Elon Musk’s legal team responded late Monday, just before a deadline, to the Securities and Exchange Commission’s request to hold him in contempt of court over a tweet he made about Tesla’s production rate. In the filing submitted to a federal court in Manhattan, Musk’s lawyers say the tweet, posted last month, did not violate the terms of an agreement Musk made with the SEC.
“The Securities and Exchange Commission’s request that Musk be held in civil contempt for a single, immaterial tweet that dutifully complied with the Order and with Tesla’s ‘Senior Executives Communications Policy’ is incorrect on the facts and on the law,” the filing read. The policy refers to a court order that requires Musk to comply with Tesla’s pre-approval policy for communications that might contain material information.
The tweet in question was posted by Musk on February 20 and said Tesla would make about 500,000 cars this year. Musk followed it with a second tweet in the same thread that clarified Tesla’s annualized production rate at the end of 2019 would be around 500,000, or 10,000 cars a week, but deliveries were estimated to be about 400,000.
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.
— Elon Musk (@elonmusk) February 20, 2019
Musk’s lawyers write that he compiled with the policy, which allows him to “exercise his reasonable discretion in the first instance to determine whether his communications contain information requiring pre-approval,” but then posted the clarification after speaking with Tesla’s disclosure counsel. His lawyers claim this “underscore[s] his diligence” in complying with the SEC settlement, adding that Tesla’s projected production and rates of production for 2019 had already been “publicly discussed in multiple documents and discussed at length in an earnings call.”
Musk ran afoul of the SEC in August after tweeting that he had secured funding to take the company private. The SEC filed a complaint alleging securities fraud after Musk and Tesla’s board rejected an earlier attempt at an agreement. As part of a settlement reached in October, Musk was allowed to remain Tesla’s CEO, but had to step down as board chair. The SEC also fined Musk and Tesla $20 million each and stipulated that Tesla had to exercise disclosure controls and procedures over Musk’s tweets.
In today’s court filing, Musk’s lawyers wrote that Musk, who just before the settlement in October called the SEC “the Shortseller Enrichment Commission” in a tweet, has since followed the settlement’s terms closely and “dramatically reduced his volume of tweets generally and regarding Tesla in particular.”
“This self-censorship,” they added, “is reflective of his commitment to adhering to the Order and avoiding unnecessary disputes with the SEC.”