As the date of his federal fraud trial nears, Nikola founder Trevor Milton casts a long shadow over his own fate and that of the electric truck manufacturer.
Milton has not actively participated in the startup electric truck and hydrogen maker’s business in more than 16 months. Yet his influence as a major shareholder weighs heavily on the company.
Most recently his vote against increasing the number of authorized shares in Nikola — a move that would dilute his approximately 11% ownership stake — threatens the company’s future. Milton also had voting rights to a substantial block of shares jointly owned with CEO Mark Russell. Milton relinquishes those voting rights to Russell in June 2023.
The meeting reconvenes virtually on Thursday, after which Nikola will release the result of the voting. If the measure doesn’t get enough votes, Nikola could try again in a year when Russell would control the jointly owned voting block.
Milton’s latest irritant
The cost of soliciting proxies for the increased number of shares is just the latest irritant Milton has placed in the way of the management team that succeeded him following his September 2020 resignation.
The company agreed to pay the Securities and Exchange Commission a $125 million fine over two years related to claims Milton made about Nikola’s technological prowess and other assertions found in an internal investigation to be untrue. The company wants Milton to reimburse the company the cost of the fine and other legal expenses.
Milton’s legal problems worsen
Prosecutors added a fourth charge against Milton last Wednesday. He allegedly defrauded the seller of a land contract for Utah property by offering to partially pay for the deal in Nikola stock options. Milton’s legal team on filed a motion Tuesday seeking to shield Milton’s wealth, lifestyle and spending habits from jurors at his trial calling it “irrelevant and unfairly prejudicial.”
Pressing for more time
Late Monday, Milton’s attorneys filed a letter pressing for a 30-day delay versus seven days offered by prosecutors.
The letter said the fourth charge differs from the first three, which allege Milton tried to pump up enthusiasm by retail investors for Nikola stock through a persistent presence on social media and interviews with financial media. The land contract issue is unrelated and would require a “pivot” in trial strategy, they said.
“Nothing in the original Indictment provided notice that these issues would be presented at
trial, let alone result in Count Four,” Milton attorney Bradley Biondi wrote to Ramos. “Defense counsel first learned that this transaction might be presented at [Milton’s] trial on June 16, 2022. Nothing in the prior discovery from the government referenced the private real estate transaction or otherwise provided any forewarning.”
Ramos earlier ruled against Milton’s bid to get his trial moved out of New York to Utah, where he resides, or to Phoenix, where Nikola has its headquarters. The trial date was set for July when he declined to appeal the denial of a venue change.
Milton’s attorneys argued that pressing ahead with the trial creates a “Hobson’s choice – to go to trial unprepared on a new count that carries a term of imprisonment of 20 years or to forego his constitutional right to a speedy trial. A speedy trial does not mean a trial by eleventh-hour surprise.”
Prosecutors are keeping the heat on Milton. They filed a motion Monday seeking to require himto declare by Friday if he plans to use an “advice of counsel” defense — effectively blaming his attorneys for giving him bad advice in the case.
