1 00:00:03,480 --> 00:00:07,560 Speaker 1: Welcome to the Bloomberg Law Podcast. I'm June Grosso. Every 2 00:00:07,640 --> 00:00:10,440 Speaker 1: day we bring you insight and analysis into the most 3 00:00:10,480 --> 00:00:13,399 Speaker 1: important legal news of the day. You can find more 4 00:00:13,440 --> 00:00:18,040 Speaker 1: episodes of the Bloomberg Law Podcast on Apple Podcasts, SoundCloud 5 00:00:18,320 --> 00:00:22,840 Speaker 1: and on Bloomberg dot com slash podcasts. Elon Musk seems 6 00:00:22,880 --> 00:00:25,360 Speaker 1: to have come out on top in his latest battle 7 00:00:25,440 --> 00:00:28,880 Speaker 1: with the SEC over his tweeting. The SEC asked to 8 00:00:28,960 --> 00:00:31,800 Speaker 1: Judge to find the testleas CEO in contempt of court 9 00:00:31,920 --> 00:00:35,440 Speaker 1: for violating in October settlement over tweets. With a tweet 10 00:00:35,479 --> 00:00:38,519 Speaker 1: in February and hearing on Thursday, Judge seemed to have 11 00:00:38,600 --> 00:00:41,519 Speaker 1: kicked the conflict back to the parties, joining me as 12 00:00:41,560 --> 00:00:45,279 Speaker 1: Peter Handing, professor at Wayne State University Law School. So, 13 00:00:45,440 --> 00:00:48,680 Speaker 1: is this basically a punt where the judge says, you 14 00:00:48,800 --> 00:00:51,280 Speaker 1: guys work this out, I have some more important work 15 00:00:51,320 --> 00:00:56,480 Speaker 1: to do here. Well. Certainly judges much prefer, especially in 16 00:00:56,520 --> 00:00:59,880 Speaker 1: civil cases, that the parties work it out among themselves. 17 00:01:00,880 --> 00:01:04,120 Speaker 1: I think calling it a punt is probably the best 18 00:01:04,160 --> 00:01:07,480 Speaker 1: way to describe it. That she has said, if you 19 00:01:07,640 --> 00:01:10,360 Speaker 1: really want me to decide, you can force me to 20 00:01:10,880 --> 00:01:14,920 Speaker 1: by not agreeing, But I think her very strong preference 21 00:01:15,040 --> 00:01:18,720 Speaker 1: is that she doesn't want to hold Musk in contempt, 22 00:01:19,240 --> 00:01:22,760 Speaker 1: nor does she want to smack down the SEC. So 23 00:01:23,200 --> 00:01:25,600 Speaker 1: I think she's very much hoping that they will come 24 00:01:25,680 --> 00:01:28,920 Speaker 1: up with some compromise that she can then sign off on. 25 00:01:29,400 --> 00:01:32,960 Speaker 1: So it appears the SEC's reading of the agreement was 26 00:01:33,040 --> 00:01:37,880 Speaker 1: too restrictive and Musk's reading would just undermine the agreement 27 00:01:38,280 --> 00:01:40,440 Speaker 1: in full. So is it going to end up somewhere 28 00:01:40,480 --> 00:01:44,720 Speaker 1: in the middle. Oh, I certainly suspect, and I think 29 00:01:44,800 --> 00:01:52,440 Speaker 1: the key question is whether Elon Muski is willing to compromise, because, um, 30 00:01:52,480 --> 00:01:56,080 Speaker 1: you know, he he's shown some rather substantial to steam 31 00:01:56,560 --> 00:02:01,680 Speaker 1: for the SEC. But Kenny's attorneys convinced him that let's 32 00:02:01,720 --> 00:02:05,040 Speaker 1: come up with something that essentially works as a fake 33 00:02:05,120 --> 00:02:09,640 Speaker 1: saving device for both sides and then the judges. At 34 00:02:09,680 --> 00:02:12,800 Speaker 1: least she signaled