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Tesla without Musk at the wheel? It’s what the SEC now wants

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DETROIT — Tesla without Elon Musk at the wheel? To many of the electric car maker’s customers and investors that would be unthinkable. But that’s what government securities regulators now want to see.

The Securities and Exchange Commission has asked a federal court to oust Musk as Tesla’s chairman and CEO, alleging he committed securities fraud with false statements about plans to take the company private.

The agency says in a complaint filed Thursday that Musk falsely claimed in an Aug. 7 statement on Twitter that funding had been secured for Tesla Inc. to go private at $420 per share, a substantial premium over the stock price at the time.

An SEC press release says the agency asked the U.S. District Court in Manhattan for a “bar prohibiting Musk from serving as an officer or director of a public company.” It also is asking for an order enjoining Musk from making false and misleading statements along with repayment of any gains as well as civil penalties.

Ousting Musk, who has a huge celebrity status with more than 22 million Twitter followers, would be difficult and could damage the company. He’s viewed by many shareholders as the leader and brains behind Tesla’s electric car and solar panel operations.

The stock market shuddered at the prospect. At the opening bell Friday, shares slid 10 percent.

“Corporate officers hold positions of trust in our markets and have important responsibilities to shareholders,” Steven Peikin, co-director of the SEC’s Enforcement Division, said in a statement. “An officer’s celebrity status or reputation as a technological innovator does not give license to take those responsibilities lightly.”

Musk, in a statement issued by Tesla, called the SEC action unjustified.

“I have always taken action in the best interests of truth, transparency and investors. Integrity is the most important value in my life and the facts will show I never compromised this in any way,” the statement said.

The complaint alleges that Musk’s tweet harmed investors who bought Tesla stock after the tweet but before accurate information about the funding was made public.

Peter Henning, a law professor at Wayne State University and a former SEC lawyer, said it’s the first fraud case involving use of social media by the CEO of a public company. Musk and Tesla didn’t fully disclose details of the plan in the Aug. 7 tweet or in later communications that day as required, he noted.

“You can’t make full disclosure in 280 characters,” he said, referring to the length limit of a tweet.

Joseph Grundfest, a professor at Stanford Law School and former SEC commissioner, said Musk will likely want to settle before trial so that he could conceivably stay on as CEO, with some constraints such as prohibiting him from making public statements without supervision. But Musk also could agree to step down as CEO and instead take another title, such as chief production officer.

The Wall Street Journal, citing people familiar with the matter, reported that Musk had been close to settling with the SEC but that he and his lawyers decided at the last minute to fight the case. Tesla did not respond to a request for comment on the report.

Grundfest also said that the challenge for the SEC is to “appropriately discipline Musk while not harming Telsa’s shareholders.”

According to the complaint, Musk met with representatives of a sovereign investment fund for 30 to 45 minutes on July 31 at Tesla’s Fremont, California, factory. Tesla has identified the fund as Saudi Arabia’s Public Investment Fund, which owns almost 5 percent of the company.

Fund representatives expressed interest in taking Tesla private and asked about building a factory in the Middle East, Musk told the SEC. But at the meeting, there was no discussion of a dollar amount or ownership stake for the fund, nor was there discussion of a premium to be paid to Tesla shareholders, the complaint said. Musk told the SEC that the lead representative of the fund told him he would be fine with reasonable terms for a go-private deal.

“Musk acknowledged that no specific deal terms had been established at the meeting and there was no discussion of what would or would not be considered reasonable. Nothing was exchanged in writing,” the complaint stated.

The SEC alleged in the 23-page complaint that Musk made the statements using his mobile phone in the middle of a trading day. That day, Tesla shares closed up 11 percent from the previous day. Musk has said that he posted the go-private tweet while driving to the airport and that no one reviewed it.

The statements, the complaint said “were premised on a long series of baseless assumptions and were contrary to facts that Musk knew.” Later in the month, Tesla announced that the go-private plan had been scrapped.

In its complaint, the SEC said that Musk’s statements hurt short sellers, investors who borrow a company’s stock betting that it will fall. Then they buy the shares back at a lower price and return them to the lenders, pocketing the profit.

In August, more than $13 billion worth of Tesla shares were being “shorted” by investors, the complaint said, as the stock was under pressure due to questions about Tesla’s finances and Musk’s erratic behavior.

Mark Spiegel, a short-seller and constant Musk critic, applauded the SEC for pursuing what he predicted would be easy for the government to prove.

