CEO Elon Musk wants out of Tesla tweet jail. Lol, no, says SEC
Uncle Sam still wants lawyer to vet EV tycoon's meme emissions
Having been found not liable for securities fraud stemming from a 2018 tweet saying he had funding to take Tesla private, Elon Musk is trying yet again to get out of his "Twitter sitter" consent decree. America's financial watchdog, the Securities and Exchange Commission, is having none of it.
The consent decree is an agreement with the SEC signed by Musk and his team in 2019 that he will allow a securities lawyer to vet his tweets related to Tesla's financials, production numbers, and other sensitive info before he presses the blue send button.
That lawyer is supposed to stop the loudmouth SpaceX supremo from tweeting stuff about his automaker that might, perish the thought, mislead investors. That consent decree stemmed from an earlier settlement between the SEC and Musk over that 2018 funding tweet.
In a letter [PDF] to the SEC this week, Musk's lawyers argued that in light of the verdict from a separate class-action suit brought against Musk by shareholders, which cleared him of liability, the SEC lacked support for its tweet-vetting consent decree.
The verdict further justifies, Musk's lawyers asserted, "why the public interest in avoiding unconstitutional settlements easily subsumes the SEC's purported stake in the consent decree," and that it also means the "unconstitutional conditions doctrine" can be applied to relieve Musk of his legal obligations.
According to the billionaire's lawyers, the unconstitutional conditions doctrine "prohibits deals achieved 'through gimmickry, which converted a valid [settlement] into 'an out-and-out plan of extortion'."
The SEC didn't mince words in its response [PDF] to Musk's lawyers, saying "the verdict has no bearing" on the legitimacy of the consent decree, nor does it say anything "about the continuing public interest in a negotiated settlement term that does not preclude Musk from tweeting accurately about Tesla or other topics."
Beyond that, the SEC claimed that Musk doesn't have a leg to stand on, since he waived his right to challenge the consent agreement when he voluntarily agreed to it – twice.
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The appeal last year failed on similar grounds, district court judge Lewis Liman said, namely that Musk wasn't forced to enter into the consent decree, and instead did it "for [his] own strategic purposes … voluntarily, in order to secure the benefits thereof, including finality" in the SEC's original lawsuit against him for the 2018 tweet.
The consent decree stemmed from the $40 million settlement Musk paid in that case, which included conditions requiring him to step down as Tesla chairman and accept having a lawyer review all Tesla-related tweets.
"Musk cannot now seek to retract the agreement he knowingly and willingly entered by simply bemoaning that he felt like he had to agree to it at the time but now … wishes that he had not," Liman said last year.
Musk's attorneys have asked for oral arguments in the appeal, but it doesn't appear a date has been set. ®