Speaker 1: Welcome to the Bloomberg Law Podcast. I'm June Grosso. Every
Speaker 1: day we bring you insight and analysis into the most
Speaker 1: important legal news of the day. You can find more
Speaker 1: episodes of the Bloomberg Law Podcast on Apple Podcasts, SoundCloud
Speaker 1: and on Bloomberg dot com slash podcasts. Elon Musk seems
Speaker 1: to have come out on top in his latest battle
Speaker 1: with the SEC over his tweeting. The SEC asked to
Speaker 1: Judge to find the testleas CEO in contempt of court
Speaker 1: for violating in October settlement over tweets. With a tweet
Speaker 1: in February and hearing on Thursday, Judge seemed to have
Speaker 1: kicked the conflict back to the parties, joining me as
Speaker 1: Peter Handing, professor at Wayne State University Law School. So,
Speaker 1: is this basically a punt where the judge says, you
Speaker 1: guys work this out, I have some more important work
Speaker 1: to do here. Well. Certainly judges much prefer, especially in
Speaker 1: civil cases, that the parties work it out among themselves.
Speaker 1: I think calling it a punt is probably the best
Speaker 1: way to describe it. That she has said, if you
Speaker 1: really want me to decide, you can force me to
Speaker 1: by not agreeing, But I think her very strong preference
Speaker 1: is that she doesn't want to hold Musk in contempt,
Speaker 1: nor does she want to smack down the SEC. So
Speaker 1: I think she's very much hoping that they will come
Speaker 1: up with some compromise that she can then sign off on.
Speaker 1: So it appears the SEC's reading of the agreement was
Speaker 1: too restrictive and Musk's reading would just undermine the agreement
Speaker 1: in full. So is it going to end up somewhere
Speaker 1: in the middle. Oh, I certainly suspect, and I think
Speaker 1: the key question is whether Elon Muski is willing to compromise, because, um,
Speaker 1: you know, he he's shown some rather substantial to steam
Speaker 1: for the SEC. But Kenny's attorneys convinced him that let's
Speaker 1: come up with something that essentially works as a fake
Speaker 1: saving device for both sides and then the judges. At
Speaker 1: least she signaled that she would be willing to sign
Speaker 1: off on that if the parties can't agree. So I
Speaker 1: think we'll see something maybe somewhere in the middle. I'm
Speaker 1: not sure who's going to get to crow about it,
Speaker 1: but certainly, um, I don't think we'll see major changes
Speaker 1: to the settlement agreement. So Musk's lawyers had argued in
Speaker 1: court filings that that he has curtailed his use of
Speaker 1: Twitter recently, but a review of his account shows he's
Speaker 1: tweeted more in March than any other month since June.
Speaker 1: But could it be that the people who follow him
Speaker 1: on Twitter no not to rely on his tweets. Does
Speaker 1: the SEC have more important things to go after than this, Well,
Speaker 1: I certainly think the SEC wanted to send a message um,
Speaker 1: and especially you know they cited his interview on sixty
Speaker 1: Minutes UM in their contempt filing. I think what the
Speaker 1: SEC wants is at least some acknowledgement that that settlement
Speaker 1: agreement had some teeth to it, beyond the twenty million
Speaker 1: dollars that both Tesla and must paid. I think they
Speaker 1: want to see that Twitter is not just going to
Speaker 1: be a way for him to communicate anything that he
Speaker 1: feels like. And so what their goal is I suspect
Speaker 1: is to get an adult in the room to be
Speaker 1: able to look at the tweets. And that may be
Speaker 1: the compromise they come up with that before he tweets,
Speaker 1: he gets someone to review it in advance, although you know,
Speaker 1: you wonder whether he would be willing to do that.
