Nikola CEO testifies that company's founder misstated facts
Nikola Corp.’s top executive testified at the trial of the truckmaker’s founder on Monday, saying he repeatedly tried without success to rein in a man prone to exaggeration and misstating facts while trying to elevate his company's share price with promises he couldn't keep.
Chief Executive Officer Mark Russell told jurors in federal court in Manhattan that Nikola founder Trevor Milton had “extraordinary control” at Nikola as the company's chief executive and largest shareholder, as it tried to create zero-emission trucks that run on electricity or hydrogen fuel cells.
Milton, 40, has pleaded not guilty to securities and wire fraud charges two years after resigning from the company. His lawyers insist at a trial entering its second week that their client never intended to defraud or deceive anyone. Milton is charged with whipping up an investor frenzy for the startup company with false claims about its production capabilities.
Nikola, which continues to operate from an Arizona headquarters, didn’t admit any wrongdoing last year when it paid $125 million to settle Securities and Exchange Commission claims.
Russell, summoned to the witness stand by prosecutors, seemed to support their contention that Milton cheated investors before and after the company's shares became publicly traded in 2020.
Russell said he insisted Milton agree he'd become chief executive officer once Nikola was publicly traded before joining Nikola's executive team, after leaving a company in 2018 that had provided Nikola with early funding.
“It was the best business idea I've come across in my career,” he said.
Russell said he wanted to ensure Milton was no longer the company's mouthpiece because he “was prone to exaggeration in making public statements.”
“He would sometimes exaggerate, sometimes misstate facts,” Russell said. “I explained to him that as top executive, anything he says in public would be the equivalent of a press release or a securities filing.”
But he said Milton continued his ways, including going on “what you'd call a blitz” of public appearances and social media postings after the company went public.
Milton also remained in control of the company by becoming an “executive board member” after Russell became CEO, meaning Russell would still report to Milton.
The board, meanwhile, had members including Milton's father and lacked anyone with public company experience, Russell said.
Hear New York Times reporter Jack Ewing discuss this case with host Mark Brodie on The Show
When the company's share price rose dramatically, Milton became “very excited” and claimed his publicity efforts reached small retail investors, Russell said.
“I'd say I don't really want them,” Russell said, explaining that he sought steady, large institutional investors instead.
In one meeting in late 2019 or early 2020, a team of Nikola executives were using a deck of slides to explain the company's plans to a prospective institutional investor when Milton began “selling” rather than using the slides — to the surprise of executives and bankers who were there, he said.
After the meeting, Russell said he told Milton it would be better if he didn't attend meetings with prospective investors anymore.
When the company announced in March 2020 that it was going to be listed on the NASDAQ exchange, it valued itself in a press release at $3.3 billion or $10 per share, citing 14,000 in “preorders” it claimed represented over $10 billion in potential revenue. But Russell testified that the interest companies had shown in buying its products were not actual orders.