that she would be willing to sign 35 00:02:12,919 --> 00:02:16,799 Speaker 1: off on that if the parties can't agree. So I 36 00:02:17,440 --> 00:02:20,560 Speaker 1: think we'll see something maybe somewhere in the middle. I'm 37 00:02:20,600 --> 00:02:23,200 Speaker 1: not sure who's going to get to crow about it, 38 00:02:23,240 --> 00:02:27,519 Speaker 1: but certainly, um, I don't think we'll see major changes 39 00:02:27,600 --> 00:02:31,320 Speaker 1: to the settlement agreement. So Musk's lawyers had argued in 40 00:02:31,400 --> 00:02:35,200 Speaker 1: court filings that that he has curtailed his use of 41 00:02:35,240 --> 00:02:38,040 Speaker 1: Twitter recently, but a review of his account shows he's 42 00:02:38,040 --> 00:02:41,200 Speaker 1: tweeted more in March than any other month since June. 43 00:02:41,720 --> 00:02:44,120 Speaker 1: But could it be that the people who follow him 44 00:02:44,160 --> 00:02:47,520 Speaker 1: on Twitter no not to rely on his tweets. Does 45 00:02:47,560 --> 00:02:52,480 Speaker 1: the SEC have more important things to go after than this, Well, 46 00:02:52,480 --> 00:02:56,760 Speaker 1: I certainly think the SEC wanted to send a message um, 47 00:02:57,520 --> 00:03:01,639 Speaker 1: and especially you know they cited his interview on sixty 48 00:03:01,680 --> 00:03:07,200 Speaker 1: Minutes UM in their contempt filing. I think what the 49 00:03:07,400 --> 00:03:12,240 Speaker 1: SEC wants is at least some acknowledgement that that settlement 50 00:03:12,280 --> 00:03:16,520 Speaker 1: agreement had some teeth to it, beyond the twenty million 51 00:03:16,560 --> 00:03:20,600 Speaker 1: dollars that both Tesla and must paid. I think they 52 00:03:20,720 --> 00:03:24,240 Speaker 1: want to see that Twitter is not just going to 53 00:03:24,280 --> 00:03:27,200 Speaker 1: be a way for him to communicate anything that he 54 00:03:27,280 --> 00:03:31,919 Speaker 1: feels like. And so what their goal is I suspect 55 00:03:32,120 --> 00:03:34,720 Speaker 1: is to get an adult in the room to be 56 00:03:34,760 --> 00:03:36,760 Speaker 1: able to look at the tweets. And that may be 57 00:03:36,920 --> 00:03:40,360 Speaker 1: the compromise they come up with that before he tweets, 58 00:03:40,360 --> 00:03:45,080 Speaker 1: he gets someone to review it in advance, although you know, 59 00:03:45,120 --> 00:03:47,360 Speaker 1: you wonder whether he would be willing to do that. 60 00:03:47,640 --> 00:03:51,440 Speaker 1: I thought he already had a so called Twitter sitter. Well, 61 00:03:51,480 --> 00:03:54,560 Speaker 1: he has something of a Twitter sitter, although in the 62 00:03:54,600 --> 00:03:58,680 Speaker 1: settlement agreement it's only when he's going to disclose what's 63 00:03:58,680 --> 00:04:02,160 Speaker 1: called material and from nation, in other words, information an 64 00:04:02,200 --> 00:04:06,880 Speaker 1: investor would consider important. Um, that's when he has to 65 00:04:06,920 --> 00:04:11,000 Speaker 1: have it reviewed. But for his other things, if he 66 00:04:11,080 --> 00:04:15,119 Speaker 1: wants to comment on the latest full moon, he could 67 00:04:15,240 --> 00:04:20,720 Speaker 1: probably do that. I expect the SEC is hopeful that um, 68 00:04:20,720 --> 00:04:23,200 Speaker 1: he might start