Musk Keeps Tesla Public, But Doesn’t End Drama

and on Bloomberg dot com slash podcasts. Earlier this month, Elon Musk sent shockwaves through Wall Street, the automotive industry, in the tech world when he announced on Twitter that he was considering taking Tesla private on Friday night, he put an end to the world when that ensued in a blog post where he said he would keep Tesla public. Joining me is Peter Henning, former federal prosecutor and professor

at Wayne State University Law School. Peter, what do you make of the unraveling of the go private plan in about eighteen days? Well, I don't think there was that much of a chance that he would take Tesla private, given the kinds of companies that we've seen who are

taken private have posit of cash flow and a growing business. Now, Tesla's business is growing, but it has been burning through cash over the last couple of years, and they can't even seem to hit some of their targets for production, So, you know, was this a likely possibility even though Musk said that he could have gotten the funding for it. I really think it was doubtful that the going private was ever really going to happen. The SEC is investigating

Tesla and Musk going private tweet plus other things. Will this decision not to go private have any effect on the SEC investigation? Well, it may have some small effect in that the urgency of the investigation likely is going to be dialed back. Tesla is not going to be taken private, and so there would be a number of

fundraising issues related to that. But it certainly doesn't end it because the impact of his tweet back on August seven drove the stock price up a little over ten percent, and you had a number of investors that day who were trading on the basis of that statement, specifically the funding secured um statement that he had there, which indicates that the going private was pretty much of a done deal.

So I don't think the SEC is going to say, well, you know, never mind um to quote Emily Littella from long ago, that you don't get a do over on this when you put that kind of information out and it has that kind of an effect on the market, and certainly driving the stock price up ten percent is a significant effect. You worked on market manipulation cases while you were an attorney at the SEC, So is this likely to end in a fine or something more? Well,

it's a good question. I mean, the SEC could pass on it or um. There are ways for the SEC to send a signal. For example, they could issue a report of investigation criticizing the company if the SEC were

to pursue an enforcement action. Proving market manipulation is difficult because you have to prove that the defendant's purpose was to affect the market price, and I suspect Musk and his lawyers could offer any number of reasons he made the statement, one of which he talked about, which was transparency. I just want to let shareholders know and I didn't mean to manipulate the price, whether he did or not. So I'm not sure if it would be a market

manipulation case. It could be a more standard ten five case will tend B five, which prohibits misstatements or emissions of material fact, and that might be the basis for a case, although even there that's not really an easy case to make because you have to show the defendant's intent or at least recklessness. So this still leaves the questions that were being asked before the going private tweet, some of which have been now amplified by Musk's behavior

in his tearful interview with The New York Times. What's one of the top concerns there? Is it getting a CFO and involved? Well, I do think there's an important corporate governance issue at Tesla that if you're going to talk about taking a company private, and especially if it's a large shareholder like Elon Musk, then there's certain things

you have to go through. Tesla is a Delaware corporation, and so you would have to get independent directors and conduct some type of negotiations and make it at least look like um more typical arms length negotiations. The company did none of that, and so I think from a corporate governance point of view, they really need to rethink

how they are operating. That you can't have important information tweeted out and there needs to be a bit more of a deliberate the process, which probably means Mr Musk is going to have to give up some of his control over the company and actually listen to the board of directors. So from what we know about him, how likely is that, well that Tesla is Musk and Musk

is Tesla. Oh absolutely, Although you know, when you're talking about a business that is trying to mature UM, you know there are any number of businesses that are tied to the founder, but then you need to move beyond the founder. Apple is a good example of that with Steve Jobs that there was all the concern that when Steve Jobs died the company wouldn't do anything. It's now

a trillion dollar company. And so if Tesla really wants to move forward, they can't be subject to the whims, shall we say, of Elon Musk or or his statements. They need to put in a little bit better UM management team, and that may mean getting in a stronger CFO, a stronger chief operating officer, someone who's going to let him be the visionary for the company but not the

