The United States Securities and Exchange Commission filed suit against Tesla's CEO Elon Musk on Thursday, alleging fraud surrounding the CEO's attempt to privatize the automaker in August. However, according to a report by CNBC, Musk had the opportunity to settle the suit ahead of its filing but pulled the plug on the deal at the last minute.
According to the report, the SEC's offer involved a "nominal fine" that would be issued to both Tesla and its CEO, but more importantly, Musk would not have been required to step down as a company officer or admit guilt. The Wall Street Journal also received a similar report, noting that the SEC had drafted the settlement with Musk and was in preparation of filing when Musk's lawyers phoned the SEC's representation to inform the agency that Musk was no longer interested in pursuing the deal. Sources told CNBC that Musk reportedly declined to sign the offer, citing that it would not be truthful to himself.
"I have always taken action in the best interests of truth, transparency, and investors," Elon Musk said in a statement provided to The Drive. "Integrity is the most important value in my life and the facts will show I never compromised this in any way.”
The SEC's filing against Musk escalates the situation. In addition to fines and an admission of guilt, the suit also requests that Musk be prohibited from acting as CEO of Tesla, or any other company that has registered a form of security with the SEC.
Tesla and its board are both sticking by Musk, stating that they are "fully confident" in Musk's leadership of the brand. The support shows the automaker's loyalty and appreciation of Musk, especially as the company works its way through the difficulties of "production hell" and the newly introduced logistical nightmares.
“Tesla and the board of directors are fully confident in Elon, his integrity, and his leadership of the company, which has resulted in the most successful US auto company in over a century," said Tesla and its Board of Directors in a joint statement provided to The Drive. "Our focus remains on the continued ramp of Model 3 production and delivering for our customers, shareholders, and employees.”
The SEC's investigation, settlement offers, and Musk's withdrawal have all taken place rather quickly; spanning only 52 days since Musk's original "funding secured" Tweet. This has caused a great deal of confusion in the public eye and has been a major player in Tesla's stock rollercoaster. It's unclear how the SEC's lawsuit will unfold, as the allegations against Musk's integrity seemingly has caused a stalemate between the government regulatory agency and the CEO's willingness to cut a deal.