Spiegel also echoed the concerns of corporate governance experts who have lambasted Tesla’s board for being too beholden to a CEO that they are supposed to oversee.

“They should have fired him a long time ago. Will they now? I don’t know,” Spiegel said.

There was no indication of that in a joint statement issued late Thursday by the company and its board.

“Tesla and the board of directors are fully confident in Elon, his integrity, and his leadership of the company,” the statement said.

 

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At 0.3% dip, September retail sales drop by largest amount in seven months

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The overall economy grew at a 2% annual rate in the April-June quarter with much of that strength coming from a 4.6% surge in consumer spending, which accounts for about 70% of economic activity. (© 2019 FOTOSEARCH)

WASHINGTON — Retail sales dropped in September by the largest amount in seven months, possibly signaling that rising trade tensions and turbulent markets are having an impact on consumer spending.

Retail sales fell 0.3% last month following a 0.6% gain in August, the Commerce Department reported Wednesday. It was the first decline since a 0.5% drop in February.

Retail sales are important to the trucking industry because trucks carry an estimated 75-80% of the merchandise sold at retail outlets.

Consumer spending was strong in the spring and economists had been counting on continued strength to protect the U.S. economy as it is buffeted by the fallout from President Donald Trump’s trade war with China.

The spending decline in October, which was unexpected, was influenced by special factors including a big 0.7% decline in sales at gasoline stations, a decline that likely reflected falling gas prices during the month.

The overall economy grew at a 2% annual rate in the April-June quarter with much of that strength coming from a 4.6% surge in consumer spending, which accounts for about 70% of economic activity.

That spending pace had been expected to slow in the July-September quarter but still remain strong enough to support economic growth near the 2% rate seen in the spring.

But some economists are worried that a slowing global economy and the adverse impact of the U.S.-China trade war could slow overall growth so much that the country could see an increasing risk of a recession ending the current record-long U.S. expansion, which began in June 2009.

“It looks like the trade war has claimed yet another victim, in addition to diminished business confidence and reduced investment spending, … consumers are starting to chicken out,” said Chris Rupkey,  chief financial economist at MUFG in New York.

Many economists said the disappointing retail sales performance would make it more likely that the Federal Reserve will cut interest rates in October for a third time this year to buy more insurance against a recession when they meet later this month.

Michael Pearce, senior U.S. economist at Capital Economics, said while there were special factors affecting the weak September sales performance, the report contained clear signs that consumption growth is slowing.

He said the report was consistent with his view that the overall economy will continue to slow to a rate of just 1% by the final three months of this year. He said that will prompt the Fed to cut rates again but not until the December meeting.

In addition to the drop in gasoline sales, sales of autos fell 0.9% in September after a solid 1.9% increase in August.

Sales at department stores were down 1.4% while sales at general merchandise stores, which include chain retailers such as Walmart and Target, fell 0.3%.

Sales also dropped at hardware stores, grocery stores and sporting goods stores. Clothing stores, restaurants and health care stores all saw increases.

Sales in a retail control group which focuses on key components that go into computations of GDP were unchanged in September after a 0.3% gain in August.

 

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TA Logistics, sister companies collaborate to offer expanded footprint

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CFI, a sister company of TA Logistics, is one of the nation’s leading truckload carriers with a fleet of over 2,300 trucks and 7,000 trailers providing on-demand as well as dedicated truckload service packages.  (Courtesy: TA LOGISTICS)   

EAGAN, Minn. — Third-party logistics provider TA Logistics Tuesday said it is expanding its service capabilities and solution resources by adding to its portfolio asset availability from Transport America, as well as sister companies CFI, one of the nation’s leading truckload carriers, and CFI Logistics, a provider of integrated supply chain solutions.

The businesses all are operating companies of TFI International Inc.

TA Logistics, founded in 2000, has long provided third-party logistics services for manufacturing, industrial and retail-based business.

By formally incorporating CFI and CFI Logistics into its solution set, the company gains broader capabilities to address customer needs for dedicated truckload capacity, freight brokerage, transportation management and network optimization, warehousing and distribution and supply chain engineering, according to Bill Carter, vice president of logistics for TA Logistics.  Additionally, the company maintains a relationship with and access to TForce, a provider of expedited same-day final mile delivery.

“Customers increasingly want a logistics partner that can operate and deliver value across the broadest footprint of their supply chain,” Carter said. “Establishing more formal relationships and joint sales efforts with our sister companies – and the complementary capabilities they offer – allows us to leverage proven assets and services and significantly bolster our ability to meet more of our customers’ needs.”

