TLDR
- Tesla directors to return $919M in compensation settlement
- Settlement includes $277M cash, $459M stock options, and forfeiture of $184M future options
- Judge Kathaleen McCormick approved the settlement
- Former MoviePass parent company CEO Farnsworth pleads guilty to fraud
- Farnsworth faces up to 25 years in prison while former MoviePass CEO Lowe faces 5 years
Two separate corporate legal cases reached major milestones this week, with Tesla directors agreeing to return hundreds of millions in compensation and former MoviePass executives admitting to securities fraud.
In Delaware, Judge Kathaleen McCormick approved a settlement requiring Tesla board members to return $919 million to the company. The agreement resolves allegations that directors, including Chair Robyn Denholm and James Murdoch, had overpaid themselves.
The Tesla settlement breaks down into three main components: $277 million in cash returns, $459 million in stock options, and the forfeiture of stock options worth $184 million for the years 2021-2023. Court documents indicate that insurance did not cover the settlement amount.
Andrew Dupre, representing the shareholders in the Tesla case, expressed satisfaction with the ruling. The legal team noted that this settlement ranks as the second-largest of its kind, highlighting the scale of the compensation dispute.
The settlement received approval during a telephonic hearing, where both the plaintiffs’ attorneys and a shareholder who had objected to the deal were present. The resolution marks the end of a lengthy legal battle over executive compensation at the electric vehicle manufacturer.
MoviePass
In a separate case, Theodore Farnsworth, former CEO of MoviePass’ parent company Helios and Matheson Analytics, pleaded guilty to charges of securities fraud and conspiracy. The Department of Justice revealed that Farnsworth could face up to 25 years in prison for his actions.
Between 2017 and 2019, Farnsworth deliberately misled investors about MoviePass’s business model. He falsely claimed that offering unlimited movie tickets for $9.95 per month was sustainable, despite knowing this statement was untrue.
The Justice Department found that Farnsworth’s deceptive practices extended beyond misleading statements. He actively engaged in schemes to artificially inflate the company’s stock price, attempting to attract new investors through false representations.
J. Mitchell Lowe, the former CEO of MoviePass, has also admitted guilt in the fraud case. In September, Lowe pleaded guilty to securities fraud and awaits sentencing in March. He faces a maximum prison term of five years.
Lowe’s legal representatives, David Oscar Markus and Margot Moss, released a statement describing their client as “a good man who is looking to move forward with his life.” They emphasized that Lowe has accepted responsibility for his actions and intends to make amends.
The MoviePass case reveals a pattern of deceptive practices at the highest corporate levels. Both executives knew their business model was unsustainable yet continued to promote it to investors.
The Department of Justice’s investigation uncovered that both Farnsworth and Lowe used false statements about the company’s operations to manipulate stock prices and attract investment.
The Tesla case represents one of the largest compensation settlements in corporate history, with board members returning nearly $1 billion in various forms of compensation to the company.
The resolution of these cases demonstrates the legal system’s ability to address corporate misconduct, whether through civil settlements or criminal proceedings.
The most recent development in these cases came with Judge McCormick’s approval of the Tesla settlement, while Farnsworth’s guilty plea sets the stage for his sentencing.
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