By Lora Kolodny
The Securities and Exchange Commission’s motion to hold Elon Musk in contempt of court is one of many legal woes afflicting the Tesla and SpaceX CEO today.
Tesla regularly deals with requests for information, or subpoenas, from regulators and government authorities at the federal, state and international level, according to its 2018 annual report.
Legal research platform Plainsite found at least 38 securities actions filed against Tesla or Elon Musk (or both) since 2010, the year it went public– a high number versus other U.S. automakers over the same period.
Tesla and CEO Elon Musk are facing dozens of lawsuits and investigations, according to public filings.
The costs of defense and settlements burden the car maker financially at a time when Tesla is already cutting headcount, closing stores and delaying loan repayments. No doubt Tesla would rather spend its money to improve its service, set up manufacturing lines to make the Model Y (its forthcoming compact SUV), or to build out its Shanghai Gigafactory.
Among Tesla’s most recent legal woes, the Securities and Exchange Commission has filed a motion to hold Musk in contempt of court. The financial regulators argue that Musk violated the agreement they finalized with him and Tesla in October 2018 requiring the CEO to submit his tweets for review by the company’s in-house counsel if they contained material business information and could potentially affect the company’s stock price.
Musk is represented in this matter by John C. Hueston, formerly the lead prosecutor for the federal trial of Enron’s Jeffrey Skilling.
Beyond the contempt case, here are some of the other cases and investigations Tesla and Musk are facing that could most impact the company.
NHTSA and NTSB regularly investigate crashes involving Tesla vehicles and the use of “Autopilot” features. These agencies initiated new investigations in March 2019, after another Tesla-involved incident proved fatal for a Model 3 driver who collided with a semi-trailer in Delray Beach, Florida.
According to a Department of Justice statement, a former Tesla employee named Salil Parulekar was indicted in November 2018 for allegedly embezzling $9.3 million from Tesla by diverting payments from one supplier to another. The potential case, which hasn’t moved past the indictment, could reveal more about troubles with Tesla’s supply chain.
Two former Tesla security employees, Karl Hansen and Sean Gouthro, filed whistleblower complaints via the law firm Meissner Associates to the SEC. They claim, among other things, that Tesla spied on workers, and covered up theft and narcotics trafficking at its battery plant in Sparks, Nevada.
A former employee, Marcus Vaughn, is pursuing a class-action lawsuit against Tesla in California alleging that the company ignored black employees’ reports of rampant racism. Tesla is trying to compel arbitration, and the plaintiff’s lawyers say they are fighting Tesla’s motions.
The National Labor Relations Board filed a complaint in August 2018accusing Musk of violating labor laws with a tweet on May 20 that employees wouldn’t have stock options if they formed a union.
Tesla-owned SolarCity has been the subject of multiple SEC investigations dating back to 2012, according to Probes Reporter, a firm that publishes FOIA research for investors. (As of May 2108, SolarCity was still under at least one SEC investigation, said Probes Reporter CEO John P. Gavin.)
Musk is being sued by spelunker Verne Unsworth, whom Musk claimed without evidence was a pedophile and child rapist. Musk lobbed those dramatic accusations at Unsworth after the cave diver questioned the Musk’s attempts to aid in the rescue of a Thai boys’ soccer team. Unsworth was part of the successful rescue effort and was critical of Musk’s approach.
In a Delaware Chancery Court, shareholders are suing Tesla alleging that the company’s acquisition of SolarCity in 2016 was improperly handled by the board, benefitted six out of seven of Tesla’s then-board members, and was ultimately a detriment to the company and its minority shareholders.
Analysis by legal research firm Plainsite found at least 38 securities actionsfiled against Tesla or Elon Musk (or both) since 2010, the year the company went public. Plainsite – which founder Aaron Greenspan describes as a “legal transparency initiative” – scans public records across the US legal system to document the volume and types of litigation effecting major U.S. corporations. (Greenspan personally holds puts in Tesla today.)
By way of comparison, Greenspan says he found only 1 securities lawsuit against Ford Motor Company filed since 2016, and only 4 since 1996, although this does not include all Ford subsidiaries.
Along with the securities litigation, Plainsite also found 43 workers’ rights cases, 14 deposit theft cases, and 20 vendor and government non-payment cases filed against Tesla since it went public in 2010. Of the 20 non-payment cases, 6 were from tax agencies in different states, Greenspan said.
Tesla also faces dozens of lawsuits around specific car-related issues, including allegations that Bluetooth doesn’t work, that Autopilot has caused Tesla cars to swerve into the wrong lanes and more. Most car-specific lawsuits against Tesla focus on the Model X. But Greenspan expects Model 3-related lawsuits to grow as the company sells more of these electric sedans.
Greeenspan also observed, “Since the end of 2018, the records show Tesla has been breaking with a lot of bigger law firms, like Morrison & Foerster, Snell & Wilmer, and of course, Williams & Connolly. We don’t know if that’s because the firms fired their client, or or Tesla fired its firms, for example, to save money. But the fact they all seemed to change up around the same time suggests Tesla slashed them for budgetary reasons.”
Tesla declined to comment.
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