SEC asks judge to hold Tesla’s Musk in contempt over tweet

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The US Securities and Exchange Commission has asked a judge to find Tesla chief executive Elon Musk in contempt of court for failing to abide by a pledge not to tweet potentially market-moving information without approval from the company’s top lawyer.

Mr Musk’s latest legal jeopardy comes six days after he posted on Twitter that Tesla would produce 500,000 cars this year. More than four hours later, he tweeted again to say that he had meant to say Tesla would hit a weekly production rate equal to an annualised 500,000 by the end of 2019. 

But the securities regulator has claimed the first tweet contravened a legal settlement that Mr Musk and the company agreed to last October, to resolve a fraud charge stemming from a “false and misleading” claim from Mr Musk that he was close to a buyout of the company.

He would have been in contempt even if he had not made a slip in the tweet, since the information he was trying to give — contained in the second tweet — amounted to new information, the SEC said.

The settlement called for all written communication from Mr Musk that was directed at shareholders, including tweets, to be vetted first by Tesla’s general counsel.

According to an SEC complaint filed late on Monday in the federal court in Manhattan, Mr Musk had told the regulators that he did not get approval before sending the first tweet, prompting a Tesla lawyer to contact him and the resulting second tweet. 

Dane Butswinkas, Tesla’s general counsel, resigned unexpectedly on February 20 after only two months at the company. The resignation came the day after Mr Musk’s unauthorised tweets, and the day the SEC says it contacted the company questioning the public disclosures. The reason for Mr Butswinkas’s departure was not disclosed, with Tesla saying only that he was returning to the Washington DC law firm where he had previously worked.

Shares in Tesla were down almost 5 per cent to $286 each in after-hours trading on Monday after the SEC filing became public.

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