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OpenAI is seeking to transition its corporate structure

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Musk is suing to prevent the change and wanted the California AG's office to join the lawsuit

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Attorney General's office declined, said it does not see how Musk's action serves state's public interest

(Updates Tuesday story to add statement from Musk's lawyer in paragraph 6)

By Anna Tong

SAN FRANCISCO, April 15 (Reuters) - The California attorney general's office declined to join a lawsuit by Elon Musk against OpenAI, the agency wrote in a letter made public on Tuesday, saying the office did not see how Musk's action serves the public interest of the state.

Musk, a co-founder of the ChatGPT maker, is now in a feud with his co-founder Sam Altman, the current OpenAI chief executive, over the firm's future.

OpenAI wants to remove its nonprofit board as its controlling power in exchange for a valuable equity stake. Musk's suit argues this would threaten the nonprofit's mission and he had asked the state to join the lawsuit.

In the letter dated Monday, the attorney general said Musk had not adequately shown that doing so would benefit the public and that Musk appeared to want to use OpenAI's charitable assets for his own purposes. In February, a Musk-led consortium made an unsolicited $97 billion bid for control of OpenAI.

In a response letter to the attorney general on Tuesday, Musk's lawyer said the attorney general misunderstood Musk's bid for OpenAI, writing that Musk does not want to buy OpenAI if the nonprofit structure remains unchanged.

"People are coming forth from all political spectrums and objecting to OpenAI's unlawful conduct and planned for-profit conversion which negatively affects us all," Musk's lawyer said in a statement, pointing out that groups including a coalition of labor and charitable organizations, as well as former OpenAI employees have joined Musk in urging a stop to OpenAI's transition.

Though the California attorney general's office has declined to join Musk's lawsuit, it remains involved in the issue: as the state overseer of nonprofits, it needs to approve OpenAI's proposed nonprofit transition because OpenAI is based in California.

OpenAI has argued that it needs to remove the nonprofit's controlling role in order to raise funds from investors. To secure a $40 billion fundraising round, the company must complete its transition by the end of the year. The nonprofit will retain a stake in OpenAI that will become increasingly valuable as the company grows, providing resources to carry out its mission, the company argues.

Musk and Altman co-founded OpenAI in 2015, but Musk left before the company became a technology star. Last year, Musk, who is also the CEO of electric carmaker Tesla, sued OpenAI and Altman, accusing OpenAI of straying from its founding mission - to develop AI for the good of humanity, not corporate profit.

OpenAI and Altman have denied the allegations. The two parties are set to begin a jury trial in spring next year.

Musk also created his own AI firm, xAI, in 2023, and Altman alleges that Musk has been trying to slow down a competitor. (Reporting by Anna Tong in San Francisco; Editing by Cynthia Osterman and Lincoln Feast)