US securities regulator: Musk’s contempt defense ‘borders on the ridiculous’

The Securities and Exchange Commission said Elon Musk’s argument that tweeting about car production forecasts on February 19 was not material information was nearly ridiculous. (AP)
Updated 19 March 2019

US securities regulator: Musk’s contempt defense ‘borders on the ridiculous’

  • SEC lawyers: Elon Musk had not had a single tweet approved by a company lawyer, violating a requirement of a court-approved settlement order
  • ‘His interpretation is inconsistent with the plain terms of this court’s order and renders its pre-approval requirement meaningless’

DETROIT: US securities regulators countered Tesla CEO Elon Musk’s contempt-of-court defense Monday night, writing in court papers that he brazenly disregarded a federal judge’s order and that one of his arguments “borders on the ridiculous.”
Lawyers for the Securities and Exchange Commission, in a response to Musk, wrote that when the contempt motion was filed in February, Musk had not had a single tweet approved by a company lawyer, violating a requirement of a court-approved settlement order.
The October securities fraud settlement stemmed from tweets by Musk in August about having the money to take Tesla private at $420 per share. But Musk didn’t have the funding secured. Tesla and Musk each had to pay $20 million in fines and agree to governance changes that included Musk’s removal as chairman.
SEC lawyers led by Cheryl Crumpton wrote in a response to Musk’s defense that he interprets the settlement order as not requiring pre-approval unless Musk decides the tweets are meaningful to investors. The agency said Musk’s argument that tweeting about car production forecasts on Feb. 19 wasn’t material information is nearly ridiculous. “His interpretation is inconsistent with the plain terms of this court’s order and renders its pre-approval requirement meaningless,” the lawyers wrote.
US District Judge Alison Nathan in Manhattan will decide if Musk is in contempt and whether he should be punished. The SEC said no hearing is necessary on the matter “because there appear to be no disputed issues of material fact.”
Musk’s lawyers wrote last week that the Feb. 19 tweet merely restated previously approved disclosures on electric car production volumes. They wrote that the tweet, which was published after the markets closed, neither revealed material information, nor altered the mix of data available to investors.
The lawyers also accused the Securities and Exchange Commission of censorship and of violating Musk’s First Amendment rights by imposing a prior restraint on his speech.
But the SEC lawyers wrote that submitting statements for approval does not mean Musk is prohibited from speaking. “As long as a statement submitted for pre-approval is not false or misleading, Tesla would presumably approve its publication without prior restraint on Musk,” they wrote. The SEC also wrote that Musk waived any First Amendment challenge to the order when he agreed to it.
Musk’s lawyers also argued that the SEC’s motion for contempt is an over-reach that exceeds its authority. But the SEC said enforcement of the order is up to the judge, who has broad powers to enforce court orders.
Monday’s filing said the Feb. 19 tweet was different from prior public disclosures by the company. Also, Musk has regularly published tweets with “substantive information” about the company and its business, the SEC contended.
Musk’s 13-word Feb. 19 tweet said that Tesla would produce around 500,000 vehicles this year, but it wasn’t approved by the company’s “disclosure counsel,” the SEC has said.
The lawyer quickly realized it and summoned Musk to the company’s Fremont, California, factory to help write a correction. The company would make vehicles at a rate of 500,000 per year, but it wouldn’t produce a half-million in 2019.
Musk’s response by former Enron prosecutor John C. Hueston of Newport Beach, California, said that the settlement allows Musk “reasonable discretion” to determine if his communications would require the lawyer’s approval. In the case of the Feb. 19 tweet, Musk determined that it did not.
Legal experts say it’s unlikely that Musk will be punished severely, but the commission wants to get on the record that Musk violated the terms, to prepare for any future violations.
The tweet was posted and corrected after US markets had closed, but experts say regulators don’t care much about that because stocks are traded nearly around the clock. Tesla’s stock rose by just $1.10, or less than 1 percent, the next day.


Virus pressure tests Saudi Arabia reforms as Aramco has Forbes debut

Updated 28 May 2020

Virus pressure tests Saudi Arabia reforms as Aramco has Forbes debut

  • ‘In terms of profits, the Saudi companies have done well. We will see more companies rising in the next few years

RIYADH: Saudi companies such as oil giant Aramco are displaying resilience in the face of the coronavirus pandemic because of reforms introduced before its arrival, say analysts.

The world’s largest oil company has become emblematic of wider corporate reforms triggered by the Saudi Vision 2030 blueprint for social and economic change.

Saudi Aramco this month appeared in the top five of the Forbes Global 2000 list, which ranks the world’s 2000 largest companies.

It comes as the world’s most profitable company reported profits on $88.2 billion last year.

This year’s rankings arrive amid a global pandemic which has devastated the earnings of some companies, improved the position of others and tested the resilience of all.

It has also shone a spotlight on the ability of the the Kingdom’s top companies to withstand the twin shock of the COVID-19 lockdown and the collapse of oil prices.

Saudi Aramco debuted on the prestigious Forbes list after completing the world’s largest initial public offering last year.

The rankings are based on a combination of sales, profits, market capitalization and assets. Three of the top five companies on the list are from China, including Industrial and Commercial Bank of China in the top spot for the eighth straight year with more than $4.3 trillion in assets.

Forbes noted that many of the companies on its list have come through a particularly difficult first quarter as a result of the COVID-19 pandemic, or what it describes as “The Great Cessation.”

“Many companies and organizations have faced difficulties in managing and mitigating the impact of COVID-19 crisis. However, there are some companies that have prepared well and put in action plans to avoid this crisis with the least damage,” said Fahad Alfaifi, a Saudi-based strategy and business planning consultant.

The pandemic has come at a time of historic change in the Kingdom’s corporate landscape driven by economic reforms which form a major part of the Vision 2030 agenda. This aims to reduce the country’s reliance on oil revenues and stimulate investment in sectors of the economy that create new jobs for a youthful population.

This backdrop has meant many companies in the Kingdom were already changing the way they did business before the arrival of the pandemic and the collapse of oil prices created new challenges.

Last year’s annual Global Competitiveness Report, issued by the World Economic Forum, placed the Kingdom third among G20 counties and 11th globally

in terms of IT governance which rates a country’s ability to adapt digital technologies such as e-commerce and financial technology.

Such technology skills are becoming increasingly important for economies as they to re-calibrate and adapt to the post-pandemic world.

Nasser Al-Qarawee, the director of the Saudi Study and Research Center, attributed the success of some Saudi companies to the great achievements made by the private sector lately and predicted that more Saudi companies would eventually join Aramco on the Forbes list.

“The national economy has seen enormous improvements and development in terms of laws and legislation that have helped reduce restrictions and bureaucracy, while the government has worked at the same time on reducing dependency on oil. Vision 2030 will further cement the Kingdom’s strong presence globally and make it have a larger influence on global decisions, not only economically but also politically.”

Tawfiq Al-Swailem, CEO of the Gulf Bureau for Research and Economic Consultations, said that many Saudi companies would emerge from the pandemic in a strong position.

“In terms of profits, the Saudi companies have done well, although the entire world is living through a state of ferocious economic war,” he said. “We will see more Saudi companies rising in the next few years.”