to cut back on his Twitter use, 69 00:04:23,240 --> 00:04:24,960 Speaker 1: and one way to do that would be to get 70 00:04:25,040 --> 00:04:29,120 Speaker 1: someone else in there to review it. So you may 71 00:04:29,200 --> 00:04:33,479 Speaker 1: have to get a full time Twitter center. Now. Could 72 00:04:33,640 --> 00:04:38,200 Speaker 1: an agreement possibly include a scale of fines escalating fines 73 00:04:38,960 --> 00:04:42,240 Speaker 1: and we've talked before about our fines really useful when 74 00:04:42,279 --> 00:04:46,400 Speaker 1: you're facing people with so much money. Well, that's certainly 75 00:04:46,480 --> 00:04:49,800 Speaker 1: the big question that um, you know, I mean, if 76 00:04:50,160 --> 00:04:53,680 Speaker 1: the first fine we're fifty or a hundred thousand dollars 77 00:04:53,880 --> 00:04:58,000 Speaker 1: um for a billionaire like Elon Musk, that's more or 78 00:04:58,080 --> 00:05:01,039 Speaker 1: less tip money. Um, And is that even going to 79 00:05:01,080 --> 00:05:04,960 Speaker 1: get his attention? Maybe the SEC comes up with some 80 00:05:05,080 --> 00:05:09,159 Speaker 1: type of schedule, of course, though that would likely require 81 00:05:09,760 --> 00:05:12,839 Speaker 1: them to go to the judge to get her judge 82 00:05:12,920 --> 00:05:17,200 Speaker 1: Nathan to impose a fine. And so I'm not sure 83 00:05:17,240 --> 00:05:21,640 Speaker 1: how elaborate they want to be here. I suspect that 84 00:05:21,680 --> 00:05:25,880 Speaker 1: the SEC's bigger goal is just to try to get 85 00:05:26,000 --> 00:05:30,040 Speaker 1: him not to tweet about the company as much as 86 00:05:30,120 --> 00:05:33,039 Speaker 1: he had, or at least be a bit more restrained 87 00:05:33,080 --> 00:05:36,160 Speaker 1: in that you could put fines in there. But you know, 88 00:05:36,640 --> 00:05:40,200 Speaker 1: is a billionaire going to notice a fine that's listed 89 00:05:40,200 --> 00:05:42,800 Speaker 1: in the thousands of dollars? I think the answer to 90 00:05:42,880 --> 00:05:46,400 Speaker 1: that is no. And Um, as far as the Department 91 00:05:46,440 --> 00:05:52,360 Speaker 1: of Justice, it's investigation of Musk and Tesla, where does 92 00:05:52,400 --> 00:05:56,279 Speaker 1: that stand? Well, we haven't heard much about that lately. 93 00:05:56,320 --> 00:06:00,160 Speaker 1: They were looking at the company's disclosures with regard are 94 00:06:00,760 --> 00:06:05,960 Speaker 1: to their production. UM. That's an area typically where the 95 00:06:06,080 --> 00:06:10,200 Speaker 1: Justice Department defers more to the SEC because it's a 96 00:06:10,240 --> 00:06:16,359 Speaker 1: corporate disclosure issue. UM. I question whether we'll see anything 97 00:06:16,440 --> 00:06:21,720 Speaker 1: come out of the Justice Department's investigation because that's not 98 00:06:21,800 --> 00:06:24,400 Speaker 1: an easy case to make. I mean that companies make 99 00:06:24,480 --> 00:06:28,240 Speaker 1: estimates all the time, and a lot of times they're wrong, 100 00:06:28,600 --> 00:06:33,160 Speaker 1: and so the companies are allowed to make mistakes and 101 00:06:33,440 --> 00:06:37,760 Speaker 1: be able to say things unless you're intentionally misleading investors, 102 00:06:37,800 --> 00:06:42,160 Speaker 1: and my bed is Tesla was not trying to mislead investors. 