Whistleblower compensation sparks controversy over Twitter buyout violation


A judge recently ruled that Tesla founder Elon Musk can use allegations made by Twitter whistleblower Peter Zatko as part of the arguments in his counterclaim against the company.

Musk intends to use not only Zatko’s allegations to win his case, but also the fact that the former Twitter CEO secured a settlement out of his $44 billion takeover deal with the social network.

As The Washington Post reported, Musk’s lawyers sent a letter to Twitter, telling the company that the $7.75 million severance payments the company made to Zatko in June violated a clause in their sales agreement.

In the letter uploaded to the SEC website, Musk’s attorneys cited Section 6.1(e) of the merger agreement, which states that Twitter promised not to “grant or provide any termination or termination payment or benefits to any of the Company’s service providers other than the payment of termination indemnities.” Amounts or benefits in the ordinary course of business in accordance with previous practices and subject to the implementation and non-cancellation of a party’s release of claims in favor of the company and its subsidiaries.” Former employees are the company’s service providers.

Musk and Twitter entered into the purchase agreement in April, and it wasn’t until June when Zatko received his severance pay.

In the letter, the lawyers said the company did not seek Musk’s approval before paying the amount or notifying him of the deal.

Musk apparently only discovered the settlement when Twitter included the information in his court filing on September 3.

As such, the Musk camp argues that the settlement serves as an additional basis for terminating the purchase agreement between the two parties, Engadget reported.

As The Post notes, it is now up to Twitter to prove that such large payments to a former employee were not out of the ordinary.

Also known as “Mudge,” Zatko accused the social network of having “fatal and egregious deficiencies” in security. He said in a complaint filed with the Securities and Exchange Commission that Twitter violated the terms it agreed to when it settled a privacy dispute with the FTC back in 2011.

The whistleblower also claimed that he could not get a direct response from Twitter regarding the actual number of bots on the site. If you recall, Musk previously accused Twitter of fraud to hide the true number of bots on his platform and told the court in a legal filing that 10 percent — not just 5 percent as the social network maintains — of daily active users who see ads are non-genuine accounts.

Twitter and Musk are set to face court in a five-day trial that is set to begin on October 17.

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