Update 5:45 PM IST: Twitter responds to Musk’s notice by saying the letter is “invalid and wrongful,” and the company hasn’t breached any terms of the acquisition agreement.
The third time is the charm. Elon Musk’s lawyers might have been thinking that while sending the third termination notice to Twitter last Friday in an attempt to end its $44 billion acquisition of the company. In the latest notice filed with the SEC, the Tesla CEO’s legal team has objected to Twitter paying severance money to the company’s former security head Peiter “Mudge” Zatko in June — arguing that the action violated a clause in the acquisition agreement.
The notice sent to Twitter mentions that the deal agreement had a condition where the social network couldn’t pay any non-ordinary severance or termination payments to “Company Service Provider” including ex-employees. We have asked Twitter for a comment, and we’ll update the story if we hear back.
The Wall Street Journal reported last week that Twitter confidentially negotiated a $7 million severance with Zatko, who left the company in January 2022. The social network hired him in 2020 to fix the platform’s myriad security problems. The report noted that Zatko had signed a standard nondisclosure agreement while accepting the payout — but it allowed him to speak about the company through whistleblower complaints and congressional hearings.
Zatko’s whistleblower complaints to the U.S. SEC and FTC came to the fore in July alleging the company of bad security practices that could be a threat “to national security and democracy.” In response, Twitter said he was fired in January 2022 for “ineffective leadership and poor performance” and his allegations against the company painted a “false narrative.” These complaints also accused Twitter of adopting murky measurement matrices to suppress the number of fake accounts on the platform — a core issue in the Musk-Twitter legal battle.
After this incident came to the surface, Musk sent his second termination notice to Twitter last month citing Zatko’s revelations that were not previously known to him. Musk’s legal team also sent a subpoena to Zatko seeking a deposition and a ton of documents from the Twitter ex-security chief. The billionaire sent his first termination notice on July 8 after a long battle about the number of spam bots on the platform.
Earlier this month, Chancellor Kathaleen McCormick of the Delaware Court of Chancery said that Musk can use Zatko’s claims in his suit against Twitter, but denied the request to delay the trial that will get underway on October 17. Musk’s team is trying to use any number of arguments — ranging from the number of fake accounts on the service to Twitter’s shady security and privacy approaches — to get out of the $44 billion acquisition deal.