Elon Musk’s X Corp. is serving a subpoena on Sen. Elizabeth Warren (D-Mass.), days after Warren urged the Securities and Exchange Commission to launch an investigation into Musk’s dual role running Tesla and Twitter.

Musk’s subpoena demands documents and communications related to Warren’s letter to the SEC, as well as Warren’s communications with the SEC and Federal Trade Commission. Musk is seeking documents going back to October 27, 2022, the day he completed his $44 billion purchase of Twitter.

Warren’s July 17 letter urged the SEC to investigate Tesla “regarding the actions of its Board of Directors in managing the apparent conflicts of its Chief Executive Officer, Elon Musk.” She wrote that Musk’s actions while running Twitter and Tesla simultaneously “have raised concerns about conflicts of interest, misappropriation of corporate assets, and other negative impacts to Tesla shareholders. Despite recent and repeated calls from investors to address these actions, the Board appears to have failed to uphold its legal duty to ensure that Mr. Musk act in the best interest of Tesla.”

Although Twitter recently hired Linda Yaccarino as CEO, Warren said Musk appears likely to continue overseeing core functions of Twitter’s business.

Today, Twitter successor company X Corp. notified a federal court that it “intends to serve a subpoena… on Senator Elizabeth Warren on July 20, 2023, or as soon thereafter as service may be effectuated.”

Musk trying to block FTC probe

The subpoena was filed with US District Court for the Northern District of California as part of a case in which Musk is trying to terminate a privacy settlement that Twitter and the FTC agreed on last year before Musk bought the company. Musk is also trying to avoid an FTC deposition and wants the court to “rein in” the FTC’s ongoing investigation into Twitter’s privacy and data practices.

The subpoena of Warren demands “all documents relating to the SEC letter, including any drafts,” and all communications relating to the letter sent or received by Warren since October 27.

Next, the subpoena asks for all communications between Warren or Warren’s office with the FTC “between October 27, 2022 and the present relating to X Corp. or Elon Musk, and all documents relating to any such communications.” The subpoena makes an identical request for all such communications with the SEC.

We contacted Warren’s office about the subpoena today and will update this article if we get a response.

X Corp. last week claimed the FTC’s investigation into Twitter is “tainted by bias” and that “the FTC’s desire to depose Mr. Musk derives from the same bad faith and improper conduct that has characterized its investigation to date.” The argument is similar to past claims by Tesla that the SEC “harass[ed]” Musk.

Warren’s call for SEC investigation

Musk will have some new headaches if the SEC heeds Warren’s call for an investigation. Warren’s letter said the “composition of Tesla’s eight-person Board raises concerns about whether it is in violation” of a rule requiring that a “majority of the board of directors must be comprised of Independent Directors.”

“Members of the Board with known ties to Mr. Musk or Tesla include Mr. Musk himself; Mr. Musk’s brother, Kimball Musk; Ira Ehrenpreis, a ‘longtime friend’ of Mr. Musk who helped design his record-breaking compensation package and explored limiting the disclosure of its details to investors; James Murdoch, Mr. Musk’s friend of almost 20 years who vacations with him; and J.B. Straubel, a former Tesla executive whose election to the Board in May of this year was opposed by both proxy advisory firm Glass Lewis and an investor group over concerns about Straubel’s role as a ‘company insider,'” Warren wrote.

Warren alleged that these “close relationships may explain the Board’s persistent inability or unwillingness to address the concerns posed by Mr. Musk’s actions.” According to Warren, that includes the “possible misappropriation of Tesla resources by Mr. Musk’s funneling of ‘more than 50 of his trusted Tesla employees’ to work on his Twitter takeover, including Tesla’s Chief Information Officer and other senior staff.”

Warren previously raised similar concerns in a December 2022 letter to Tesla Board Chair Robyn Denholm.

“This use of Tesla employees raised obvious questions about whether Mr. Musk appropriated resources from a publicly traded firm, Tesla, to benefit his own private company, Twitter,” Warren wrote to the SEC. “This would potentially violate Mr. Musk’s legal duty of loyalty to Tesla and trigger questions about the Board’s responsibility to prevent such actions, and may also run afoul of other ‘antitunneling’ rules that aim to prevent corporate insiders from extracting resources from their firms.”

Last week, Musk and other current and former Tesla board members agreed to return over $735 million to settle a shareholder lawsuit that alleged the Tesla directors “grossly” overpaid themselves.

https://arstechnica.com/?p=1955598