Twitter on Monday pushed back against yet another attempt from Elon Musk to back out of his $44 billion agreement to purchase the social media company, with the mogul saying Twitter’s multi-million dollar payout to a whistleblower violated the terms of their deal.
Attorneys for Musk last week sent a letter to Twitter executives pointing to the company’s $7.75 million payout to Peiter Zatko, the former head of security at the company who alleged that Twitter misled regulators about its poor cybersecurity defenses and its negligence in attempting to root out fake accounts that spread disinformation.
Zatko served as Twitter’s security chief until he was fired early this year, and filed complaints in July with the U.S. Securities and Exchange Commission, the Federal Trade Commission and the Department of Justice over the company’s alleged mishandling of security issues.
Musk’s attorneys claimed in their letter that under the terms of the merger, Twitter agreed not to give severance payments to former employees “other than the payment of severance amounts or benefits in the ordinary course of business consistent with past practice,” among other considerations. Neither Musk nor his counsel was made aware of the severance payment given to Zatko, which they said in the filing violated a portion of the original agreement between Musk and Twitter.
The social media company disagreed. In a response filed on Monday, lawyers for Twitter wrote Musk’s claim was “invalid and wrongful under the Agreement” and that the company “intends to enforce the Agreement and close the transaction on the price and terms agreed upon with the Musk Parties.”
Noting that it is the third time Musk had notified them of his intent to pull out of the deal, Twitter’s counsel wrote each attempt was unlawful for the “independent reason that Mr. Musk and the other Musk Parties continue to knowingly, intentionally, willfully, and materially breach the Agreement,” in part.
The latest back-and-forth between the SpaceX CEO and Twitter comes less than a week after a judge ruled Musk could include new evidence revealed by Zatko as he fights to get out of his $44 billion deal, but that he won’t be able to delay a high-stakes October trial over the dispute.
Chancellor Kathaleen St. Jude McCormick, the head judge of Delaware’s Court of Chancery, denied Musk’s request to delay the trial by four weeks.
Twitter has sued Musk, asking the Delaware court to force him to go through with the deal he made in April to buy the company. Musk has countersued and a trial is set to start the week of Oct. 17.
Musk’s legal team has argued that the allegations made by Zatko to U.S. officials may help bolster Musk’s claims that Twitter misled him and the public about the company’s problem with fake and “spam” accounts. Zatko, a well-known cybersecurity expert known by his hacker handle “Mudge,” said he was fired in January after raising flags about Twitter’s negligence in protecting the security and privacy of its users.
The judge’s ruling followed an hours-long hearing at which attorneys for Musk and Twitter argued with each other about the merits of Zatko’s claims and the pace at which both sides are producing evidence ahead of the trial.
Twitter’s attorneys sought to downplay the relevance of Zatko’s allegations to the merger dispute, arguing that an initial 27-page complaint he sent to Twitter and a later retaliation claim made no mention of the “spam bot” issues that Musk has given as a reason to terminate the deal. Zatko “never said a word about spam or bots” until his July whistleblower complaint, said Twitter attorney William Savitt.
Twitter has argued for weeks that Musk’s stated reasons for backing out were just a cover for buyer’s remorse after agreeing to pay 38% above Twitter’s stock price shortly before the stock market stumbled and shares of the electric-car maker Tesla, where most of Musk’s personal wealth resides, lost more than $100 billion of their value.
Zatko is scheduled to testify in front of the Senate Judiciary Committee on Tuesday about his allegations against Twitter.
“Mr. Zatko’s allegations of widespread security failures and foreign state actor interference at Twitter raise serious concerns,” committee chairman Sen. Dick Durbin, D-Ill., and ranking member Sen. Senator Chuck Grassley, R-Iowa, wrote in calling for Zatko’s testimony. “If these claims are accurate, they may show dangerous data privacy and security risks for Twitter users around the world.”