Just days after Elon Musk took control of Twitter, he has now set out to go after the SEC.
The Tesla founder quietly signed an amicus letter last week that could prevent the Securities and Exchange Commission from issuing gag orders that prevent people who plead with the SEC without admitting fault from discussing their cases .
He signed a supporting petition from Barry Romeril, a former Xerox chief financial officer, asking the Supreme Court to negate a 2003 deal in which he agreed to always remain silent about the fraud case against him, the reports New York Times.
Romeril was one of six Xerox executives who cracked down on allegations of a $1.4 million profit inflation in the late 1990s.
As part of his deal with federal authorities, Romeril had agreed not to deny the allegations against him and was permanently banned from serving as an officer of a public company, according to Reuters.
He has since argued before the U.S. Court of Appeals for the Second Circuit that the obligation to remain silent about the case violated his First Amendment right and that “no law of Congress authorizes so sweeping a restriction on freedom of speech.”
However, the Court of Appeals had a different opinion when Judge Denny Chin wrote last year that Romeril waived his right to contest the allegations when he agreed to the settlement.
Now Romeril is appealing the case again — this time to the Supreme Court with the help of fellow executives like Musk, who also found himself in the crosshairs of the SEC after a 2018 agreement that censored what he could tweet.
That agreement was upheld in federal court in Manhattan on Wednesday.
Elon Musk has signed an amicus brief targeting the US Securities and Exchange Commission’s gag rule
He signed it in support of Barry Romeril, former Xerox Chief Financial Officer, who agreed in 2003 not to dispute allegations of fraud against him
In briefs filed with the Supreme Court, The New York Times argues that the group of corporate executives argues that forcing silence on matters affecting their businesses denies investors important information.
However, the SEC has long argued that its gag order helps it monitor markets more effectively — claiming that if every defendant opts out of a trial but later comes forward with the charges publicly, it would undermine the SEC’s legitimacy.
But the group of businessmen says most people settle with the SEC because it’s too costly to fight the charges against them.
They also argue that banning any discussion of the cases violates the SEC’s core job of protecting investors and instead keeps them in the dark about material information.
They even cite former SEC Chairman Arthur Levitt, reports the Times, who said in a 1999 speech that “quality information is the lifeblood of strong, dynamic markets” and argued that the SEC “should be prevented from making a full… , open, public discussion, which creates this vitality.”
It is unclear if the Supreme Court will hear her case.
For years, the SEC has imposed a gag order to prevent corporate executives from releasing the charges against them to the public
It’s just Musk’s latest attempt to break free from SEC regulators.
Regulators have been investigating Musk for years and even reached an agreement with the Tesla CEO in October 2018.
As part of the deal, Musk and Tesla agreed to pay $20 million in fines over Musk’s tweet that he had the money to take Tesla private for $420 per share two months earlier.
Writing midway through the trading day that Tesla is about to make a big change, he wrote, “I’m considering privatizing Tesla for $420.”
That might have been dismissed, but the stock skyrocketed after the news because Musk also added, “Funding secured.”
Funding was far from secured and the company remains publicly traded, but the tweet boosted the stock price.
Musk later told federal investigators that he had Tesla stock priced at $420 after claiming he was taking the company private because he thought his then-girlfriend, singer Grimes, would enjoy the marijuana reference.
April 20, 420 and 4:20 p.m. have been used to celebrate marijuana since a 1991 High Times article told the story of five high school friends, including one who was a roadie for the Grateful Dead and found smoking ” 420″ shorthand used at her school in California in 1971.
“According to Musk, he calculated the price of $420 per share based on a 20% premium to the stock’s closing price that day, believing that 20% was a ‘standard premium’ in a privatization transaction,” explains the complainant in the case was filed in the US District Court for the Southern District of New York.
“That calculation resulted in a price of $419, and Musk indicated that he rounded the price up to $420 because he recently learned of the importance of the number in marijuana culture and thought his girlfriend ” would find it funny, which admittedly isn’t a good reason to pick an award.”‘
A settlement specified governance changes, including Musk’s removal as CEO, and the pre-approval of Musk’s tweets by Tesla’s attorneys.
He was later accused of violating that gag order when he tweeted on November 6, 2021 that he was considering selling 10 percent of his Tesla stake to cover stock option tax bills.
The SEC said at the time that he tried to illegally alter Tesla’s stock prices and market value for personal gain, though he was never charged, and denies wrongdoing.
On August 7, 2018, Musk announced to his 22 million followers that he was considering taking Tesla private, saying he had “secured funding.”
Tesla stock value fell sharply after Elon Musk released a Twitter poll asking if he should sell 10 percent of his stake in the company
Musk had since sought to challenge the gag order in his tweets, comparing himself to rapper Eminem in court documents when he claimed that requiring Tesla attorneys to review some of his tweets was an unconstitutional restriction on his right to free speech.
“The (SEC) won’t let me be or won’t let me be me, so let me see; They tried to turn me off,” Musk wrote in court filings last month, citing Eminem’s 2002 song Without Me.
Eminem’s lyrics referenced the Federal Communications Commission, which fined a radio station in Colorado $7,000 for playing his profanity-laden song The Real Slim Shady, which it deemed offensive.
The FCC eventually vacated their sentence, Musk’s attorneys noted in their court filings, ruling that “the First Amendment is a key constitutional limitation that requires us to act cautiously and with reasonable restraint.”
Musk’s attorney, Quinn Emanuel’s Alex Spiro, had reportedly told the SEC that Musk would not release any preapproval or verification documents for his tweets.
And in court documents, Spiro stated that “the sporadic nature of the SEC’s harassment underscores this [consent decree’s] chilling effect because it is impossible to know in advance which tweets will incur the wrath of the commission,” reports the New York Post.
“Even the SEC seems unsure which tweets require pre-approval, leaving only two conclusions: the consent decree is overly vague, or the agency is maliciously pursuing its investigation.”
But the SEC has argued Musk isn’t immune to a scrutiny of his Tesla-related tweets and shouldn’t be excused from the 2018 agreement because he found compliance “less convenient than he had hoped.”
On Wednesday, Judge Lewis Limon agreed with federal regulators, writing in his 22-page decision, “Musk could hardly have believed when he filed the decree (the settlement) that he would be immune from closed SEC investigations.
“Not surprisingly, when Musk tweeted that he was considering selling 10 percent of his stake in Tesla, the SEC had some questions.”
He also agreed with the SEC that Congress gave it sweeping powers to investigate whether someone violated securities laws — paving the way for the agency to enforce its November tweet subpoena and investigate other potential violations.
Musk could then challenge the SEC again once the subpoena is enforced, Limon wrote.
“Musk may wish otherwise, but he remains subject to the same enforcement authority — and has the same means to challenge the exercise of that power — as any other citizen,” he concluded.