Blog Musk Settles SEC Fraud Charges, Will Step Down as Tesla’s Chairman

Tesla Chief Executive Elon Musk will give up his chairman title under the terms of a settlement with the Securities and Exchange Commission related to fraud charges, according to a release.

Musk and Tesla have agreed to settle the charges against them without admitting or denying the SEC’s allegations. Among other relief, the settlements require that:



Musk will step down as Tesla’s Chairman and be replaced by an independent Chairman. Musk will be ineligible to be re-elected Chairman for three years;

Tesla will appoint a total of two new independent directors to its board;

Tesla will establish a new committee of independent directors and put in place additional controls and procedures to oversee Musk’s communications;

Musk and Tesla will each pay a separate $20 million penalty. The $40 million in penalties will be distributed to harmed investors under a court-approved process.



“The total package of remedies and relief announced today are specifically designed to address the misconduct at issue by strengthening Tesla’s corporate governance and oversight in order to protect investors,” Stephanie Avakian, Co-Director of the SEC’s Enforcement Division, said in a release.

According to the SEC’s complaint against him, Musk tweeted on August 7, 2018 that he could take Tesla private at $420 per share — a substantial premium to its trading price at the time — that funding for the transaction had been secured, and that the only remaining uncertainty was a shareholder vote. The SEC’s complaint alleged that, in truth, Musk knew that the potential transaction was uncertain and subject to numerous contingencies. Musk had not discussed specific deal terms, including price, with any potential financing partners, and his statements about the possible transaction lacked an adequate basis in fact. According to the SEC’s complaint, Musk’s misleading tweets caused Tesla’s stock price to jump by over six percent on August 7, and led to significant market disruption.

The settlement is subject to court approval.

 

[sandpiper]

Your silly insults are not welcome; I hereby return them to you in triplicate. It's standard operating procedure for the big money to have a "front man" who represents them. Such was the case with John D. Rockefeller, Andrew Carnegie, and Bill Gates. Where do you think the money came from to monopolize oil, steel, and the computer business? It's an old trick. You need to bone up on history, and I don't mean the kind taught at the university level. The truth is hidden within layers of lies, much like an onion. I suppose you think that this is a "free country"; it's not. It was incorporated by the British Empire as a result of the American Civil War, which was financed on both sides by British banksters. Nothing new under the sun. I do think that Mr. Musk should be removed from his position of authority. That may have been the plan all along. We'll never know.

Meanwhile, I'm thoroughly impressed with the achievements of Tesla. I just took delivery of my Model III, and the fit and finish are impeccable, regardless of all the yowling and meowling about such things. It's smooth and silent. The features and engineering are very, very impressive. I look forward to the day when they link these cars with the SpaceX satellite system, not to mention the tunneling systems they have in mind.

The problem with such conspiracy theories is not that people are above doing such things. They’re not. It’s that people aren’t nearly smart enough to pull it off.

 

[dhanson865]

But isn't Tesla desperate for cash at the moment?

No, they have tons of cash on hand (Billions of dollars). They are just concerned about showing profitability on a quarterly basis using Generally Accepted Accounting Principles - (GAAP).

That's not about being short on cash, that's about keeping it flowing in and out in reasonable ratios.

Tesla ended the second quarter with $2.78 billion in cash after spending $610 million in capital expenses

$20 million from Tesla, $20 million from Elon. Compare that to what they have to work with.

They likely decided the $20 million from Tesla would be cheaper than the money they would spend on lawyers to fight it.

 

[JeffC]

Have you visited the Investment threads on this board? Based on the discussion there, apparently everything in the known universe affects the stock price.

To a degree that's almost true. Which is why companies usually are very careful about what they say. Musk could be a bit more careful in what he says. I say that as a strong supporter.

 

[TheTalkingMule]

Lame.

 

[Barklikeadog]

gonna be fun watching how this independent filter goes

 

[Xenoilphobe]

This is not exactly accurate, The CEO is like U.S. President — in charge of how the company / executive branch of the federal government is run. The Board is like Congress — it has the power to remove the CEO / President, and you need its approval for major projects.

The Board only meets once every month or two months, and isn’t directly involved with the factory.

So the board is useless, like Congress?

 

[Xenoilphobe]

This is best read with the Twilight Zone music playing in the background.

 

[ricebucket]

So the board is useless, like Congress?

