By Jonathan Stempel
NEW YORK, Feb 17 (Reuters) – Tesla Inc (TSLA.O) and its Chief Executive Elon Musk on Thursday accused the U.S. Securities and Exchange Commission (SEC) of harassing them with an “endless” and “unrelenting” investigation to punish Musk for being an outspoken critic of the government.
The accusation came in a letter to U.S. District Judge Alison Nathan in Manhattan, who presided over a 2018 SEC settlement stemming from Musk’s tweet about a potential buyout of Tesla.
The SEC declined to comment. In a one-sentence order, Nathan directed the regulator to respond by Feb. 24.
Thursday’s letter escalates Musk’s battle with regulators as they scrutinize his social media posts and Tesla’s treatment of workers, including accusations of discrimination.
The SEC sued Musk in August 2018 after he tweeted he had “funding secured” to potentially take his electric car company private at $420 per share. In reality, a buyout was not close.
Tesla and Musk settled by agreeing to each pay $20 million in civil fines, and to let Tesla lawyers vet some of Musk’s communications in advance, including tweets that could affect Tesla’s stock price. Musk also gave up Tesla’s chairmanship.
In Thursday’s letter, Spiro accused the SEC of ignoring its commitment to distribute to shareholders the $40 million in fines, while instead “devoting its formidable resources to endless, unfounded investigations” into Musk and Tesla.
“Worst of all, the SEC seems to be targeting Mr. Musk and Tesla for unrelenting investigation largely because Mr. Musk remains an outspoken critic of the government; the SEC’s outsized efforts seem calculated to chill his exercise of First Amendment rights,” Spiro wrote.
Spiro asked Nathan to schedule a conference to find out why the SEC is “issuing subpoenas unilaterally” without court approval, and why the money isn’t being distributed.
If the SEC found that Musk violated the settlement, it could ask Nathan to throw it out and reopen the case, or pursue new charges.
The letter was filed eight days after California’s Department of Fair Employment and Housing sued Tesla over allegations by Black workers that it tolerated racial discrimination at its Fremont, California, plant. read more
Tesla called that lawsuit misguided. It is also trying to reduce or throw out an approximately $137 million jury award to a Black former elevator operator for subjecting him to a hostile work environment at the Fremont plant.
Separately on Thursday, the National Highway Traffic Safety Administration (NHTSA) opened a formal probe into 416,000 Tesla Model 3 and Model Y vehicles after receiving complaints about unexpected braking tied to its Autopilot system. read more
Tesla has issued 10 recalls since October, including some under pressure from the NHTSA.
Shares of Tesla closed $47.04, or 5.1%, lower on Thursday to $876.35 on Nasdaq.
The cases are SEC v Musk, U.S. District Court, Southern District of New York, No. 18-08865; and SEC v Tesla Inc in the same court, No. 18-08947.
