NEW YORK (Reuters) – Elon Musk’s lawyers, said that the U.S. Securities and Exchange Commission has failed to meet its heavy burden to show that the Tesla Inc chief executive should be held in contempt, and the tweet to ask his contempt motion was appropriate and “not material.”
FILE PHOTO: SpaceX founder Elon Musk looks at a post-launch press conference after the SpaceX Falcon 9 rocket, carrying the Crew Dragon spacecraft, lifted off on an uncrewed test flight to the International space station from the Kennedy Space Center in Cape Canaveral, Florida, united states, 2 March 2019. REUTERS/Mike Blake
In a Friday filing in federal court in Manhattan, Musk lawyers also said their client “respects his obligations” for the electric car company, the shareholders and the court.
Musk is trying to avoid being held in contempt for violating its October 2018 fraud settlement with the SEC has tweeted at 7:15 a.m. EST on Feb. 19 are more than 24 million followers on Twitter that Tesla could build about 500,000 vehicles in 2019.
SEC spokesman Ryan White declined to comment.
Musk the scheme, including $20 million in civil fines for both him and Tesla, dissolved in an SEC lawsuit over an Aug. 7, 2018 Twitter post in which Musk said that he was “funding” his Palo Alto, Calif. – based company private at $420 a share.
The SEC, said Musk committed a “flagrant” violation of this agreement by tweeting about Tesla’s production of outlook without first seeking the approval of the company’s lawyers.
In a Monday filing, the SEC went further, complaining that Musk never had after the settlement sought pre-approval for a Tesla-related tweets.
But in Friday’s filing, Musk lawyers said the SEC had admitted during settlement talks that Tesla-related tweets were not subject to a broad pre-approval.
They also said that the tweet was not material because it simply restated old news, used in general, was “ambitious and optimistic,” and do not move Tesla share price.
“The main question is whether Musk met with Tesla’s policy, not whether the SEC is satisfied with Tesla’s policy of’ Musk ‘ s lawyers wrote. “Musk’s belief that the 7:15 tweet does not require pre-approval was correct.”
Musk has until March 26 to tell U. S. District Judge Alison Nathan, whether he wants to request a hearing on the contempt of the movement. The SEC has said that there is no oral hearing is not necessary.
The October settlement requires Musk to step down as Tesla’s chairman. Legal experts say that a contempt finding could subject him to a higher penalty, any further restrictions on his activities, or even removal of Tesla’s board of directors or as chief executive.
Tesla shares closed Friday down $9.49, or 3.5 percent, at $264.53. They are 32% below their peak set on Aug. 7, after “funding” tweet.
The case is SEC v Musk, the U. S. District Court for the Southern District of New York, No. 18-08865.
Reporting by Jonathan Stempel in New York, editing by G Crosse and Diane Craft