Carter said that bringing to market a portfolio of logistics management, same-day final-mile delivery, reliable middle-mile trucking, and over-arching supply chain optimization capabilities is critical for today’s evolving, high-velocity, eCommerce-driven supply chains.

“Customers want to be able to choose a single element of service, a broadly integrated solution, or anything in between,” he said. “Yet the common denominator is to have those multiple capabilities within one organization that can flex and adapt. That’s a valuable differentiator that TFI companies enjoy.”

TForce operates a network of 60 distribution and product staging centers in the U.S., with nearly 4,400 dedicated last-mile delivery trucks, covering 92 percent of communities in the U.S. TForce’s capabilities include expedited last mile service for parcel, package, freight and large-format goods delivered into homes or businesses.

CFI is one of the nation’s leading truckload carriers with a fleet of over 2,300 trucks and 7,000 trailers providing on-demand as well as dedicated truckload service packages. CFI Logistics provides complimentary supply chain planning, optimization and transportation management services to ensure optimal network operations, asset deployment and utilization, and supply chain productivity.

Importantly, Carter said, with CFI’s 35 years of experience and operations in Mexico, inbound cross-border goods from Mexico can now be seamlessly managed and expedited for delivery into TA Logistics distribution centers, where they can then be staged for order fulfillment and final-mile delivery via an owned intra-Mexico LTL network.

Lastly, he said customers benefit from the convenience and efficiency of working with one service provider for multiple needs, and receiving a single, consolidated invoice.

“Time is money for our customers, so ease and efficiency of doing business and not having to manage multiple carriers and invoices becomes a key advantage,” Carter said.

 

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Transportation, safety, funding to be emphasis area for new AASHTO president

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Patrick McKenna, left is the new president of the American Association of State Highway and Transportation Officials. The association’s new vice president is Victoria Sheehan. (McKenna photo courtesy Missouri Department of Transportation: CATHY MORRISON; Sheehan photo courtesy: NEW HAMPSHIRE DOT)

WASHINGTON — The newly-elected president of the American Association of State Highway and Transportation Officials (AASHTO) says he plans to emphasize the need for surface transportation funding reauthorization and highlight transportation safety as the major focus areas of his one-year term.

“We need to make clear the public benefit of federal surface transportation investment and its impact on the safety, mobility, health, and economic well-being of all Americans,” Patrick McKenna, director of the Missouri Department of Transportation since 2015, said in a statement reported by the Journal, AASHTO’s official publication.

The expiration of the 2015 Fixing America’s Surface Transportation or FAST Act in September 2020 means reauthorizing surface transportation funding will occur in a presidential election year: “a tall task, but one that AASHTO and its members must fully embrace [as] state DOTs depend on the funding stability provided by multi-year transportation program,” McKenna said.

Launching a national campaign focused on how “transportation is personal” that explains the many benefits transportation investment provides to all Americans is one tactic McKenna plans to spearhead during his term as AASHTO’s 2019-2020 president as part of the organization’s effort to get surface transportation funding legislation reauthorized.

He also plans to place renewed focus on reducing transportation fatalities, which McKenna described as a “national public health crisis” in his remarks.

“Despite tremendous advances in technology and millions invested in [driver] education, the annual loss of life on our nation’s roads is staggering,” he said, noting that the National Highway Traffic Safety Administration’s most recent estimates indicated that 36,700 people died on America’s roads in 2018.

To help reduce those losses, McKenna said AASHTO will continue its role in the Towards Zero Deaths and Vision Zero national coalitions while “facilitating a conversation” with state DOTs and local communities to consider ways to deploy “innovative infrastructure designs and technologies” to more safely accommodate pedestrians, bicyclists, and scooter users.

McKenna, who recently completed a one-year term as AASHTO’s 2018-2019 vice president, also served as president of the Mid America Association of Transportation Officials for 2017-2018 and is a member of the executive committee for the National Academy of Science’s Transportation Research Board.

Victoria Sheehan will be AASHTO’s vice president in 2019-2020.

Sheehan commissioner of the New Hampshire DOT in 2015 after a 10-year career in the Massachusetts Department of Transportation’s highway division, where she served in a number of roles including accelerated bridge program manager, bridge program consultant contracts administrator, and finally as manager of strategic planning and highway performance.

Sheehan is originally from Northern Ireland.

She is only the second woman to serve as vice president in the association’s 105-year history.

 

 

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