The board is absolutely not useless in terms of reining in an out of control CEO. Without control of the new independent board, Elon must be a lot more cautious as he can now be more easily replaced as CEO.

I think this is a good reality check for him. And it could have turned out a lot worse. He really needs to get schooled on the role of an officer at a public company.

 

[Xenoilphobe]

The board is absolutely not useless in terms of reining in an out of control CEO. Without control of the new independent board, Elon must be a lot more cautious as he can now be more easily replaced as CEO.

I think this is a good reality check for him. And it could have turned out a lot worse. He really needs to get schooled on the role of an officer at a public company.

I agree, he needs a mentor.

Not so aligned with the $40M fine/tax over a stupid tweet. If this were someone else in public office the national debt would be $22 trillion.

 

[JeffC]

So the board is useless, like Congress?

Congress makes the laws. President signs or vetos them. Courts interpret them. It's a team sport.

Neither the President nor courts make the laws (unless you believe in "legislating from the bench", i.e., courts changing laws to what's popular as opposed to what's actually written in the laws, which I most vehemently do not). Neither Congress nor the President interpret them. Neither Congress nor the courts execute the laws.


Totally agree with @ricebucket . A board has a duty to both help set the direction of the company and control the CEO. Tesla's board was too much in Elon's pocket (especially with him as chairman of the board, friends and family on the board, etc.) and he got a bit too much of a free pass. He needs to behave a bit more responsibly as CEO, in particular the taking company private tweets, etc.

The SEC settlement terms are actually very wise in this regard. Two more independent directors and a different Chairman may help teach Elon to behave better. I am 100% on the side of Elon, Tesla, SpaceX, etc., and want them to succeed wildly.

I hope the entire process improves as a result, and expect it may. Depends who they add to the board and who is Chairman. FFS, get someone good.

 

[JeffC]

I agree, he needs a mentor.

Not so aligned with the $40M fine/tax over a stupid tweet. If this were someone else in public office the national debt would be $22 trillion.

$40M is pocket change for them, but enough to get attention.

Vastly more important is the changes to the board, and hopefully careful improvements in Elon's behavior.

I 100% support Tesla's stated mission and Elon.

 

[Garlan Garner]

Congress makes the laws. President signs or vetos them. Courts interpret them. It's a team sport.

Neither the President nor courts make the laws (unless you believe in "legislating from the bench", i.e., courts changing laws to what's popular as opposed to what's actually written in the laws, which I most vehemently do not). Neither Congress nor the President interpret them. Neither Congress nor the courts execute the laws.


Totally agree with @ricebucket . A board has a duty to both help set the direction of the company and control the CEO. Tesla's board was too much in Elon's pocket (especially with him as chairman of the board, friends and family on the board, etc.) and he got a bit too much of a free pass. He needs to behave a bit more responsibly as CEO, in particular the taking company private tweets, etc.

The SEC settlement terms are actually very wise in this regard. Two more independent directors and a different Chairman may help teach Elon to behave better. I am 100% on the side of Elon, Tesla, SpaceX, etc., and want them to succeed wildly.

I hope the entire process improves as a result, and expect it may. Depends who they add to the board and who is Chairman. FFS, get someone good.

Why does everyone want a cookie cutter Chairman of the board?

Lets see.....who is the chairman of the board for Ford? Oh yeah....I know. William Ford Jr. Did anyone know that? Nope....and everyone is happy with him I suppose. He's cookie cutter.
He spends all 32 weeks of his vacation away from the company....but everyone is happy.
He gets paid a boat load of money while at the same time...….Ford is going to stop selling all of its cars and just about only sell the F150 truck.....but everyone is happy.
Ford's stock price can't seem to get higher than $10 but everyone is happy.

You guys would probably be elated to swap William Ford Jr. with Elon because he doesn't tweet and he doesn't say anything about anything.


Is anything standard about Elon?

Elon is a standard genius.
He doesn't seem to be concerned about how much money he makes.
He's a multibillionaire that sleeps at his job site.
He's the only board member / CEO that exists that actually comes up with product technology himself.
He's the only genius that has a tremendous amount of social skills.
He hangs out with common folks such as myself and doesn't look down on anyone because of their financial status.
He sleeps on the floor of the factory in order to not have to waste time traveling to work in the morning.
He has allowed anyone and everyone to suggest improvements and criticism through twitter. There have been a tremendous amount of updates and software improvements through twitter.