day to day manager of the company. Peter, what about the company's cash position which you mentioned before, and also its ability to meet mass market produced goals which it hasn't been able to. No, and it's the old phrase on Wall Street, I think has been under promise and overperform UM and in a lot of ways, uh Tesla has been doing almost the opposite, where you know, they say, well, we're going to produce this many vehicles, this many vehicles,

and then they don't do it. UM. So they're going to need to UM get their public statements in line with their actual operations. And that's what Wall Street is gonna want to see. Certainly, investors um and there are a number who are devote it to the company, but some investors I think may have lost or questioned his credibility going forward. All right, thanks so much, as always, Peter for your insights. That's Peter Henning, professor at Wayne

State University Law School. As he paid his legal threats on several fronts. President Trump continues to lash out at Attorney General Jeff Sessions, scaling up attacks on Twitter over the weekend. Speaking with Fox News last Thursday, the President once again complained about Sessions recusing himself from the Russia investigation. Even my enemies say that Jeff Sessions should have told you that he was going to recuse himself, and then you wouldn't have put him in. He took the job,

and then he said I'm going to recuse myself. I said, what kind of a man is this? Joining me is Ellie Honike, a former federal prosecutor and special counsel at Lowenstein Sandler. Ellie Trump has been seeming trying to bait Jeff Sessions and tweets and interviews for more than a year. It hasn't worked. But when they have a meeting in the Oval Office after that inflammatory interview on Thursday, nothing is said when they're face to face. What do you

make of this? So one of the President's primary misunderstanding seems to be this notion that the Department of Justice the Attorney General work for him personally Donald J. Trump, But in fact, the Department of Justice represents the American people, and the Attorney General's job is not protect the president's best interest, and the President's been struggling with that ever since he took office. Um, and this battle of words

is really unprecedented. Its stunning. Is somebody who worked for Department of Justice for eight years, and as you noted, it's sort of I think what often happens with bullies is they say there they talk one way, uh, you know, behind someone's back, but then when they're face to face, they they backed down. So I don't know what the president's ultimate end goal is, but that could be what's

going on. Well, now, it also seems that there are a few centers who are falling in line, and Trump quoted from one of them, Lindsey Graham and his tweet on Saturday. Every president deserves an attorney general they have confidence in. So is it likely in your mind that after the mid terms we might see Trump fired Jeff Sessions and then what happens is that a constitutional crisis or not at that point? Unfortunately, I think it is likely. I think all the signals are there, and the president

cannot have possibly had six with this anymore. Clearly, look at his whole string of tweets attacking the good sense and even the sort of manhood I guess of Jeff Sessions. So I think that's pretty clearly evidence that he intends to get rid of Sessions, and if he does, I'm going to have a constitutional crisis. No, I don't think so.

I think we're gonna I think it's gonna be problematic. Um, what would happen then is the president would get to a point an acting attorney general who would still in the role pending senatorial approval, and I think the first order of business of that person will be to do the president's fitting too, at least oversee and I would hope not any more than that the Rosenstein and Mueller investigation.

So I think that is the game plan, and I think we're seeing signals of that, not only from the President's own words, but also, as you said, for members of Progress, Senator Jeff Flake said yesterday, the concern is that sessions termination would be the first domino to fall and the Justice Department's investigation into Russian interference. Do you agree with that? I do think so. I think it would.

