Legal experts say it’s unlikely the Tesla CEO will face a severe penalty if he’s found in contempt, but he could be barred from holding top positions.
DETROIT — Tesla CEO Elon Musk has until March 11 to explain to a federal judge in New York why he shouldn’t be held in contempt of court.
U. S. District Judge Alison Nathan issued an order Tuesday after federal securities regulators asked the court to hold Musk in contempt for violating the terms of a settlement agreement.
The Securities and Exchange Commission sought the order following a Feb. 19 tweet from Musk about auto production numbers that was not approved by a Tesla lawyer. Under a settlement from October related to a previous tweet, Musk’s tweets must be OK’d by the lawyer if there is potential for the message to influence the company’s stock price.
Legal experts say it’s unlikely Musk will face a severe penalty even if he is found to be in contempt, but he could be barred from serving as CEO or an officer at Tesla.
Erik Gordon, a University of Michigan law and business professor, doesn’t believe that will happen, “because what Musk did was not gigantic and it was quickly corrected.”
But Gordon expects Musk will do it again, and that would trigger more significant action from the court.
“I think it’s only a matter of time before the nuclear option is invoked and upheld because Musk just will not constrain himself,” Gordon said.
