Ed. Note: A classic Candid Camera episode is where a car without a motor makes a downhill stop at a service station for a checkup. The attendants are stunned to find the car is engineless. Fiction and funnies turned into fact with Trevor Milton, whose hydrogen/fuel cell/electric truck company, Nikola Corp., pulled this stunt with a rolling truck in a promotional video. Kenneth Maize has the story in “Trevor Milton, E-truck Nikola Corp. Founder, Headed to Prison?“
“It was mostly smoke and mirrors. The company had acquired “gliders,” truck platforms without engines. In one notorious case highlighted by Hindenburg, Nikola in 2018 posted a YouTube video of a battery-powered Nikola cab and trailer … moving rapidly along a desert highway. Hindenburg said the truck wasn’t moving under its own power. Nikola had towed the engineless truck to the top of a hill, and it was rolling because of gravity.”
U.S. District Judge Edgardo Ramos in Manhattan Monday (Dec. 18) sentenced Trevor Milton, founder and former CEO of e-truck company Nikola Corp. (NKLA:NASDAQ) to four years in prison for defrauding investors. Prosecutors had sought a sentence of 11-years in the slammer. He will be out on bail pending an appeal.
Ramos also ordered Milton to pay a $1 million fine and forfeit a Utah property. Nikola is currently based in Phoenix, Ariz.
A federal jury in October 2022 found Milton guilty of one count of securities fraud and three counts of wire fraud.
Milton, a former door-to-door salesman and college dropout, founded the company from his Utah basement in 2015 and took it public through a Special Purpose Acquisition Company (SPAC) in 2020, raising over $3 billion. The SPAC was run by run by former General Motors vice-chairman Stephen Girsky. Girsky, who became chairman of the Nikola Board, was named Nikola CEO in August, succeeding Michael Lohscheller, who succeeded Milton.
Nikola was temporarily worth $13 billion, making it more valuable than Ford Motor Co. The company’s shares, which opened at $65.90/share not long after it went public, closed at 87 cents on Monday.
On September 8, 2020, the company announced a deal where General Motors would acquire 11% of Nikola and a seat on the board, a deal worth about $2 billion at the time. Nikola had earlier announced it would produce a fuel cell pickup named Badger, which did not exist even as a prototype,
Nikola’s shares began a precipitous decline after Hindenburg Research, an activist short selling firm, on September 10, 2020, released a devastating report on the company. Hindenburg said that “we believe Nikola is an intricate fraud built on dozens of lies over the course of its Founder and Executive Chairman Trevor Milton’s career.
We have gathered extensive evidence—including recorded phone calls, text messages, private emails and behind-the-scenes photographs—detailing dozens of false statements by Nikola Founder Trevor Milton. We have never seen this level of deception at a public company, especially of this size.” It later became known that Hindenburg had the aid of a Nikola whistleblower.
The Securities and Exchange Commission and the Department of Justice launched a criminal investigation of Nikola that month. Milton resigned on Sept. 20, 2020.
Several analysts have suggested that the company is headed toward bankruptcy, possibly liquidation. The Motley Fool stock analysis web site commented, “There’s little sign that Nikola’s business will succeed over the long term, and those who buy the stock could still wind up suffering big losses even though it has already fallen so dramatically.”
During the trial, U.S. attorney for the Southern District of New York Damian Williams said, “Trevor Milton lied to Nikola’s investors—over and over and over again. That’s fraud, plain and simple, and this office has no patience for it.” The Wall Street Journal reported, “Witnesses testified that he lied to ordinary investors about nearly every aspect of Nikola.”
Nikola (it’s not coincidental that the chosen company name is also the first name of legendary electric pioneer Nikola Tesla) over the years claimed it had lined up orders for a variety of electric-powered heavy trucks, including battery-powered models and the latest, hydrogen fuel cell vehicles. The initial offer was for a semi that would use natural gas to turn a turbine, generating electricity for an electric motor. That was followed by claims for a battery-electric truck and a hydrogen fuel cell electric power system.
It was mostly smoke and mirrors. The company had acquired “gliders,” truck platforms without engines. In one notorious case highlighted by Hindenburg, Nikola in 2018 posted a YouTube video of a battery-powered Nikola cab and trailer, “Nikola One Electric Semi Truck in Motion,” in 2016 moving rapidly along a desert highway.
Hindenburg said the truck wasn’t moving under its own power. Nikola had towed the engineless truck to the top of a hill, and it was rolling because of gravity.
In a lengthy and convoluted press release, Nikola admitted that the truck was not powered in 2016, nor 13 months later when it posted the video. Bloomberg commented, “The story of Milton’s stage-prop truck is, by this point, legendary in certain corners of the retail investing internet.”
UPDATE: Read more about the Trevor Milton verdict here. Judge Ramos stated: “The law does not grant a pass for good intentions. It is decidedly the obligation of business executives who are seeking to have the public purchase their stock to speak the truth.”