Elon Musk, the owner of the social media platform X, was seen gesturing during an event with Britain’s Prime Minister Rishi Sunak in London on November 2, 2023.
A lawsuit filed in federal court on Monday alleges that Elon Musk wrongfully fired four former members of Twitter’s top brass just before his acquisition of the company. The lawsuit claims that this was a deliberate attempt by the billionaire to illegally deny them severance packages.
According to the complaint, Musk holds a particular disdain for Parag Agrawal, Ned Segal, Vijaya Gadde, and Sean Edgett, who formerly served as the CEO, CFO, CLO, and General Counsel of Twitter, respectively. These individuals diligently and rightfully advocated for the interests of Twitter’s public shareholders during Musk’s wrongful attempt to back out of the agreement. In response to their actions, Musk has vowed to seek revenge against them for the rest of their lives.
The lawsuit alleges that Musk tried to deceive the plaintiffs by withholding more than $128.59 million in severance pay and stock options.
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According to the 39-page lawsuit filed in the U.S. District Court for the Northern District of California, the employment contracts of the four former executives included clauses that entitled them to one year’s salary along with the value of substantial unvested stock awards if their employment was “negatively affected by a change in control.”
The unvested stock would be valued at $44 billion, which is the acquisition price of Twitter’s stock at the time of the April 2022 merger. This translates to $54.20 per share. Elon Musk, who infamously tried to withdraw from the deal and was subsequently sued, had no choice but to finalize the acquisition.
In their securities filings, X, the social media company, has listed the golden parachutes of each executive, according to the lawsuit.
According to the complaint, it is stated that the aforementioned provisions were already known and disclosed to Twitter’s public shareholders, including Musk, prior to the acquisition. The complaint further highlights that Twitter’s proxy statement specifically outlined the exact amounts that would be payable to its executive officers in the event of their involuntary termination, or if they chose to leave for valid reasons, following the acquisition.
In an attempt to bypass these compulsory payments, Musk devised a strategy, as revealed by his official biographer, Walter Isaacson. Isaacson’s book, which extensively references the lawsuit, delves into the intricate details of the plan implemented by the renowned entrepreneur behind Tesla and SpaceX.
According to the complaint, these statements were not just the ramblings of a self-absorbed billionaire with a team of enablers who turned a blind eye to the potential legal repercussions of his actions. Musk specifically boasted to Isaacson about his intention to deceive Twitter’s executives in order to avoid paying them their rightful severance benefits, thereby saving himself a staggering $200 million.
According to the lawsuit, Musk decided to finalize the acquisition just a few hours earlier than originally planned, right before the takeover was about to take place.
According to Isaacson’s book, the Twitter deal was set to close on Friday, with a carefully planned transition for the opening of the stock market. The money would be transferred, the stock would be delisted, and Musk would assume control. This would allow Agrawal and other key Twitter executives to receive their severance packages and have their stock options vested.
According to the lawsuit, Musk was able to terminate the then-executives “for cause” and avoid the financial obligations of severance pay and unvested stock awards by finalizing the deal the night before.
According to the complaint, Musk’s strategy is to retain the money he owes to others and make them take legal action against him. The complaint alleges that even in cases where Musk is unsuccessful, he can still cause delays, inconvenience, and financial burden for those who are less financially capable.
According to the plaintiffs, they were not terminated “for cause,” as claimed. The lawsuit further includes X and a number of SpaceX employees who were essentially tasked with managing Musk’s Twitter account at the time of the acquisition. The lawsuit suggests that these employees were involved in an attempt to retroactively create false justifications for the terminations.
According to the filing, Musk fired the Plaintiffs without providing them with severance benefits. The filing further alleges that Musk fabricated reasons for their termination and appointed employees from his companies to justify his decision. The termination letters accused each Plaintiff of “gross negligence” and “willful misconduct” without providing any evidence to support these claims. Despite the efforts of Musk’s employees to find supporting facts, they were unable to do so over the course of a year.
The plaintiffs have filed a lawsuit against the defendants, alleging a total of six counts under the Employee Retirement Income Security Act (ERISA). This act specifically regulates formal severance plans, including Twitter’s, and typically resolves disputes through an administrative process.
The plaintiffs in the lawsuit allege that Musk and X have intentionally prolonged the process in order to evade payment. Along with seeking severance pay and stock awards, the plaintiffs are also demanding penalties of $110 per day starting from Dec. 29, 2022, along with interest, and reimbursement for their attorneys’ fees.
We contacted X for comment on this story, but as of now, we have not received a response.
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