In the past, I've written about O'Melveny's belief that a government job is something to be monetized for your own personal benefit (links one, two, three, four, five and six). It might have been the most noxious thing I saw at O'Melveny. This attitude among regulators reportedly created the opioid crisis, for example. Any way, one public servant apparently wasn't aware of what he should be doing with his job. So he put duty over his pecuniary interests. His reward for doing the right thing, is that Elon Musk is trying to harm his life.
This all started when Mr. Musk tweeted something in 2018 that boosted Tesla's stock price by six percent. The problem was that it was a lie, according to the Securities and Exchange Commission ("SEC").
Needless to say, allowing an executive to get away with lying to boost his company's stock price endangers the health of the markets -- markets that are far more important than Elon Musk or Tesla. I know Tesla has a trillion dollar market cap, but that number is insignificant when compared to the value of all securities traded on SEC-regulated exchanges. You can't allow one tiny part of the market to corrupt the system, even if that tiny part is connected to the wealthiest man in the country.
There's a reason why America's securities markets are the most desirable and preeminent in the world -- it's because the SEC fights to make sure that everything is run transparently and fairly. So they naturally filed charges against Mr. Musk for the alleged lie.
To settle the charges, Mr. Musk had to pay tens of millions of dollars and make severe changes to Tesla's governance. Mr. Musk also reportedly did one other thing. When the SEC lawyer who interviewed Mr. Musk left to join the law firm of Cooley LLP, Mr. Musk told the firm to fire him. He reportedly said that if they did not fire him, he would not send them any more billable hours.
Based on the harsh settlement and Mr. Musk's ire, I think it's fair to conclude that this attorney did his job. He was not deferential or obsequious to Mr. Musk's status and prestige; he didn't kowtow to Mr. Musk, in the hope of landing a lucrative job at Tesla.1 And in response, the centibillionaire is trying to teach him and all government personnel a lesson.
Looking to the future . . . I'm going to try to follow two things: the attorney's career, and whether there will be fewer SEC enforcement actions, because SEC employees are afraid of what will happen to them if they pursue powerful executives. These two questions are another litmus test of whether or not we now live in a corrupt and broken third world country.
[Addendum: An earlier version of this post included the attorney's name, but I later redacted it at Cooley's request. Incidentally, they informed me that his career at the firm has not been harmed in any way.]
[Second addendum: Mr. Musk claims that he did not lie when tweeting. His 2018 tweet said that a Saudi Arabian investment fund had offered to buy Tesla. The fund denied that, after which the SEC filed charges against Mr. Musk for the tweet. Mr. Musk, though, claims the fund had verbally made the offer. He reportedly "privately raged" at the fund's manager for denying it. Whatever happened, there was apparently no evidence of an offer, and so the SEC had little choice but to pursue the matter.]
[Third addendum: On February 3, 2023, a jury ruled for Mr. Musk in a trial over the 2018 tweet, "finding that Mr. Musk’s statements did not cause the investors’ losses."]
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1 This happens, even at the generally competent SEC. For example, in the year 2000, the SEC was told that Bernie Madoff was lying about his investment returns. But the SEC personnel investigating Mr. Madoff's prestigious firm did only a cursory review before blessing him. It wasn't until the 2008 financial crisis, when investors pulled their money out of everything, including Mr. Madoff's funds, that he had to confess that he didn't have their money, because he had been lying the entire time.
