By Chris Prentice and Jody Godoy
(Reuters) -A federal judge on Thursday tentatively ruled that Elon Musk must testify again for the U.S. Securities and Exchange Commission’s probe of his $44 billion Twitter takeover, handing the SEC a victory in its latest skirmish with the world’s richest person.
During a hearing in San Francisco, U.S. Magistrate Judge Laurel Beeler quickly rejected arguments by Musk’s attorney that SEC officials do not have the authority to issue subpoenas, saying the agency has broad investigative powers and that no judge would “second guess” an SEC probe.
Beeler told the sides to figure out when Musk would sit for one more four-hour deposition, or she would issue an order.
“If you don’t work it out, then it’s in San Francisco in February,” she said during Thursday’s hearing.
The SEC sued Musk in October to compel the Tesla and SpaceX CEO to testify as part of an investigation into his 2022 purchase of social media giant Twitter, which he subsequently renamed X. Musk refused to attend a September interview for the probe, the SEC said.
The agency is examining whether Musk followed the law when filing the required paperwork with the agency about his purchases in Twitter stock, and whether his statements in relation to the deal were misleading.
Thursday’s face-off is the latest spat in a years-long feud between Musk and the top U.S. markets regulator, dating back to 2018 when he tweeted that he had “funding secured” to take the electric carmaker private.
The SEC has been probing Musk’s Twitter takeover since April 2022, when he first disclosed he had purchased stock in the company. Musk gave the SEC documents for its probe and testified via videoconference for two half-day sessions that July, the SEC said in its filing. SEC attorneys said they have more questions for Musk after receiving new documents, and had sought additional testimony in September, but Musk would not comply.
In response to the SEC’s October lawsuit, Musk’s lawyers urged Beeler to deny the SEC’s request, calling the probe misguided. “The SEC’s pursuit of Mr. Musk has crossed the line into harassment,” they wrote in a filing last month.
They also argued that, based on a clause in the constitution relating to official appointments, enforcement staff conducting the probe are not lawfully appointed and therefore lack power to issues subpoenas. The judge said she is inclined to take the SEC’s view on the issue but would take a closer look before issuing her order.
She also conceded the demands of long-running investigations can be “frustrating,” but still sided with the SEC minutes, emphatically dismissing Musk’s attorney’s arguments.
“You’ve got one more four-hour deposition, one more day of depositions to survive and it’s over. It seems unlikely there’s going to be any more hassle,” she said.
Musk and the SEC have been sparring since his “funding secured” tweet in 2018. The SEC settled that case but the commission sued Musk again in 2019 for allegedly breaching a that settlement. The tweets also prompted a shareholder lawsuit. A jury in February found Musk was not liable for misleading investors.
Over the years, the agency has opened multiple other probes into Musk and Tesla.
On April 4, 2022, Musk disclosed he had acquired a 9.2% stake in Twitter. It was 11 days after the SEC’s deadline for such disclosures. Musk initially indicated via that regulatory filing that he planned to be a passive stakeholder, meaning he did not plan to take over the company.
Later that month, however, he announced plans to buy Twitter for $44 billion. He subsequently tried to get out of the deal, alleging Twitter was not disclosing the full extent of bot activity on its platform.
After being sued to complete the deal, Musk closed his acquisition of Twitter in late October 2022.
(Reporting by Chris Prentice and Jody Godoy in New York, Additional reporting by Hyunjoo Jin in San Francisco Editing by Michelle Price and David Gregorio)