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Critical court decisions loom for Elon Musk as he straddles politics and business (Video)
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Critical court decisions loom for Elon Musk as he straddles politics and business (Video)

Elon Musk faces major court rulings in the coming days and weeks as a judge weighs the legality of his billionaire electoral draw while another decides if the tesla (TSLA) CEO recovers $56 billion compensation package.

Musk is used to fighting business battles in court. But on Monday it was his recent foray into presidential politics on behalf of Republican candidate Donald Trump that put him on the defensive.

During a hearing in Pennsylvania state court, Musk’s lawyers argued that a series of 1 million dollar gifts linked to Musk’s pro-Trump political action committee, America PACdid not violate the state’s gambling and public nuisance laws, as Philadelphia District Attorney Larry Krasner alleges.

Elon Musk speaks to former President Donald Trump, Republican presidential candidate, at a campaign rally at Madison Square Garden, Sunday, Oct. 27, 2024, in New York. (AP Photo/Evan Vucci)Elon Musk speaks to former President Donald Trump, Republican presidential candidate, at a campaign rally at Madison Square Garden, Sunday, Oct. 27, 2024, in New York. (AP Photo/Evan Vucci)

Elon Musk speaks to former President Donald Trump, the Republican presidential candidate, at a campaign rally at Madison Square Garden on October 27 in New York. (AP Photo/Evan Vucci) (ASSOCIATED PRESS)

Krasner, a Democrat, filed a lawsuit against Musk and his US PAC on October 28, alleging that the drawing amounted to an “illegal lottery.” It asked the court for an emergency hearing to prevent the defendants from engaging in unfair or deceptive acts or practices.

the draw presented by musk in October offer registered voters in swing states the chance to win $1 million in exchange for their email and other personal information, and a promise to support the Constitution’s protections on free speech and the right to bear arms.

On October 19, when Musk announced the petition, he said, “We’re going to give $1 million (randomly) to people who have signed the petition, every day from now until the election.”

Philadelphia District Attorney Larry Krasner walks to Elon Musk's hearing in a lawsuit filed by the Philadelphia District Attorney seeking to block Donald Trump supporter Musk's $1 million-a-day donation to Undecided state voters, at City Hall in Philadelphia, Pennsylvania, U.S., October 31, 2024. REUTERS/Matthew HatcherPhiladelphia District Attorney Larry Krasner walks to Elon Musk's hearing in a lawsuit filed by the Philadelphia District Attorney seeking to block Donald Trump supporter Musk's $1 million-a-day donation to Undecided state voters, at City Hall in Philadelphia, Pennsylvania, U.S., October 31, 2024. REUTERS/Matthew Hatcher

Philadelphia District Attorney Larry Krasner. REUTERS/Matthew Hatcher (REUTERS/Reuters)

A lawyer for Musk argued in court on Monday that the giveaways did not amount to a lottery because the $1 million winners were not chosen at random. Instead, the lawyer said, they were chosen for their potential as spokespersons for America PAC’s agenda, according to a mail by New York Times journalist Teddy Schleifer.

Before the hearing, Chris Gober, lawyer for Musk and America PAC characterized Krasner’s lawsuit as a partisan agenda disguised as legal arguments.

The case ended up back in the Pennsylvania Court of Common Pleas, after a federal district court judge disagreed with Musk’s claim that the matter belonged in federal court.

As of Monday, America PAC said it had awarded 16 separate million-dollar awards to voters in Pennsylvania, Georgia, Nevada, Arizona, Michigan, Wisconsin and North Carolina, and planned to award two more.

Musk faces another legal showdown in Delaware, where the judge who rescinded Musk’s $56 billion compensation package At the beginning of this year he is close to ruling on whether he will recover the right to that money.

Tesla is asking Delaware Court of Chancery Chief Judge Kathaleen McCormick to throw out her decision and replace it with the will of the company’s shareholders, who approved the payment for the second time in June.

McCormick ruled in January that Musk’s personal relationships with board members and general counsel were not fully disclosed to shareholders when they initially voted on this package.

Last week he made it clear that a new ruling would soon arrive. “I am writing to inform you that I intend to issue that decision before the end of this year,” McCormick wrote in a letter submitted to the court docket on Friday.

McCormick’s decision could weigh heavily on Tesla’s results.

In this courtroom sketch, Chancery Court Chief Judge Kathaleen McCormick listens to testimony in a courtroom in Wilmington, Delaware, Monday, Nov. 14, 2022, where Tesla shareholders are challenging a compensation plan for CEO Elon Musk potentially valued at more than $55 billion. (Elizabeth Williams via AP)In this courtroom sketch, Chancery Court Chief Judge Kathaleen McCormick listens to testimony in a courtroom in Wilmington, Delaware, Monday, Nov. 14, 2022, where Tesla shareholders are challenging a compensation plan for CEO Elon Musk potentially valued at more than $55 billion. (Elizabeth Williams via AP)

In this courtroom sketch from 2022, Chancery Court Chief Judge Kathaleen McCormick listens to testimony as Tesla shareholders question a compensation plan for CEO Elon Musk. (Elizabeth Williams via AP) (ASSOCIATED PRESS)

If approved, the pay deal would give Musk the right to exercise approximately $56 billion in Tesla stock options.

In 2018, when shareholders first approved the compensation package, Tesla said the pact would cost Tesla about $2.5 billion if Musk achieved all of his performance-based milestones.

In a subsequent filing with the U.S. Securities and Exchange Commission, the company said reissuing the compensation plan under Tesla’s rising stock price would cost $25 billion.

If McCormick validates the second shareholder ratification, it is unknown if a new accounting position would be required.

Robyn Denholm, Tesla’s chairman and head of its audit committee, wrote in a statement before the vote that requiring a new accounting position would amount to a misunderstanding of what ratification means.

“The company has already assumed the expense of these options, and the reality is that ratification saves shareholders from a new charge for a new compensation plan,” Denholm said.

Alexis Keenan is a legal reporter for Yahoo Finance. Follow Alexis on X @alexiskweed.

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