Twitter pushes back at Elon Musk’s attempt to exit deal over purported whistleblower payout

By Clare Duffy, CNN Business

(CNN) - Twitter on Monday pushed back at a new attempt by Elon Musk to walk away from their $44 billion acquisition deal over a payment the company is said to have made to a former employee who later turned whistleblower, calling the billionaire's move "invalid and wrongful."

Musk on Friday sent a third letter to Twitter seeking to terminate their deal, with this one pegged to a purported $7.75 million severance payment the company made to its former head of security, Peiter Zatko, who later blew the whistle about its alleged security and privacy vulnerabilities.

In the letter, Musk's lawyers claimed the payment — said to have been made to Zatko and his lawyers on June 28 as part of a separation agreement — violated a provision of the acquisition contract. Twitter agreed not to provide any severance payments to employees in amounts outside "the ordinary course of business consistent with past practice," according to the contract.

The payment was revealed in a court filing by Twitter earlier this month and marks additional justification for Musk to exit the deal, the letter states. In its Monday response, Twitter said it "has breached none of its representations or obligations under the Agreement."

Neither Twitter nor Zatko's lawyers commented on the purported $7.75 million severance payment cited in Musk's letter. The Wall Street Journal last week reported that Twitter agreed in June to pay roughly $7 million as part of a settlement agreement with Zatko, citing people familiar with the matter.

The third termination letter comes as the legal battle heats up between Musk and Twitter over their acquisition deal and shows how Musk's team is seizing on the whistleblower allegations in an effort to to bolster its case for the billionaire to exit the deal that was struck in April.

Musk first sent a letter to terminate the deal in July, alleging that Twitter violated the agreement by misrepresenting the number of spam and fake bot accounts on its platform. Twitter sued Musk to complete the acquisition, accusing the billionaire of using bots as a pretext to exit a deal he developed buyer's remorse over following a market decline.

Musk's team on Friday filed under seal updated counterclaims, after the Delaware judge overseeing the case ruled that he could add claims related to the whistleblower disclosure. In July, Zatko filed a whistleblower disclosure to multiple US lawmakers and government agencies alleging, among other things, that Twitter has misled Musk and the public about the prevalence of bots on its platform and that it has violated a 2011 consent order with the Federal Trade Commission related to the protection of user data. The disclosure was first reported last month by CNN and the Washington Post.

Twitter has said Zatko's disclosure is "riddled with inconsistencies and inaccuracies and lack important context." Zatko was fired from Twitter in January, a move Twitter claimed was due to his poor performance. Zatko contends it came after he began raising concerns internally about security issues and misrepresentations by executives to the company's board.

Zatko's lawyers have previously said that "he did not make his whistleblower disclosures to the appropriate governmental bodies to benefit Musk or to harm Twitter, but rather to protect the American public and Twitter shareholders."

Zatko was set to be deposed by Musk's team last Friday. He is expected to testify in a Senate hearing on Tuesday.

The case between Twitter and Musk is set to go to trial in October. Last week, the judge denied a request by Musk's team to delay proceedings by a month in light of the whistleblower disclosure.

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