The Securities and Exchange Commission submitted a letter to a federal judge on Friday responding to allegations by Tesla CEO Elon Musk that the agency had “broken promises” and engaged in a “pattern of conduct” amounting to harassment after an earlier settlement agreement.
In September 2018, the SEC charged Musk with making “false and misleading” statements to investors after he announced via Twitter that he had secured funding for a private buyout of Tesla at $420 a share. Following his tweets, Tesla stock went into a period of unusual volatility and the deal Musk alluded to never materialized.
Tesla, Musk and the SEC eventually struck a revised settlement agreement in 2019 to resolve the charges.
As part of the deal, Musk had to temporarily relinquish his role as chairman of Tesla’s board and to pay a $20 million fine individually. Tesla also had to pay a $20 million fine. Musk and Tesla agreed the celebrity-CEO would have the content of his social media posts approved by a securities law expert before publishing them on occasions when they contained material business information.
The $40 million they paid was supposed to be distributed to Tesla shareholders after that.
In a letter sent on behalf of Musk and Tesla to the court Thursday, attorney Alex Spiro suggested the SEC had been ignoring their duty to remit that $40 million to Tesla shareholders.
The SEC’s Stephen Buchholz replied Friday, saying the agency was actually making progress on that task, which was fairly complex. He noted that Tesla had never expressed any concern about this to the agency before and that SEC staff expect to submit a “proposed plan of distribution” to the court for approval by the end of March 2022.
Musk’s attorney, Spiro, also suggested that the SEC was not focused on remittance because it was too busy investigating and issuing more subpoenas to Tesla. The attorney wrote, “The SEC seems to be targeting Mr. Musk and Tesla for unrelenting investigation largely because Mr. Musk remains an outspoken critic of the government.”
Musk’s battles with regulators tend to be public and messy, occasionally including vulgar taunts. The CEO has expressed his displeasure with the SEC on Twitter on multiple occasions, including in October 2018 when he called the agency the “shortseller enrichment commission,” and in July 2020 when he wrote: “SEC, three letter acronym, middle word is Elon’s.”
Spiro also suggested that the SEC’s ongoing investigative activity seemed “calculated to chill” Musk’s First Amendment rights.
In a recent financial filing for the fourth-quarter of 2021, Tesla revealed that it had received a subpoena from the SEC late last year. The filings said: “On November 16, 2021, the SEC issued a subpoena to us seeking information on our governance processes around compliance with the SEC settlement, as amended.”
Friday’s SEC letter to the court argued that Tesla was not following proper procedures to challenge any subpoena the agency had issued as an independent regulator, aside from the court proceedings.