Indicted Nikola Corp. founder Trevor Milton wants to use internal conversations at the electric truck maker in his federal fraud trial, but Nikola is fighting for a protective order to stop him.
By intervening as a third party, the startup finds itself enmeshed in the criminal case from which it is trying to steer clear.
Nikola is honoring a government request to allow use of Milton’s conversations with Britton Worthen, Nikola’s general counsel, in the trial scheduled to begin Sept. 12 in New York. But the company asked U.S. District Court Judge Edgardo Ramos on Monday to block testimony about conversations Worthen had with other company employees.
“Notably, the DOJ did not ask Nikola to waive privilege as to communications between Worthen and other Nikola employees besides Milton, presumably because … Milton could not have been acting in reliance on advice he never received and did not know Worthen ever provided,” according to Nikola’s filing.
Federal prosecutors filed three criminal fraud charges against Milton last July, alleging he lied about Nikola’s technology and progress to pump up Nikola’s stock price. Last month, they added a fourth charge related to a land deal in Utah that Milton offered to partially pay for with Nikola stock options.
Blaming his counsel’s advice
The government suspects Milton is planning to use an advice-of-counsel defense, effectively blaming his lawyers for his problems. Prosecutors asked Ramos to order Milton to declare his intent about using such a defense by July 1. A ruling is pending.
Despite paying tens of millions of dollars to defend Milton, Nikola has tried to distance itself from the case. It agreed to pay the Securities and Exchange Commission a $125 million fine related to Milton’s statements. But Nikola is trying to get Milton to reimburse the fine and other expenses Nikola paid on his behalf.
Milton resigned as executive chairman, left the board and separated from the company on Sept. 20, 2020. That came 10 days after a short seller’s blistering report alleging Milton lied about the company’s canceled Nikola One hydrogen-powered fuel cell electric truck and dozens of other matters. Nikola investigated the allegations internally and found some of them true.
Nikola’s plea to intervene
In a 19-page letter to Ramos, Milton’s attorneys cited 29 cases to support Nikola’s intervention and request for a protective order
“This evidence demonstrated that Milton generally did not seek advice on public statements, let alone in advance of such statements being made; and, when he did, he was told to restrain his social media usage — advice that he flatly ignored,” Nikola’s attorneys wrote.
Milton has no legitimate claim to ask for waiving attorney-client privilege beyond that which involves him directly. Besides, Nikola attorneys said, the information is irrelevant to the case.
“Indeed, despite having been provided with a copy of his email inbox as part of his separation, Milton has not yet cited a single document showing that Worthen — or any other lawyer — ‘explicitly approved’ his public statements,” Nikola’s attorneys wrote. “In any event, legal advice given to other employees cannot establish the truth or falsity of a statement.”
Latest dustup between Nikola and Milton
Nikola’s refusal to bait the hook for Milton in a court fishing expedition is the latest dustup between Milton and the company. Nikola is spending significant amounts to overcome Milton’s resistance to a company proposal to increase the number of authorized shares in the company.
His vote against the proposal — which accounted for 85% of the no vote — has led to two adjournments in the company’s annual meeting. Nikola issues practically daily entreaties to shareholders to vote remaining proxies in favor of the measure that would allow Nikola to raise money to scale its business.
The increase in authorized shares from 600 million to 800 million would significantly dilute Milton’s 11% stake in the company if the shares are activated and used to pay for increased electric and fuel cell truck production and development of hydrogen fuel stations.
Nikola needed 2% of 112 million unvoted proxies as of June 30 to pass the proposal. The meeting resumes next Monday.