The prosecution rested its case in Trevor Milton’s federal fraud trial on Friday, after three weeks of questioning witnesses who characterized the Nikola Corp. founder as a liar obsessed with the startup’s stock price.
If convicted on the most serious of four securities and wire fraud counts, Milton, 40, faces up to 25 years in jail. According to his defense attorneys, Milton believed what he was saying and never sought to deceive anyone.
The defense anticipates presenting its case on Monday and resting on Tuesday. The nine men and three women jury might start deliberating as early as next week.
Image of organized deception
Federal prosecutors attempted to build a picture of deliberate deception. According to defense attorneys, Milton was not alone in embellishing statements about the nascent electric truck producer.
Witness evidence revealed two major themes: Milton enjoyed telling stories about the company he created in the basement of his Utah home in 2015 to anyone who would listen. When the firm went public, Milton became preoccupied with the stock price.
The government’s case is being heard in the United States District Court for the Southern District of New York in Manhattan, and it is based on Milton’s exaggerations regarding Nikola’s technological successes and future potential. Prosecutors believe Milton pressured retail traders into investing in the company and profited from their lack of due diligence.
After research by short-seller Hindenburg Research said Nikola existed on a “ocean of lies,” the government sent its first subpoenas against him in September 2020. Nikola stock dropped 24% in the two days following the report.
A late addition to the land agreement
In July 2021, the government accused Milton of three charges of wire and securities fraud. Prosecutors added a fourth indictment in June related to a land deal in which Milton offered Nikola stock options in exchange for a Utah ranch.
Peter Hicks, the landowner, sued Milton in civil court earlier this year for $45 million. Options that Hicks decided to accept turned out to be worthless. During cross-examination, he revealed that he made a $1.6 million profit on the land sale by selling Nikola shares Milton sold him at a discount.
Executives from Nikola take a stand
Nikola CEO Mark Russell and CFO Kim Brady both testified in Milton’s favor. Both said Milton lied about the facts despite being warned about the repercussions. Russell, Brady, and chief counsel Britton Worthen conducted what Russell described as an “intervention” with Milton at one point.
Russell testified that he considered quitting but decided against it because it would disrupt the company. Following the completion of a merger with special purpose acquisition company VectoIQ, Nikola’s directors picked Russell, a seasoned manufacturing executive, to lead the company instead of Milton.
To Russell’s displeasure, Milton persuaded the board of directors to declare him executive chairman, thus making him Russell’s boss. Russell previously worked with Milton at Worthington Industries and re-joined him as president of Nikola in 2019. He portrayed Milton as a dreamer who got carried away, but he never accused him of illegal behavior.
When Brady took the stand, he was much harsher on Milton, noting that Milton’s public pronouncements “may be false and overblown.” Brady was confrontational during cross-examination with Milton’s defense attorneys, who pointed out that as CFO, Brady signed off on many of the company’s largest contracts and commitments.
There will be more legal processes
Brady has also approved tens of millions of dollars for Milton’s defense as part of his separation agreement with Nikola when Milton quit in September 2020, around 10 days after the Hindenburg story.
Nikola and Milton will begin mediation in January over the company’s attempt to make Milton to pay for his defense and a $125 million fine. To settle claims against Milton, Nikola agreed to pay the Securities and Exchange Commission. In the settlement, Nikola admitted no wrongdoing.
The SEC has sued Milton on many of the same grounds as the criminal complaint. That case has been put on hold until the criminal trial is completed.
