Charge rests on Nikola founder’s fraud trial
The prosecution in Trevor Milton’s federal fraud trial ended Friday after three weeks of calling witnesses who portrayed the Nikola Corp founder. as a prevaricator obsessed with the startup’s share price.
Milton, 40, faces up to 25 years in prison if convicted on the most serious of four securities and wire fraud charges. His defense attorneys say Milton believed what he said and never intended to mislead anyone.
The defense plans to present its case on Monday and rest on Tuesday. The jury of nine men and three women could start deliberating next week.
Coordinated Deception Image
Federal prosecutors attempted to paint a picture of coordinated deception. Defense attorneys planted seeds that Milton wasn’t alone in exaggerating claims about the startup electric truck maker.
Two main themes emerged from the testimonies: Milton enjoyed telling stories about the business he founded in the basement of his Utah home in 2015 to anyone who would listen. And Milton was obsessed with the stock price once the company went public.
Milton’s exaggerations about Nikola’s technological accomplishments and future opportunities include the government case being tried in U.S. District Court for the Southern District of New York in Manhattan. Prosecutors say Milton coerced retail traders into investing in the business and relied on their lack of diligent research.
The government issued its first subpoenas to Nikola in September 2020, after a report by short seller Hindenburg Research alleged that Nikola existed on a “ocean of lies”. Nikola stock lost 24% of its value in the two days following the report.
Land for sale a late addition
The government charged Milton with three counts of wire fraud and securities fraud in July 2021. Prosecutors added a fourth count in June related to a land deal in which Milton offered options to purchase of shares from Nikola in partial payment for a ranch in Utah.
Landowner Peter Hicks sued Milton for $45 million in civil court earlier this year. The options Hicks agreed to accept proved worthless. He admitted on cross-examination that he made a profit of $1.6 million on the land deal after selling the Nikola shares that Milton had sold him at a discount.
Nikola leaders take a stand
Nikola CEO Mark Russell and CFO Kim Brady testified against Milton. Both said Milton played freely with the facts despite being warned of the potential consequences. At one point Russell, Brady and Chief Counsel Britton Worthen conducted what Russell described as an “intervention” with Milton.
Russell testified that he threatened to quit but decided against it because it would destabilize the company. Nikola’s directors chose Russell, a seasoned manufacturing executive, over Milton to lead the company as it completes a merger with special-purpose acquisition firm VectoIQ.
Milton persuaded the trustees to appoint him as executive chairman, effectively Russell’s boss, much to Russell’s chagrin. Russell had worked with Milton at Worthington Industries and reunited with him as president of Nikola in 2019. He described Milton as a visionary who got carried away, but he didn’t accuse him of outright criminality.
Brady was much harsher on Milton when speaking out, saying Milton’s public statements “could be inaccurate and exaggerated”. On cross-examination, Brady got combative with Milton’s defense attorneys, who pointed out that as chief financial officer, Brady signed many of the company’s biggest contracts and commitments.
More lawsuits to come
Brady also approved tens of millions of dollars for Milton’s defense, as part of his separation agreement when Milton resigned from Nikola in September 2020, about 10 days after the Hindenburg report.
Nikola and Milton will begin mediation in January over his attempt to force Milton to reimburse the company for his defense and a $125 million fine Nikola has agreed to pay the Securities and Exchange Commission to settle the allegations related to Milton. Nikola did not admit any wrongdoing in the settlement.
The SEC sued Milton for many of the same allegations contained in the criminal complaint. This case is pending until the end of the criminal trial.
Nikola CFO: Milton’s claims ‘could be inaccurate and exaggerated’
Nikola CEO testifies that Trevor Milton went on a “blitz” to attract shareholders
Trevor Milton cast as greedy villain and victim of betrayal in fraud trial
Click for more FreightWaves articles by Alan Adler.