103 00:06:42,160 --> 00:06:46,320 Speaker 1: Elon Musk is simply pumping up Tesla and saying, Gee, 104 00:06:46,320 --> 00:06:49,039 Speaker 1: what a great company we are. Well, I would like 105 00:06:49,120 --> 00:06:52,200 Speaker 1: to be at the meeting the judge ordered on. The 106 00:06:52,279 --> 00:06:55,640 Speaker 1: judge ordered that must meet with SEC officials for at 107 00:06:55,680 --> 00:06:59,000 Speaker 1: least one hour within the next two weeks. And considering 108 00:06:59,040 --> 00:07:01,559 Speaker 1: all the things he has said, all the negative things 109 00:07:01,600 --> 00:07:06,200 Speaker 1: he said about the SEC, what might that meeting be? Like, Peter, Well, 110 00:07:06,720 --> 00:07:11,000 Speaker 1: you know, you think back to your elementary school or 111 00:07:11,080 --> 00:07:13,880 Speaker 1: high school days when you were called It's a long 112 00:07:13,920 --> 00:07:16,360 Speaker 1: time to think back. Okay, well, I know it's a 113 00:07:16,400 --> 00:07:19,000 Speaker 1: long time for me too. But it's essentially he's being 114 00:07:19,040 --> 00:07:22,360 Speaker 1: sent to the principal's office, um, and they're gonna have 115 00:07:22,440 --> 00:07:25,200 Speaker 1: to sit down and work something out. He's gonna have 116 00:07:25,200 --> 00:07:28,200 Speaker 1: his lawyers with him. Uh So I expect we we 117 00:07:28,600 --> 00:07:33,320 Speaker 1: may well see a bit more circumspect Elon Musk, at 118 00:07:33,440 --> 00:07:38,400 Speaker 1: least for a little while. UM will run out. Long term. 119 00:07:39,280 --> 00:07:43,240 Speaker 1: I think he enjoys having his twenty plus million followers 120 00:07:43,240 --> 00:07:46,320 Speaker 1: on Twitter too much to be able to really restrain 121 00:07:46,440 --> 00:07:50,240 Speaker 1: himself from saying things, and he likes the publicity, and 122 00:07:50,400 --> 00:07:52,880 Speaker 1: apparently he obviously we would have heard about it if 123 00:07:52,920 --> 00:07:56,640 Speaker 1: he was disrespectful in any way in the courtroom yesterday. 124 00:07:56,840 --> 00:07:59,040 Speaker 1: So he must be at least behaving himself in that 125 00:07:59,080 --> 00:08:04,119 Speaker 1: regard certainly, and I expect his lawyers had a brief 126 00:08:04,160 --> 00:08:07,440 Speaker 1: discussion with him, saying, you had better be careful in 127 00:08:07,480 --> 00:08:10,640 Speaker 1: front of a federal judge. If you do anything to 128 00:08:10,720 --> 00:08:15,920 Speaker 1: mouth off, that could be disastrous for you with the sec. 129 00:08:16,840 --> 00:08:18,840 Speaker 1: You know, maybe he can be a little bit more lippy. 130 00:08:20,240 --> 00:08:23,640 Speaker 1: All right, Thanks so much, Peter. This will continue on 131 00:08:23,760 --> 00:08:26,120 Speaker 1: I can guarantee that that's Peter Handing, a professor at 132 00:08:26,120 --> 00:08:31,360 Speaker 1: Wayne State University Law School. Thanks for listening to the 133 00:08:31,400 --> 00:08:34,760 Speaker 1: Bloomberg Law Podcast. You can subscribe and listen to the 134 00:08:34,800 --> 00:08:38,720 Speaker 1: show on Apple Podcasts, SoundCloud, and on bloomberg dot com 135 00:08:38,800 --> 00:08:42,960 Speaker 1: slash podcast. I'm June Brosso. This is Bloomberg