Federal prosecutors have not offered a plea deal to indicted Nikola Corp. founder Trevor Milton nor has his defense team sought one, setting the stage for his criminal fraud trial to begin on Monday.
The revelation in the final pretrial conference in U.S. district court in New York on Thursday essentially put to rest speculation that the founder of the Phoenix-based electric truck manufacturer would avoid a jury trial.
The government charges in four counts that Milton lied about the company’s technology progress and prowess to inflate the company’s stock price. Free on $100 million bail, he could face a long federal prison sentence if convicted. Jury selection begins Monday. Opening opening arguments should follow on Tuesday.
The trial could last five weeks.
The case has been compared to that of former biotechnology entrepreneur Elizabeth Holmes, founder of health technology company Theranos. She was convicted in January of defrauding investors and faces up to 20 years in federal prison when she is sentenced in October.
Milton’s motions denied
U.S. District Judge Edgardo Ramos repeatedly dismissed Milton’s defense motions, including an attempt to keep out a 2017 video showing a Nikola prototype truck being rolled down a hill that Milton claimed ran under its own power.
The defense claimed the video predated the allegations in the criminal complaint and would inflame a jury. The judge said the video is relevant to the charges Milton faces.
Ramos also granted Nikola’s motion to intervene as a third party in the trial. It was trying to prevent Milton from using certain confidential company communications in his defense.
The company also was granted a protective order blocking Milton from eliciting testimony about communications between him and the company’s general counsel that are protected by attorney-client privilege.
Is Nikola a meme stock?
Several exchanges between prosecutors and Milton’s defense team became testy and sarcasm tinged, including an argument over a prosecution witness expected to testify about social media.
“We oppose the testimony of Dina Mayzlin,” one of Milton’s attorneys said. “All she would talk about are social media posts, followers and the like. People out in the ether, chatting. It’s prejudicial.”
Assistant U.S. Attorney Nicolas Roos countered: “She’s the dean of the USC marketing school. She has a degree from MIT. … Let me give you a tutorial about the Wall Street Bets area of Reddit.”
Judge Ramos asked, “Are you saying Nikola became a meme stock?”
Roos replied, “Some investors would say so.”
Milton attorney Marc Mukasey then interjected with: “This is junk science.”
Ramos ruled: “I’m going to allow her to testify.”
Prosecutors said they plan to call “three or four” investors as witnesses.
“I am granting the government’s motion to exclude arguments that investors acted negligently,” Ramos said. “But the defense can ask tough questions. We’ll deal with it.”
4th charge added in June remains
The fourth charge against Milton added in June accuses him of talking up the value of Nikola stock options to get the seller of a Utah ranch to accept them as part of a multimillion-dollar land sale. The landowner sued Milton in a civil case earlier this year.
Ramos ruled against Milton’s motion to dismiss the charge. He also ruled as moot a motion over whether Milton’s attorneys would use an “advice of counsel” defense, essentially blaming his troubles on poor advice from his legal counsel. Defense lawyers said they would not use that approach.
Milton’s social omnipresence
A frequent user of Twitter, Milton was a constant presence on social media, hyping the Nikola story in his role as executive chairman. The company went public in June 2020 via special purpose acquisition company VectoIQ. It was an early SPAC success story only to become the first to find itself enmeshed in scandal.
Milton’s frequent media interviews and social media posts, combined with a pandemic-fueled increase in day trading, led Nikola’s stock price above $90 a share in the days following the completion of its business combination.
Short seller Hindenburg Research published a scathing report in September 2020 that ultimately led Milton to resign. The stock began a long decline in part because of Hindenburg’s claims the company was built on “an ocean of lies.” Some of those allegations caught the attention of the Justice Department and Securities and Exchange Commission. Investigations ultimately led to three fraud counts against Milton in July 2021.
Nikola agreed to pay the SEC a $125 million fine over two years and admitted no wrongdoing. The company is seeking reimbursement of the fine and other money it spent defending Milton in an ongoing arbitration. Milton has sold tens of millions of dollars worth of Nikola stock since a lockup on his once-dominant stake expired in December 2020.
Editor’s note: Corrects spelling of Mayzlin