Nikola changed its social media passwords and even tried “an intervention” to rein in founder Trevor Milton’s social media activities, CEO Mark Russell testified Tuesday in Milton’s fraud trial.
The chief executive described his relationship with Milton as strained to the point where he considered resigning from the electric truck manufacturing startup because Milton wanted to remain CEO after the company went public via special purpose acquisition company VevtoIQ in June 2020.
“Trevor said, ‘I’m not sure the company is ready for me to step away,’” Russell told Assistant U.S. Attorney Jordan Estes during his second day of testimony in Milton’s federal fraud trial in New York. “It wasn’t what we agreed. I did my best to persuade people. But he became executive chairman.”
Milton’s use of social media to spread fabrications about the company he founded in 2015 is at the heart of securities and wire fraud charges punishable on conviction by 20 to 25 years in prison each.
Nikola was aware of what Milton was doing and took steps to rein him in, Russell said. That included “an intervention” by Russell, CFO Kim Brady and Chief Counsel Britton Worthen.
“He expressed emotional hurt,” Russell said of Milton’s reaction to the meeting. “He told me to decide if I was on his side or not. I started considering resigning. But it would have created a crisis for the company.”
Nikola changed the passwords to its social media accounts to slow Milton.
“He talked to someone and got it reversed,” Russell said. “He kept tweeting.”
Russell also told Milton his request to sell $70 million of his company stock before Nikola reported any revenue was ill-advised. Milton went ahead anyway.
“What was Mr. Milton purchasing?” Estes asked.
“Ranch land in Utah and Wyoming. And jets,” Russell responded. “I told him he should wait.”
‘I tried to help him’
Under cross-examination by defense attorney Marc Mukasey, Russell said he tried to be a mentor to Milton, who is 20 years younger than him.
“I tried to help him,” Russell said.
Mukasey asked Russell how much his Nikola stock was worth. He said $190 million to $200 million based on the Black Scholes mathematical formula. Several jurors perked up at that response. Russell, 60, will step down as CEO on Jan. 1.
Asked when the “intervention” with Milton occurred, Russell responded, “I didn’t keep notes.”
Approached outside court, Milton only laughed when asked whether the intervention occurred.
Nikola’s stock soars, then crashes
In the five days after Nikola went public, its market capitalization soared from $3 billion to $27 billion.
The stock began a long decline after short seller Hindenburg Research published a negative report Sept. 10, 2020, alleging Nikola was built on “an ocean of lies.”
After the Hindenburg report, Russell said Nikola Chairman Steve Girsky told him the board would begin negotiating Milton’s exit. Milton resigned Sept. 20. He was indicted July 29, 2021, and is free on $100 million bail.