I think it would set in motion the president reasserting, through his chosen Attorney general, reasserting control over Lawler's investigation. And I think the more he does that, the more problematic it is. I think there remains to be seen. His options would range from have the new person shut it down, perhaps even as a precondition to the appointment, to anywhere to you know, keep a close eye on it, monitor it, and let's make sure it will go a

direction that concerns me. I think either of those is problematic, but the different degree. So we've seen this assault on Jeff Sessions in tweets, etcetera for more than a year. But it seems that a real trouble for Trump right now is the Michael Cullen play and investigations in the Southern District of New York, where the U. S. Attorney, also appointed by Trump, also refused himself. But Trump doesn't seem to be seeing that as as much of a betrayal as the Sessions. I suppose he doesn't see it

perhaps has played as much of a threat. Um. Right that the US attorney for the stuff that district did recuse himself, and as with the Department of Justice, the number two guy, the deputy U S. Attorney, has taken over. Ultimately, I guess I'm given some face by the fact that you can't fire the entire Department of Justice, can't fire the entire Southern District of New York. Um. I think

that independent will ultimately prevail. And UM I'd also add think there's now evidence that reporting that the New York State Attorney General and the District Attorney of New York in Manhattan are looking at presidential potential issues for the president as well. And there's there's something the person I can do to derail roads. Ellie, how much does the Attorney General. Let's let's just take it away from this

and just say another attorney general, another investigation. How much, say so, do they have in the Southern District's investigations. It's interesting, technically the Southern District is more than technically the Southern District is part of the United States Department of Justice. I laughed because I worked there and people used to call us the Sovereign District of New York. And that's a reflection of the fact that the Southern

District is historically fiercely independent, and I think that will prevail. Um, Like I said, you can't fire the entire Southern District of New York. Um. I think the Southern District is going to do what it's gonna do. So in some ways they're they're that independence, I think is a good thing, and they make the Southern District even more of a threat than, uh than Main Justice itself. Let's talk about some of the immunity deals that were reached that we

found about about. Well, first of all, we know that Michael Cohen made a deal and said the you know, in court rather inflammatory things, but we also had um American Media Chairman David Pecker, um making getting immunity, and Alan Weiselberg, the CFO of the Trump organization. Now, where do you see those fitting in to the Mueller probe? Uh So, immunity, first of all, is sort of a

version of cooperation. It's where the prosecutors want to speak with an individual witness who may have some level of criminal exposure, but not quite enough exposure or not enough proof to have that person fleaked guilty to a charge. So immunity is a bit more limited, but enabled prosecutors

to get the testimony from those individuals. Um, it's clear that what to me, what the Southern District is doing is circling around these allocations of campaign finance reform that Cohen pled guilty to count seven and eight of his plea. Weislbrook obviously is evolved in those payments, and so is Pecker. So I think that's where the Southern districts focus. Where

does it overlap with Mueller? Remember the southerns sure a part of d O J. And you know, based on my time there and based on history, there's pretty free sharing of information. So if the Southern District develops information or a cooperator it's relevant to Moller. I would have every reason to think that would be shared across the line.

Let's turn to Paul Manafort for a moment, because the talk of Trump granting him a pardon keeps coming up over and over again, especially in light of some of the comments that Trump made after the Manifort guilty verdicts. What what do you see as the result if if there were a plea agreement, if there were a pardon given to Manafort, where would that lead? We have about a minute here. I think, first of all, I think he's quite likely to grant that pardon. He's been signaling

not just during the trial, but before the trial. He said tweets saying, oh, it's metaphorts a good man and it's a sad day. Unfortunately or I guess fortunately, depending on your perspective. The part of her is very broad and has almost never been challenged. I do think that if there was proof that that the President's part in Manafort to prevent h from cooperating, you could have an obstruction case there. But he's already laid the foundation to say no, it's not because I was trying to keep

them quiet because I felt bad. Firm and I felt it was unjust. Maybe somebody disagrees, but I'm the president and I had a very broad part of power, So I do think it could go that way, and I don't think there's a heck of a lot that could be done to counteract it. Well, we shall see. That's always on our list here things have talked about. Thanks so much, Ellie. That's Ellie Hohnig. He's a special counts up lowlan Stein Sandler. Thanks for listening to the Bloomberg

Law Podcast. You can subscribe and listen to the show on Apple podcast, SoundCloud, and on Bloomberg dot com slash podcast. I'm June Brolso this is Bloomberg