The prosecution in Trevor Milton’s federal fraud trial rested Friday after three weeks of calling witnesses who painted the Nikola Corp. founder as a prevaricator obsessed with the startup’s stock price.
Milton, 40, faces up to 25 years in prison if convicted on the most serious of four securities and wire fraud charges. His defense attorneys claim Milton believed what he was saying and never intended to mislead anyone.
The defense expects to present its case Monday and rest on Tuesday. The jury of nine men and three women could begin deliberating next week.
Picture of coordinated deceit
Federal prosecutors tried to paint a picture of coordinated deceit. Defense attorneys planted seeds that Milton was not alone in exaggerating claims about the startup electric truck maker.
Two main themes emerged from witness testimony: Milton liked to tell stories about the company he founded in the basement of his Utah home in 2015 to anyone who would listen. And Milton obsessed over the stock price once the company went public.
Milton’s exaggerations about Nikola’s technology accomplishments and its future opportunities comprise the government’s case being tried in the U.S. District Court for the Southern District of New York in Manhattan. Prosecutors claim Milton coerced retail traders to invest in the company and counted on their lack of diligent research.
The government issued its first subpoenas to Nikola in September 2020, after a report by short seller Hindenburg Research alleged Nikola existed on an “ocean of lies.” Nikola stock lost 24% of its value in the two days after the report.
Land deal a late add
The government charged Milton with three counts of wire and securities fraud in July 2021. Prosecutors in June added a fourth count tied to a land deal in which Milton offered Nikola stock options in partial payment for a Utah ranch.
The landowner, Peter Hicks, sued Milton for $45 million in civil court earlier this year. Options Hicks agreed to accept ended up being worthless. He admitted during cross-examination that he made a $1.6 million profit on the land deal after selling Nikola shares Milton sold him at a discount.
Nikola executives take the stand
Nikola CEO Mark Russell and CFO Kim Brady testified against Milton. Both said Milton played loose with the facts despite being warned about potential consequences. At one point, Russell, Brady and chief counsel Britton Worthen conducted what Russell described as an “intervention” with Milton.
Russell testified he threatened to quit but decided not to because it would destabilize the company. Nikola’s directors chose Russell, a seasoned manufacturing executive, instead of Milton, to run the company upon conclusion of a merger with special purpose acquisition company VectoIQ.
Milton persuaded directors to name him executive chairman, effectively Russell’s boss, to Russell’s chagrin. Russell had worked with Milton at Worthington Industries and reunited with him as Nikola president in 2019. He described Milton as a visionary who got carried away, but he did not accuse him of outright criminality.
Brady was much tougher on Milton when he took the stand, claiming Milton’s public statements “could be inaccurate and exaggerated.” Under cross-examination, Brady was combative with Milton’s defense attorneys, who pointed out that as CFO, Brady signed off on many of the company’s biggest contracts and commitments.
More legal proceedings ahead
Brady also has approved tens of millions of dollars for Milton’s defense, part of his separation agreement when Milton resigned from Nikola in September 2020, about 10 days after the Hindenburg report.
Nikola and Milton will begin mediation in January over its attempt to force Milton to reimburse the company for his defense and a $125 million fine Nikola agreed to pay the Securities and Exchange Commission to settle allegations related to Milton. Nikola admitted no wrongdoing in the settlement.
The SEC has sued Milton over many of the same allegations contained in the criminal complaint. That case is on hold until the criminal trial concludes.
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