Jon Brodkin
2023-10-06 12:38:17
arstechnica.com
The US Securities and Exchange Commission sued Elon Musk yesterday, alleging that he refuses to appear for testimony in an investigation into whether he violated federal law with his purchases of Twitter stock. The SEC asked a federal court to force Musk to testify “as required by the investigative subpoena.”
“The subpoena with which Musk failed to comply relates to an ongoing nonpublic investigation by the SEC regarding whether, among other things, Musk violated various provisions of the federal securities laws in connection with (1) his 2022 purchases of Twitter stock, and (2) his 2022 statements and SEC filings relating to Twitter,” the SEC alleged in its lawsuit in US District Court for the Northern District of California.
The SEC told the court it “seeks Musk’s testimony to obtain information not already in the SEC’s possession that is relevant to its lawful investigation. The SEC has followed all appropriate administrative steps required in seeking Musk’s testimony. In the face of Musk’s blatant refusal to comply with the SEC’s subpoena, the SEC now asks the Court to intervene and compel Musk’s compliance.”
The SEC began its investigation in April 2022 after Musk acquired a 9 percent stake in Twitter and failed to disclose it within 10 days as required under US law. A separate, ongoing class-action lawsuit alleges that Musk’s late disclosure caused investors to sell Twitter stock at artificially low prices. Musk’s stock purchases occurred shortly before he struck a deal to buy Twitter outright.
Musk calls for regulators to be punished
The SEC said its “investigation pertains to considerably more than the timing and substance of a particular SEC filing; it also relates to all of Musk’s purchases of Twitter stock in 2022 and his 2022 statements and SEC filings.” Musk testified twice last year but objected to a third round of testimony this year, claiming that the SEC is using its subpoena power to “harass” him, according to the lawsuit.
“None of Musk’s objections has any legal validity, and he has no justifiable excuse for his non-compliance with the SEC’s subpoena,” the SEC said.
Musk has a long history of fighting with the SEC. In response to a post about the new SEC lawsuit, Musk yesterday called for an overhaul of the SEC and “punitive action” against regulators. “A comprehensive overhaul of these agencies is sorely needed, along with a commission to take punitive action against those individuals who have abused their regulatory power for personal and political gain. Can’t wait for this to happen,” Musk wrote.
Musk failed to appear for testimony on September 15, despite previously agreeing to appear on that date, the SEC said. Two days before the scheduled testimony, “Musk abruptly notified the SEC staff that he would not appear. Musk attempted to justify his refusal to comply with the subpoena by raising, for the first time, several spurious objections, including an objection to San Francisco as an appropriate testimony location,” the SEC lawsuit said.
Musk allegedly complained about the San Francisco location by pointing out that he does not live there. The SEC said it offered to conduct the testimony at any of its 11 offices across the US:
Notwithstanding the specious nature of Musk’s untimely objections, the SEC staff attempted to negotiate in good faith with Musk to find an alternative date and location for his testimony. The SEC staff offered to conduct Musk’s testimony at the SEC’s Fort Worth, Texas office (the closest SEC office to Musk’s current personal residence) or any other of the Commission’s offices, and proposed multiple dates in October and November 2023. These good faith efforts were met with Musk’s blanket refusal to appear for testimony.
On September 24, “Musk’s counsel responded by informing the SEC that Musk would not appear for testimony in any location,” the SEC said. Musk’s refusal to testify “is hindering and delaying the SEC staff’s investigation to determine whether violations of the federal securities laws have occurred,” the agency said.