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Elon Musk is under investigation for “conduct” related to his pending acquisition of Twitter, the company said in an Oct. 6 court filing released yesterday. “Elon Musk is currently under federal investigation for his conduct in connection with the Twitter acquisition,” Twitter told Delaware Court of Chancery Judge Kathaleen McCormick.
Twitter’s filing mainly describes its efforts to obtain documents related to the ongoing investigation. It said a privilege transcript prepared by Musk’s law firm referred to “drafts of a May 13 email to the SEC [Securities and Exchange Commission]’ and ‘a slide presentation for the FTC [Federal Trade Commission]’, but that ‘the final communications themselves were neither created nor logged’.
“Through an attorney he has exchanged essential correspondence with these authorities regarding their investigations,” Twitter wrote. “Twitter wants these documents because they relate to key issues in this litigation. Twitter requested the submission of these documents months ago.
Twitter filed this court order just before McCormick delayed the process to give Musk and Twitter three weeks to complete the $44 billion merger. Twitter wrote that Musk’s “hide and seek” must end and asked the court for an order compelling “the submission of the communications from the defendants’ attorneys to the government regarding Twitter and the Twitter transaction.”
Twitter berates Musk for ‘stonewalling’
Twitter said it had been searching for the documents since July 22, and described Musk’s attempts to avoid releasing them as follows:
The defendants initially resisted production by reserving the right to withhold communications based on what they called “investigative privilege.” After the court expressed doubts about this type of “privilege,” the defendants took a new approach. Instead of logging the communication as privileged, they simply considered it outside the scope of detection, on the theory that the search protocol Twitter negotiated with the defendants’ attorney somehow missed the mark.
“The obvious explanation for blocking the defendants is that they do not want Twitter to receive documents that further undermine the defendants’ position in this lawsuit,” Twitter also wrote. “But that’s no excuse. Defendants should be compelled to arrange for their law firms to promptly collect and produce the requested communications.”
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The SEC questioned Musk about his May 17 tweet in which he claimed the “deal can’t go ahead until” Twitter CEO Parag Agrawal justifies the company’s spam account estimates. The SEC told Musk that the term “does not imply that Mr. Musk and his affiliates exercise any legal right” to suspend the merger agreement to suspend the acquisition, but “we note that Schedule 13D has not changed.” was made to reflect the obvious material change.”
The SEC also investigated Musk’s late disclosure of his 9.2 percent stake in Twitter, which he amassed before attempting to buy the company outright. The FTC also reportedly opened an investigation into whether Musk failed to comply with an antitrust filing requirement related to that investment. Musk’s original application indicated that he intended to be a passive shareholder, but he later resubmitted it to classify himself as an active investor.
Musk’s lawyer accuses Twitter of “misdirection”.
Musk’s attorney claimed Twitter’s filing was a “misdirection,” according to Portal. “Alex Spiro, an attorney for Musk, told Portal that Twitter’s court filing was a ‘misdirection,’ claiming, ‘It is Twitter executives who are under federal investigation.'”
The Twitter filing reads: “Defendants do not deny that their attorney exchanged responsive, non-privileged communications with government agencies regarding Musk’s acquisition of Twitter. Instead, they try to protect these documents from discovery by claiming that Twitter’s request for release comes ‘too late’. and that her attorney has agreed to submit only documents identified through the use of agreed search terms. None of the arguments hold water.”
Noting that Twitter had requested the documents in July and made further attempts to obtain the same documents in August, the company said: “The defendants have refused for months and have delayed production. You cannot now cite your own disability as a basis for denying Twitter the documents it requested from the start.” Additionally, Twitter said that search terms “provide no excuse for avoiding the creation of relevant responsive documents that are known to that they are lawyers, such as the government notices at issue in this application”.
The court case could end without a trial if Twitter and Musk complete the acquisition. Musk recently said he would close the deal, despite previously trying to get out of it, delaying the process. But Twitter said in another court filing last week that there is a problem with Musk’s funding and that Musk won’t commit to a closing date.
Judge McCormick previously criticized Musk for withholding text messages, citing “glaring flaws” in the Musk side’s document preparation. McCormick also considered sanctioning Musk for not producing Signal messages that appeared to have been deleted using Signal’s auto-delete feature.