ONE TWEET out of a thousand.....and he gets punished. My opinion.....I'm a stock holder and I don't care. I'll take a thousand improvements on my Tesla for every single tweet that affects my stocks price. You shouldn't cage a genius such as this and treat him as though he is a standard cookie cutter person. Leave him alone.....let him be who he is.

Einstein failed math because the teacher didn't understand what he was doing. Einstein didn't provide his teacher with cookie cutter math. He once corrected his teacher on evening on a math problem by writing a book for the class to study math with. Teacher got mad and failed Einstein. Einstein quit school and went mad for a while.

I surely hope Elon doesn't go away and take all of his toys with him. I sincerely hope he has someone to encourage him at this time as he has done some amazing things concerning curbing pollution and overall technology.


All I can say is - Lets watch the "cookie cutter" chairman of the board coming in.....and see what now happens to Tesla's "updates" and suggestion improvements via twitter.....such as version 9. Sadly....its going away or is going to be drastically reduced.

Have the shorters won with the help of the SEC?

 

[cpa]

Have the shorters won with the help of the SEC?

No.

I do not share this doom and gloom forecast for Tesla and Elon Musk. I do agree that he needed to be reined in. Musk and Tesla have made promises in the past that while true, did not materialize in the time frame that they were promised or are still on the drawing board. While I do not have the stock prices handy for the past four years, it is quite possible that the market reacted favorably to these promises only to drop down once delays and problems were announced. These in and of themselves likely did not rise to the level worthy of investigation by the SEC, but they nevertheless were problematic and perhaps indicative of the management style of Tesla, Inc., led by Elon Musk.

However, Elon Musk went too far with his twitter comment, and that pissed off a lot of people when it proved to be essentially a discussion outlined on a cocktail napkin. He could have made his life and everyone's life better if his tweet were posed differently. Perhaps something like, "All this noise coming from different places makes it difficult for us at Tesla Motors to focus on our mission. It would be so wonderful if we could take Tesla private and become removed from the public spotlight and stock market."

I think Silicon Valley has a lot of capable, forward-thinking, and seasoned individuals who would be fantastic to become a board member and chairman. These people will share Musk's vision and enthusiasm.

 

[Garlan Garner]

He could have made his life and everyone's life better if his tweet were posed differently. Perhaps something like, "All this noise coming from different places makes it difficult for us at Tesla Motors to focus on our mission. It would be so wonderful if we could take Tesla private and become removed from the public spotlight and stock market."

That would have been a cookie cutter statement. Elon is NOT cookie cutter material. That was my whole point.

When you are breaking into an industry such as "automotive" ( something that hasn't been done for a long long time) there are going to be a TON of people who get angry. You can't worry about pleasing everyone....except in this case.....he got caught up with an unforgiving world that controls this area of behavior. I really don't care how many people got upset.

It doesn't matter anymore.

It wasn't doom and gloom.




Oh by the way everyone.....ignore PA_85's constant disagreements. He disagrees with every one of my posts no matter where I post. There is nothing that can be done about that in TMC.

 

[Garlan Garner]

Question:


Is this kinda thing over?

This was 99.9% of what his tweets were like. Sounds kinda out of control doesn't it? <------extremely sarcastic.

Is this kinda thing over? ( critics....please respond ). I've got thousands just like this.

 

[JeffC]

Why does everyone want a cookie cutter Chairman of the board?

Lets see.....who is the chairman of the board for Ford? Oh yeah....I know. William Ford Jr. Did anyone know that? Nope....and everyone is happy with him I suppose. He's cookie cutter.
He spends all 32 weeks of his vacation away from the company....but everyone is happy.
He gets paid a boat load of money while at the same time...….Ford is going to stop selling all of its cars and just about only sell the F150 truck.....but everyone is happy.
Ford's stock price can't seem to get higher than $10 but everyone is happy.

You guys would probably be elated to swap William Ford Jr. with Elon because he doesn't tweet and he doesn't say anything about anything.


Is anything standard about Elon?

