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Tesla subpoenaed in the SEC’s Model 3 investigation

Tesla subpoenaed in the SEC’s Model 3 investigation


All three open probes are intensifying

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Illustration by Alex Castro / The Verge

Tesla and its CEO Elon Musk disclosed in a regulatory filing Friday that the Securities and Exchange commission has subpoenaed Tesla about Musk’s many projections for Model 3 production, signaling that the investigation — which first came to light in August — is ramping up.

It’s the third open investigation to intensify in recent weeks. Last week, The Wall Street Journal reported that Federal Bureau of Investigation’s probe for any potential criminal activity surrounding Model 3 production goals has amplified. And Tesla confirmed in Friday’s filing that, in a separate Department of Justice investigation into Musk’s abandoned attempt to take the company private, the company has been asked “to voluntarily provide [the DOJ] with information” about both criminal probes. This is on top of the fact that former employees have been subpoenaed in the FBI’s investigation.

Investigators want to know if Musk purposely or recklessly misled investors with lofty Model 3 goals

“There have not been any developments in these matters that we deem to be material, and to our knowledge no government agency in any ongoing investigation has concluded that any wrongdoing occurred,” Tesla said in the filing. The company says it is cooperating with authorities, and stresses to the investing public that it can’t predict the outcome of any of the investigations, while warning that they could have an “adverse impact” on Tesla’s business if one or more investigations result in an enforcement action.

Tesla and Musk recently settled a securities fraud case with the SEC about the CEO’s go-private tweets. The agency originally sought to permanently ban Musk from holding an officer or director position at any publicly traded company, not just Tesla. But the two sides eventually agreed to a three-year ban from his role as Tesla chairman, and both he and the company were made to pay $20 million fines.

The additional, ongoing probes come just as Tesla and Musk have turned in the company’s first profitable quarter in two years. In an interview with Recode’s Kara Swisher this week, Musk said he’s spending about 80 to 90 hours a week focused on Tesla, which he said is “pretty manageable” compared to the 100-plus hour weeks he and others were putting in near the end of last quarter, which he called “excruciating.”

“Tesla’s not staring death in the face. We’re in, I think, a pretty good position,” Musk said. “We don’t want to be complacent, but it’s not... Up until around September, we were really faced with, like, ‘We must solve this or we’re gonna die,’ constantly. I feel like we’re no longer in the staring-death-in-the-face situation.”

“Tesla’s not staring death in the face.”

Because the SEC brings civil cases, the agency has a much lower burden of proof than the DOJ would if it decides to bring criminal charges against Tesla. But Tesla has a little cover in this area. In August, a court dismissed a shareholder lawsuit over the same issue of potentially misleading Model 3 production numbers, saying that Tesla properly cautioned that its projections were just that — soft targets that could be disrupted by a number of factors. (The case is not completely closed; the plaintiffs filed an amended complaint at the end of September.)

In the interview with Recode, Musk dismissed The Wall Street Journal’s report of the FBI’s intensifying investigation. He particularly took issue with the idea that “the FBI is closing in” — words that the paper didn’t use. “That is utterly false. That’s absurd. To print such a falsehood on the front page of a major newspaper is outrageous. Like, why are they even journalists? They’re terrible. Terrible people,” Musk said.