SEC Lawsuit Seeks To Remove Elon Musk As Tesla CEO Or Officer In Any Public Company

Originally published on September 28, 2018 8:28 pm
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AUDIE CORNISH, HOST:

Elon Musk, the co-founder and CEO of the electric car company Tesla, is brash, outspoken and seen by many as a quirky genius. Those who worry about the quirky part had new evidence recently when Musk smoked marijuana legally in California on a live Internet podcast with comedian Joe Rogan.

(SOUNDBITE OF PODCAST, "THE JOE ROGAN EXPERIENCE")

ELON MUSK: So is that a joint, or is it a cigar?

JOE ROGAN: No.

MUSK: OK.

ROGAN: It's marijuana...

MUSK: It's weed.

ROGAN: ...Inside of tobacco. You never had that?

MUSK: Yeah, I think I tried one once.

ROGAN: Come on, man.

MUSK: I mean, it's legal, right?

CORNISH: Now Musk's other public actions have landed him in trouble. The Securities and Exchange Commission is accusing him of securities fraud. This relates to a claim Musk made on Twitter about securing funding to take Tesla private. The SEC's lawsuit seeks to remove Musk as CEO or an officer of Tesla and to ban him as well from holding such posts at any public company. And that has implications for many people beyond Elon Musk. Reporter Max Chafkin of Bloomberg News told me about the SEC's allegations and why they're serious.

MAX CHAFKIN: Elon Musk in August surprised everyone with this tweet that he was going to buy the company for $420 per share. Now, that was kind of weird for a bunch of different reasons. Probably the biggest one is that it would have made this the biggest buyout in corporate history. And it was also weird because it was sort of immediately apparent that he hadn't really thought through it. The SEC takes a more sober view of sudden market-moving news.

CORNISH: Why does the SEC care?

CHAFKIN: Elon Musk said that funding was secured for this proposed buyout offer. And as far as the SEC is concerned, if you say that, you actually have to have the money to buy the company. And if you read the SEC's complaint, it looks like very clearly that he didn't and almost as if he - making up as he went along.

CORNISH: Is Elon Musk fighting this lawsuit? I know the company board is behind him.

CHAFKIN: Yeah, he's absolutely fighting. They - he released a statement saying that he was disappointed, he didn't feel like he acted in bad faith. And you can expect that the defense is going to be that he was on Twitter. He wasn't saying this in the most official capacity possible. He was just sort of tweeting what he thought and that people shouldn't have taken this as seriously. But the thing is the investors did. The stock went way up. And now the SEC is unsurprisingly looking into this.

CORNISH: Is this a dilemma for the SEC? I mean, they're saying they want him banned from running any kind of public company - I mean, not just running it, being an officer on any kind of company. What are they trying to accomplish here?

CHAFKIN: This is sort of a standard thing that the SEC will threaten in cases like this. What makes it a bit unusual is that it's unclear that removing Elon Musk from Tesla would leave much left of it. He is sort of the singular force who is seen as the guy who has made this happen. So if you were to take him away from the head of the company...

CORNISH: Right. He's the head engineer, like, the head marketer (laughter).

CHAFKIN: The guy who designed the car. In a way, that is - it's probably more than anywhere else in business - I mean, Facebook and Mark Zuckerberg is probably the place where it comes the closest. So if they get rid of him, you don't know what's left.

CORNISH: He's also, as you said, I mean, basically a titan in the automotive industry. Does this have broader implications going forward?

CHAFKIN: Well, the implications are that there are lots of other car companies who are trying to race to make their own electric cars. They've sort of seen what Elon Musk and Tesla have achieved. They've seen that customers like this. And they're coming out with these things. And we're about to see lots and lots of them over the next couple of years. So they're going to see this as an opportunity. And so it may not halt the progression of electric cars. It might just cause some people to buy different electric cars.

CORNISH: Reporter Max Chafkin - he's been covering this story for Bloomberg News. Thanks so much.

CHAFKIN: Thank you.

(SOUNDBITE OF MTBRD FEAT. FLAMINGOSIS' "FANFARE") Transcript provided by NPR, Copyright NPR.