PHOENIX — The founder of Nikola Corp. has been arrested on securities fraud charges alleging he made false and misleading statements to investors about the electric and hydrogen-powered truck startup.
Trevor Milton surrendered Thursday and pleaded not guilty before he was freed on $100 million bail.
The company is headquartered here in Phoenix and just finished construction on a large plant in Coolidge. pic.twitter.com/5bFJ5MNvxt— Zach Crenshaw (@ZachCrenshaw) July 29, 2021
A Manhattan federal court indictment accuses him of making the false and misleading statements that particularly harmed novice investors hoping to replace or supplement income during the coronavirus lockdown.
Lies about "nearly every aspect of the business"
"In order to drive investor demand for Nikola stock, Milton lied about nearly every aspect of the business," said the Southern District of New York prosecutor at a press conference Thursday.
The prosecutors allege Milton made outrageous promises and claims that were not remotely true. Years ago, he said one of the Nikola semi-trucks was fully operational, but apparently, it was not.
"The closest it ever came to driving is when a group of engineers took it to the top of a hill and rolled it down so it could be filmed for a commercial," said the lead prosecutor.
Milton was also indicted by U.S. Securities and Exchange Commission, accused of "flooding the market with false and misleading information" to inflate the Nikola stock price and make himself a billionaire.
Milton resigned from Nikola in September amid allegations of fraud.
At the time, Milton said he would defend himself against accusations the company made false claims about its vehicles, allegations Nikola rejects.
The company was billed as the next Telsa, but now some are comparing it to Theranos.
Both companies share strong ties to Arizona.
In 2018, Nikola's headquarters was an incredibly sought-after prize, as the company looked to move from Utah. They landed on Arizona, building a corporate building in Phoenix and a $600 million factory in the Coolidge area, after initially moving it from Buckeye.
The Arizona Commerce Authority rolled out an incentive package that would exceed $46 million, if certain benchmarks were met. All of it was performance-based.
To date, more than three years after the initial deal, the Arizona Commerce Authority tells ABC15:
"In addition to its manufacturing facility, which is now under construction in Coolidge, Nikola has established its corporate headquarters and R&D innovation center in Phoenix that’s been operational since 2019.
To date, Nikola has received $1 million of the $3.5 million Arizona Competes Fund grant it is eligible for.
In addition, Nikola has been reimbursed $337,082.52 of the $2,185,534 in Job Training grants for the creation of 486 new Arizona jobs."
Some now wonder if the ACA, Governor Ducey and the city of Coolidge did their due diligence on the company.
"State government doesn’t make a judgement on financial health of a company. That’s left to the marketplace and the consumer. Every business is a measured risk," said Governor Ducey Thursday.
"But we want at least some basic due diligence to find out whether or not these companies can really do what they say they're doing," said Tom Ryan, a valley attorney. "Everything about it was a fraud, and everybody who was involved in the corporation worked hard to cover up the problems that they were having."
Governor Ducey and other state lawmakers are trying to remain more optimistic about the company's long-term health and viability.
"I think very highly of the company and from what I understand it’s very effective and attractive technology," said Gov. Ducey.
"The jury's still out on what the future of Nikola holds as well," said TJ Shope, the Arizona State Senator representing the Coolidge area. "My hope... is that this is a potential bad guy that got caught. It didn't sink the company and it could be full steam ahead."
"There's a lot at stake."
The communities in Pinal County are now holding their breath.
"It is a very positive project for us long term," said Sen. Shope. "It's the type of thing that transforms a community"
"We all need it here in Casa Grande, Coolidge, and Eloy," said Lalo Hernandez, a small business owner.
"I thought it was great, because it was bringing jobs to the economy. To our area. Something that was needed," said Shannon Bell-Brown, a mother born and raised in the area. "This throws everything in the air...People were looking forward to having employment and now what do they do? There’s not a lot of jobs."
Many residents worry the factory could become another empty eyesore, like Phoenix Mart.
"That was supposed to bring a whole lot of jobs to the area. And now it’s just a hollowed-out building, sitting in the middle of nowhere doing nothing because of similar reasons," said Bell-Brown.
"In the words of Charles Dickens, this company is dead deader than a doornail. Dead. It will not produce a mass-produced vehicle ever," said Ryan.
A Nikola spokesperson pushed back on the pessimism and premature death sentence.
In a statement to ABC15, they wrote:
"Trevor Milton resigned from Nikola on September 20, 2020 and has not been involved in the company’s operations or communications since that time. Today’s government actions are against Mr. Milton individually, and not against the company. Nikola has cooperated with the government throughout the course of its inquiry. We remain committed to our previously announced milestones and timelines and are focused on delivering Nikola Tre battery-electric trucks later this year from the company’s manufacturing facilities."
There is no doubt that for the company to succeed it will have to overcome a lot of hype and, if the prosecutor's evidence is true, outright lies by their former founder.
Wall Street will be watching the stock price, but Pinal County will be watching the factory, hoping the two thousand jobs, averaging $80,000 a year, still come to fruition.
"There's a lot at stake," said Shope. "In a positive way."
The governor's office and the Arizona Commerce Authority declined to answer specific questions about their confidence in, and conversations with, the company.
In a statement to CNN, Milton's legal team said he is innocent of the charges.
"This is a new low in the government's efforts to criminalize lawful business conduct. Every executive in America should be horrified," said the statement. "Trevor Milton is an entrepreneur who had a long-term vision of helping the environment by cutting carbon emissions in the trucking industry. Mr. Milton has been wrongfully accused following a faulty and incomplete investigation in which the government ignored critical evidence and failed to interview important witnesses. From the beginning, this has been an investigation in search of a crime. Justice was not served by the government's action today, but it will be when Mr. Milton is exonerated."