Elon is a standard genius.
He doesn't seem to be concerned about how much money he makes.
He's a multibillionaire that sleeps at his job site.
He's the only board member / CEO that exists that actually comes up with product technology himself.
He's the only genius that has a tremendous amount of social skills.
He hangs out with common folks such as myself and doesn't look down on anyone because of their financial status.
He sleeps on the floor of the factory in order to not have to waste time traveling to work in the morning.
He has allowed anyone and everyone to suggest improvements and criticism through twitter. There have been a tremendous amount of updates and software improvements through twitter.

ONE TWEET out of a thousand.....and he gets punished. My opinion.....I'm a stock holder and I don't care. I'll take a thousand improvements on my Tesla for every single tweet that affects my stocks price. You shouldn't cage a genius such as this and treat him as though he is a standard cookie cutter person. Leave him alone.....let him be who he is.

Einstein failed math because the teacher didn't understand what he was doing. Einstein didn't provide his teacher with cookie cutter math. He once corrected his teacher on evening on a math problem by writing a book for the class to study math with. Teacher got mad and failed Einstein. Einstein quit school and went mad for a while.

I surely hope Elon doesn't go away and take all of his toys with him. I sincerely hope he has someone to encourage him at this time as he has done some amazing things concerning curbing pollution and overall technology.


All I can say is - Lets watch the "cookie cutter" chairman of the board coming in.....and see what now happens to Tesla's "updates" and suggestion improvements via twitter.....such as version 9. Sadly....its going away or is going to be drastically reduced.

Have the shorters won with the help of the SEC?

Not asking for a cookie cutter chairman. Asking for a little wiser use of Twitter by Elon. Small changes, more maturity. A little bit wiser.

There are many excellent tech executives and board members who could help Tesla.

All potentially positive, not negative.

 

[Garlan Garner]

Not asking for a cookie cutter chairman. Asking for a little wiser use of Twitter by Elon. Small changes, more maturity. A little bit wiser.

There are many excellent tech executives and board members who could help Tesla.

All potentially positive, not negative.

But Jeff,

You are asking for exactly what has happened.

He uses Twitter in a tremendously wise way....for years upon years now. Do you mean perfection?




Oh by the way everyone.....ignore P85_DA's constant disagreements. He disagrees with every one of my posts no matter where I post. There is nothing that can be done about that in TMC. The mods don't care.

 

[Garlan Garner]

Proof.

by the way everyone.....ignore P85_DA's constant disagreements. He disagrees with every one of my posts no matter where I post. There is nothing that can be done about that in TMC. The mods don't care.

 

[strangecosmos]

Why does everyone want a cookie cutter Chairman of the board? ... You guys would probably be elated to swap William Ford Jr. with Elon because he doesn't tweet and he doesn't say anything about anything.

The Board, including Elon (who still has a seat, even after he steps down as Chair), will nominate a new Chair. The shareholders will vote to approve. So, it will be somebody the Board — including Elon — is happy with and the shareholders are happy.

The rest of the Board has supported Elon, and so have the shareholders. At the June shareholders meeting, 83.5% of shares voted to keep Elon on as Chair. So, both the Board and the shareholders would prefer Elon to be Chair. But since he can't be, we need to pick someone else.

It doesn't have to be someone "cookie cutter". It could be someone like Richard Branson (similar interests to Elon: Virgin Galactic and Virgin Hyperloop One), Reid Hoffman (former CEO of LinkedIn, a colleague of Elon's at PayPal), Eric Schmidt (former Chair of Google), or Bill Gates. One of the existing independent Board members could also be promoted to Chair. I made a thread about this.

 

[Garlan Garner]

The Board, including Elon (who still has a seat, even after he steps down as Chair), will nominate a new Chair. The shareholders will vote to approve. So, it will be somebody the Board — including Elon — is happy with and the shareholders are happy.

The rest of the Board has supported Elon, and so have the shareholders. At the June shareholders meeting, 83.5% of shares voted to keep Elon on as Chair. So, both the Board and the shareholders would prefer Elon to be Chair. But since he can't be, we need to pick someone else.

It doesn't have to be someone "cookie cutter". It could be someone like Richard Branson, Reid Hoffman, Eric Schmidt, or Bill Gates. One of the existing independent Board members could also be promoted to Chair. I made a thread about this.

Maybe...…

I have very little confidence in that though.



by the way everyone.....ignore P85_DA's constant disagreements. He disagrees with every one of my posts no matter where I post. There is nothing that can be done about that in TMC. The mods don't care.