on as CEO for a certain amount of time and hit certain financial milestones. I think it was 10 years.

    So if he takes this SEC "deal" and has to step down as CEO would he lose all that? I think so.

    And I think it is bullshit. Imagine what would happen if Musk left. Nobody but the shorts (who are desperate for this to happen) would win because the stock would dive 40% minimum.

    And I don't see what Musk did wrong. He said he had a deal. He never said he was taking it which would have been a board (and possibly stockholder) action anyway. The SEC is being totally arbitrary. Let them take it to court if they want to be embarrassed.

    • by mlyle ( 148697 ) on Friday September 28, 2018 @10:16PM (#57393534)

      SEC deal was to step down as chairman, not CEO. It wouldn't have affected his comp.

    • Imagine what would happen if Musk left. [...] stock would dive 40% minimum.

      Why would anyone want to invest in a company in which one perishable asset accounts for 40% of the value?

      • Why would anyone want to invest in a company in which one perishable asset accounts for 40% of the value?

        The track record of the market has been that any slight bit of negative news about Tesla can and will impact the stock price by a significant amount. 10%? 20%?

        I didn't get Tesla stock as early as I wanted because I wasn't paying attention. My next big chance was during all the hysteria about "Tesla fires." The stock went down 20% and I bought then. The fires disaster/problem was obviously as insignificant as hindsight has show it to be. But the fear-ridden-panic-prone backbrain of the market was

    • And I don't see what Musk did wrong. He said he had a deal.

      You don't see that saying he had a deal when he didn't have a deal as something wrong? The SEC disagrees with you.

    • And I don't see what Musk did wrong.

      Hmm, when a publicly listed company makes announcements, they must be 100% correct as regards to any material claims. This is a measure taken because some companies in the past have been known to manipulate their stock price by disclosing information that is not correct.

      Let us forget about electric cars and look at big oil where abuses have happened in the past. A company may announce that it is looking for oil in place A. That is fine. They can announce that they have

    • And I don't see what Musk did wrong.

      Shoots from the hip and acts like a rockstar. Geeks love him for it, and it works for private companies, but it's completely irresponsible for public companies to be run that way. Public companies are supposed to be run with the public interest in mind.

      The SEC is being totally arbitrary.

      The SEC is set up to deal with greedy animals that will cause mass panic in the market and stampede if they see a way to make an extra penny. Hence, all those pesky regulations that exist for good reasons, whether you feel they're fair or not.

  • Elon's going to crash a bunch of his own companies!

    Why?

    For shits and giggles! WHY ELSE?

  • Can tromp their jackboots through these companies and remove the idea guy and cause them to implode. They don't seem to realize that he's really Tony Stark. Well, Tesla, SpaceX, Boring, etc. were all nice-to-haves, but will expect them to all go TU after the gov't figures out a way to whip him into a super-max for a few not-well-thought-out words in a tweet. Maybe they think he's some kind of D'nish D'Souza or somesuch. Persecution at the hands of big gov't I think to be becoming the norm rather tha

    • by Anonymous Coward


      They don't seem to realize that he's really Tony Stark.

      How I miss the Golden age of slashdot, when the libertarian nutjobs were well-read and would have said "Musk is really John Galt"...

      Fucked in the heads millennials only watch Disney crap.

      • JG is a bit dated, and besides, TS is just plain cool. So's EM. But as for the gov't... we have to keep it from being our biggest enemy, like a fire we're thinking we're using to keep warm, but goes on a rampage and consumes us. Smokey Bear says put that campfire out... dead out...

  • Coming up after the break: how they squared the circle followed by a peek at the fully functional perpetual motion machine. It's not a hoax, say boffins.

    But now back to our main story - reports are coming in that Rei has actually shut the fuck up.

  • Anyone watching the interviews with half a brain can see it: Elon needs to step back and take a break before he falls apart. If you ask me he's a world treasure. A higher chance of him being productive later is the best thing for us, for himself, and for his companies. Whether he takes this deal or not he should focus a higher percentage of his efforts on delegation. He should create a team of ten of the best engineers in the world and, yes, two board members and he should delegate more than half of his wor
  • Elon, don't let the bastards grind you down.

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