Nikola CEO Says He Learned Debut Truck Without Power After Joining

Nikola CEO Says He Learned Debut Truck Without Power After Joining

(Bloomberg) — Nikola Corp.’s chief executive officer said. to a jury that he only learned after joining the company that its first electric truck did not have a gas-powered turbine or a fuel cell when founder Trevor Milton unveiled it.

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Milton, who is on trial for allegedly lying to investors about Nikola’s progress, was prone to exaggeration, CEO Mark Russell told jurors Monday in federal court in Manhattan as he described the December 2016 disclosure. .

Under questioning by the prosecution, Russell said he warned Milton that he should “be careful” with his comments and promises as chief executive. He told the court that both Russells would come on board, first as president, but only if he became chief executive when Nikola went public.

Russell joined the company in 2019 and was quickly promoted, just ahead of Nikola’s 2020 listing. But in so far as he sought to violate his understanding with Milton, the founder became executive chairman, with final say over critical decisions.

A Warning

After the listing, Russell testified, Milton would say or do something that I would see and worry about,” and Russell would remind him that “his public statements would be the equivalent of a press release or a securities filing.”

Despite Milton’s tendency towards hype, Russell thought his plans were the best he had seen in his career, he told the court, but the two differed fundamentally on Nikola’s future.

“He was very focused on the stock price day-to-day and got excited when it went up, and that worried me,” Russell said. “I felt the most important thing we could do was build value for the long term.”

Russell testified that he and CFO Kim Brady advised Milton not to attend meetings with institutional investors. He added that Nikola had “no business” pursuing a clean energy collection truck, the Badger, and warned Milton that it would take more money to develop than the company had raised at that point. .

Read more: Nikola Cannibalized Ford for Electric Collection, Jury Said

Ultimately, as the company’s scrutiny increased, Milton resigned in September 2020, just over three months after Nikola’s reverse merger.

The testimony of the outgoing CEO, who is set to resign by Jan. 1, came in the second week of Milton’s trial on securities and wire fraud charges. Accused of dumping investors by making non-functional products appear fully functional and of lying about the company’s technology and partnerships, Milton faces a maximum of 25 years in prison if convicted of the most serious charge.

The case is what the defense calls “prosecution by distortion,” arguing that Milton was just following the company’s marketing plan and didn’t say anything he didn’t believe to be true.

Odd Fellows Bed

Russell joined Nikola’s management team six months after stepping down as president and chief operating officer of steel products manufacturer and automotive supplier Worthington Industries Inc. Before making the move, he told the jury Monday, he met with Milton several times — hence his surprise at Milton’s jump on the new CEO as executive chairman.

Veteran Michael Lohscheller, who has served as Nikola president since February, will succeed Russell, who announced his retirement last month.

Read More: Nikola’s Short Money-Blower Report

Despite the conflict between them, Russell and Milton are linked by strange circumstances. Milton partially holds Nikola stock through an entity called T&M Residual that he owns jointly with Russell. T&M owns about 9% of Nikola’s shares, according to data compiled by Bloomberg. Nikola said Russell manages the T&M shares independently of the company.

Nikola had Russell’s reunion with Milton again. The two worked together briefly at Worthington, which acquired one of Milton’s earlier startup companies. Russell confirmed that Milton had resigned from Worthington, telling him that the corporate world was not for him and that he was going to start an initiative to build the truck of the future. Russell’s understanding was that Milton was working on a natural gas turbine truck, he told the jury, explaining that it was only when he got into Nikola that he discovered vital parts were missing from the front half board.

Bad look

At one point, Russell had parts of a series of early 2020 emails read out by prosecutors, including Milton, then-director Jeff Ubben and current chairman Steve Girsky, who was also the company’s CEO. special purpose acquisition, or SPAC, Nikola took public. In the exchange, Ubben and Girsky emphasized to Milton the importance of an independent board of investors. Russell testified he joined them in that effort.

One problem they asked: It wouldn’t look good for Milton’s father, who was a director at the time, to stay on the board if Nikola was public.

Milton pushed back against changes on the board. In one email presented by the government, it highlighted one of its goals.

“The most important thing,” he said in the email, “is that I always have full control of the board and that I have people who work well with my personality.”

The case is USA v. Milton, 21-cr-478, US District Court, Southern District of New York (Manhattan).

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(He adds further evidence about Milton’s views in the second part, background on Residual T&M in the third part and conflicts over the board in the fourth part.)

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