Speaker 1: I thought he already had a so called Twitter sitter. Well,
Speaker 1: he has something of a Twitter sitter, although in the
Speaker 1: settlement agreement it's only when he's going to disclose what's
Speaker 1: called material and from nation, in other words, information an
Speaker 1: investor would consider important. Um, that's when he has to
Speaker 1: have it reviewed. But for his other things, if he
Speaker 1: wants to comment on the latest full moon, he could
Speaker 1: probably do that. I expect the SEC is hopeful that um,
Speaker 1: he might start to cut back on his Twitter use,
Speaker 1: and one way to do that would be to get
Speaker 1: someone else in there to review it. So you may
Speaker 1: have to get a full time Twitter center. Now. Could
Speaker 1: an agreement possibly include a scale of fines escalating fines
Speaker 1: and we've talked before about our fines really useful when
Speaker 1: you're facing people with so much money. Well, that's certainly
Speaker 1: the big question that um, you know, I mean, if
Speaker 1: the first fine we're fifty or a hundred thousand dollars
Speaker 1: um for a billionaire like Elon Musk, that's more or
Speaker 1: less tip money. Um, And is that even going to
Speaker 1: get his attention? Maybe the SEC comes up with some
Speaker 1: type of schedule, of course, though that would likely require
Speaker 1: them to go to the judge to get her judge
Speaker 1: Nathan to impose a fine. And so I'm not sure
Speaker 1: how elaborate they want to be here. I suspect that
Speaker 1: the SEC's bigger goal is just to try to get
Speaker 1: him not to tweet about the company as much as
Speaker 1: he had, or at least be a bit more restrained
Speaker 1: in that you could put fines in there. But you know,
Speaker 1: is a billionaire going to notice a fine that's listed
Speaker 1: in the thousands of dollars? I think the answer to
Speaker 1: that is no. And Um, as far as the Department
Speaker 1: of Justice, it's investigation of Musk and Tesla, where does
Speaker 1: that stand? Well, we haven't heard much about that lately.
Speaker 1: They were looking at the company's disclosures with regard are
Speaker 1: to their production. UM. That's an area typically where the
Speaker 1: Justice Department defers more to the SEC because it's a
Speaker 1: corporate disclosure issue. UM. I question whether we'll see anything
Speaker 1: come out of the Justice Department's investigation because that's not
Speaker 1: an easy case to make. I mean that companies make
Speaker 1: estimates all the time, and a lot of times they're wrong,
Speaker 1: and so the companies are allowed to make mistakes and
Speaker 1: be able to say things unless you're intentionally misleading investors,
Speaker 1: and my bed is Tesla was not trying to mislead investors.
Speaker 1: Elon Musk is simply pumping up Tesla and saying, Gee,
Speaker 1: what a great company we are. Well, I would like
Speaker 1: to be at the meeting the judge ordered on. The
Speaker 1: judge ordered that must meet with SEC officials for at
Speaker 1: least one hour within the next two weeks. And considering
Speaker 1: all the things he has said, all the negative things
Speaker 1: he said about the SEC, what might that meeting be? Like, Peter, Well,
Speaker 1: you know, you think back to your elementary school or
Speaker 1: high school days when you were called It's a long
Speaker 1: time to think back. Okay, well, I know it's a
Speaker 1: long time for me too. But it's essentially he's being
Speaker 1: sent to the principal's office, um, and they're gonna have
Speaker 1: to sit down and work something out. He's gonna have
Speaker 1: his lawyers with him. Uh So I expect we we
Speaker 1: may well see a bit more circumspect Elon Musk, at
Speaker 1: least for a little while. UM will run out. Long term.
Speaker 1: I think he enjoys having his twenty plus million followers
Speaker 1: on Twitter too much to be able to really restrain
Speaker 1: himself from saying things, and he likes the publicity, and
Speaker 1: apparently he obviously we would have heard about it if
Speaker 1: he was disrespectful in any way in the courtroom yesterday.
Speaker 1: So he must be at least behaving himself in that
Speaker 1: regard certainly, and I expect his lawyers had a brief
Speaker 1: discussion with him, saying, you had better be careful in
Speaker 1: front of a federal judge. If you do anything to
Speaker 1: mouth off, that could be disastrous for you with the sec.
Speaker 1: You know, maybe he can be a little bit more lippy.
Speaker 1: All right, Thanks so much, Peter. This will continue on
Speaker 1: I can guarantee that that's Peter Handing, a professor at
Speaker 1: Wayne State University Law School. Thanks for listening to the
Speaker 1: Bloomberg Law Podcast. You can subscribe and listen to the
Speaker 1: show on Apple Podcasts, SoundCloud, and on bloomberg dot com
Speaker 1: slash podcast. I'm June Brosso. This is Bloomberg