Feds seek 11-year prison term for Nikola founder

Federal prosecutors want Nikola Corp. founder Trevor Milton sentenced to 11 years in prison for inflating the price of the electric truck maker’s stock to enrich himself.

The proposed sentence is in line with a presentence investigation report. But it fell well below the 60 years in prison called for based on calculations of the seriousness of Milton’s crimes. The government is also seeking a $5 million fine, forfeiture of a ranch in Utah that was subject of one of three fraud convictions, and an undetermined amount of restitution to investors to be determined after Monday’s scheduled sentencing n U.S. District Court in Manhattan, New York.

Milton, 41, was convicted of one count of securities fraud and two counts of wire fraud in October 2022 following a 3 1/2-week jury trial.

‘Misleading investors in public and in person’

Milton “engaged in a sustained scheme to take advantage of individual, non-professional investors, repeatedly misleading investors both in public and in person in order to inflate the stock price of his company, Nikola, and ultimately with the goal of enriching himself,” the government said in a 41-page memo filed early Tuesday.

Attorneys for Milton argued in a presentencing memo Nov. 14 that he should receive probation because his actions had not caused any harm. Milton has been free on a $100 million bond.

According to data from the U.S. Sentencing Commission’s Judiciary Sentencing Information database, 29 white-collar crime defendants convicted during the last five years received an average sentence of 16 years and four months. 

The government sentencing memo recounts several false and misleading statements about Nikola’s achievements and technology prowess including that it had:

• Early success in creating a “fully functioning” semi-truck prototype known as the “Nikola One.”
• Engineered and built an electric- and hydrogen-powered pickup truck known as “the Badger” from the “ground up” using Nikola’s parts and technology.
• Begun producing hydrogen at a reduced cost.
• Reservations for the future delivery of Nikola’s semi-trucks that were binding orders represented billions in revenue.

‘Real harm to investors who were misled’

“The conduct not only distorted the market — at one time driving Nikola’s market capitalization higher than that of Ford’s, despite Nikola never having produced a vehicle for sale at the time — it brought real harm to investors who were misled as to the risks of their investments, which, for those who held onto their stock at the encouragement of Milton, became effectively worthless once the truth became known.”

Milton’s only interest was money, prosecutors said. 

During the course of his scheme to inflate the value of Nikola’s stock, the value of Milton’s holdings rose from approximately $1.1 billion in March 2020 to a peak of approximately $7.3 billion in June 2020.

Prior to the closing of a reverse merger with special purpose acquisition company VectoIQ in June 2020, Milton sold a portion of his Nikola stock for about $100 million. By September 2020, he had spent approximately $83.5 million, “including on luxuries like an airplane and hangar and an estate in Turks & Caicos,” the memo said.

The government said Milton’s “lack of remorse and failure to accept any form of responsibility for his actions only emphasize the need for just punishment in this case. Milton deflects, suggests others may be at fault and offers excuses for his behavior.

‘Greed, selfishness and lack of concern’

“Milton’s offenses, like so many other white-collar crimes, were the result of greed, selfishness, and lack of concern for the potential impact on others.”

Investors lost between $660.8 million to $673.6 million by following Milton’s lies and bidding up Nikola’s stock price. Shares plummeted after a short seller’s report detailing Milton’s chicanery. Both figures exceed the $550 million threshold that adds years to a recommended sentence.

“There is no reason to doubt that Milton is a loving husband, and Milton’s admirable qualities should be taken into account,” the government said in a brief reference to Milton’s positive acts. But that should not spare him from punishment, the sentencing memo said.

“There are many examples of first-time fraudsters in this district who become recidivists. Were the Court to impose the sentence requested by the defendant, he would be in his early 40s and would be fully capable of starting a new company and repeating his past conduct without fear of significant jail time.”

Editor’s note: Adds recommended $5 million fine, forfeiture and restitution and minor edits.

Related articles:

‘Ambitious dreamer’ Trevor Milton seeks probation instead of prison

Nikola founder Trevor Milton guilty on 3 fraud counts

Nikola claws back $165M from founder Trevor Milton

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