Tesla is no ordinary automaker, and Elon Musk is no ordinary CEO. He makes grand bets and pronouncements, gets cornered by TMZ, and injects himself into spats with other tech luminaries. Occasionally, lawyers get involved.
In the past month or so, a lot of lawyers have gotten involved. On August 7, the Tesla CEO tweeted that he was considering taking his company private, and that he had secured the funding to do so. The latter may not have been completely true, which has drawn the attention of shareholders and federal regulators alike.
Meanwhile, ex-employees have filed two whistle-blower complaints with the US Securities and Exchange Commission, alleging retaliation and the coverup of a drug ring. Others say they were improperly fired from the company, or that it improperly interfered with potential board members. And at least four Tesla shareholders have accused the company of fraud and market manipulation—and one wants everyone who purchased Tesla securities after that tweet to join his case. Meanwhile, the SEC has reportedly opened a probe into Musk’s Twitter activity; the commission served the electric car maker with subpoenas on last week.
There is a lot happening, and with the fate of Tesla far from certain, it’s a good moment to pause and run through some of the wildest allegations thrown about in the last three months, which fall on a spectrum from “yeesh” to “yikes” to “Holy Mother of God.” Of course, these lawsuits are all based on allegations at this point. Nothing has been proven yet, and lawsuits tend to come with the territory when you’re running a big company. These will (likely) play out slowly, and hopefully with heapings of thoughtful deliberation and hard evidence, within the justice system. But in the meantime, expect them to serve as frustrating mountains (or mole hills) to scale as the company continues to work on ramping up its vehicle production.
The Martin Tripp Complaint
On July 11, a former Tesla technician named Martin Tripp filed a whistle-blower complaint with the Securities and Exchange Commission, alleging Tesla had lied to investors about production numbers and knowingly used damaged batteries and scrapped parts in its cars. Tesla denies the allegations, and says it fired Tripp for leaking information to reporters, stealing trade secrets, and hacking into the company’s computer systems. In June, it sued Tripp for hacking and trade secret theft.
Last week, Tripp tweeted out internal photos and emails that he says corroborate his claims. The former employee deleted his Twitter account a day later.
In a statement to WIRED, a Tesla spokesperson called the claims false: “Mr. Tripp does not even have personal knowledge about the safety claims that he is making. No punctured cells have ever been used in any Model 3 vehicles in any way, and all VINs that have been identified have safe batteries. Notably, there have been zero battery safety issues in any Model 3.”
Karl Hansen Complaint
Last Thursday, another former member of Tesla’s internal security department filed a whistle-blower complaint with the SEC, and this one—if you can believe it—is even stranger. Karl Hansen alleges that the electric car maker failed to inform its shareholders and law enforcement that it had uncovered an employee-run drug trafficking scheme out of its Nevada Gigafactory battery plant.
In a summary of the complaint reviewed by Jalopnik, Hansen wrote that in May, the Drug Enforcement Administration informed the automaker that “a Tesla employee may be a participant in a narcotics trafficking ring involving the sale of significant quantities of cocaine and possibly crystal methamphetamine at the Gigafactory on behalf of a Mexican drug cartel from Sonora, Mexico.” (In a statement, the DEA told BuzzFeed it “does not notify non-law enforcement entities of ongoing or pending investigations.”) Hansen says he told Tesla that he had confirmed this law enforcement tip in mid-June, but that the company did not inform board members or the public.
“This guy is super [peanut emoji],” Musk told Gizmodo in a Twitter direct message. “He is simultaneously saying that our security sucks (it’s not great, but I’m pretty sure we aren’t a branch of the Sinaloa cartel like he claims) and that we have amazing spying ability. Those can’t both be true.”
A Tesla spokesperson told WIRED the company took Hansen’s allegations “very seriously,” that some are false, and that when it tried to corroborate his claims, Hansen was unresponsive. “We made numerous attempts to engage further with Mr. Hansen to understand more about what he was claiming and the work that he did in reaching his conclusions. He rejected each of those attempts, and to date has refused to speak with the company further,” the spokesperson said.
Last week, Musk sent Tesla shares a’bouncing when he suddenly announced on Twitter that he was considering taking Tesla private, and that he had secured the funding to do so. But over the course of the next few days, it became clear that the funding wasn’t quite secure. So on August 10, a short seller named Kalman Isaacs filed a class-action lawsuit against Musk and Tesla on behalf of everyone who bought Tesla securities after the tweet. Isaacs’ complaint alleges that Musk meant to lie—that he knew funding wasn’t secured but hoped to squeeze the short sellers who so frustrate him. “As a result of Defendants’ materially false and misleading statements, as well as their market manipulation, Tesla securities purchasers were injured to the tune of hundreds of millions of dollars,” the lawsuit, filed in the Northern District Court of California, reads. Other shareholders have filed at least three similar lawsuits, all in the same California court and seeking restitution for funds lost during early August’s market rollercoaster. (Tesla shares climbed 11 percent following Musk’s twitter announcement but have since fallen, especially after Musk granted a glum and emotional interview with The New York Times.) A Tesla spokesperson declined to comment.
In June, Tesla’s former director of environmental, health, safety, and sustainability, a man named Carlos Ramirez, filed a lawsuit alleging wrongful termination. According to his suit, filed in Alameda County Superior Court in California, Ramirez alleges he uncovered flaws in the company’s incident reporting system at its Fremont, California, plant, including “numerous instances of lack of treatment of Tesla employees that suffered workplace injuries, recordkeeping violations, and improper classification of workplace injuries to avoid treating and reporting workplace injuries.” Ramirez’s complaint claims that he alerted Tesla management to these issues, but that the company ignored them, failed to notify the public or state agencies, and then fired him weeks later.
Tesla says Ramirez was not fired for reporting the system flaws, but instead for inappropriate workplace conduct. “It was clear that he had engaged over and over again in harassing workplace behavior and used extremely inappropriate language that violated any reasonable standard,” a Tesla spokesperson said in an extensive statement, published in full by Jalopnik. Representatives for Tesla and Ramirez are set to meet before a judge in late October.
When Elon Musk posted that “funding secured” tweet earlier this month, he not only launched himself into the crosshairs of litigious shareholders—he also reportedly caught the attention of the US Securities and Exchange Commission. The federal agency is said to be looking into the circumstances surrounding the tweet, as well as Tesla’s take-private scheme, and reportedly issued Tesla subpoenas last week.
To be sure, many investigations don’t result in charges. But should the SEC choose to do so, it could sanction or sue the electric car maker for fraud or even market manipulation, according to John Coffee Jr., a Columbia Law School professor who studies corporations and securities regulation. If the SEC does bring a suit, experts say Musk and Co. are better off settling quickly, because a loss in court could mean writing million-dollar paychecks. Indeed, Fox Business reports that the tweet has already cost Tesla big bucks, millions in fees to law firms.
It’s yet another thing for a busy electric car maker to deal with, as it tries to reshape the world.
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