Tesla Receives Subpoenas In US Fraud Probes

Tesla Model 3. Image credit: Tesla

The SEC and the FBI have both issued legal writs as they broaden their investigations into Tesla’s tumultuous dealings with investors

US regulators have issued subpoenas to Tesla for information on projections made by chief executive Elon Musk last year in relation to production of its Model 3 electric car, the company and Musk have disclosed in a regulatory filing.

The Securities and Exchange Commission (SEC) investigation, which first came to light in August, is one of three that are currently open against the company, the others being spearheaded by the FBI and the Department of Justice.

The subpoenas legally oblige Tesla to provide documents on the Model 3 projections given last year, aggressive targets that the company repeatedly missed.

The SEC’s subpoenas address “certain projections that we made for Model 3 production rates during 2017 and other public statements relating to Model 3 production,” Tesla said in the quarterly filing.

Elon Musk$40m fraud settlement

The news follows the SEC’s settlement with Tesla and Musk in September for Musk’s statements on Twitter about plans to take the company private.

Musk tweeted at the time that he had “funding secured” for the deal, but later dropped the plans, admitting they had been unrealistic.

As part of the settlement, Musk was forced to resign his position as chairman at Tesla for three years, with Musk and Tesla paying fines of $20 million each (£15m).

In an interview published by Re/code over the weekend, Musk acknowledged that the settlement places restrictions on what he is able to say in social media posts.

“I think it’s mostly just if it’s something that might cause a substantial movement in the stock during trading hours,” he said, also admitting that he regretted some of his inflammatory Twitter posts in the past.

“It’s fair to say I would probably not have tweeted some of the things I tweeted, that was probably unwise,” Musk said.

Tesla S - Shutterstock - © Robert GubbinsOpen investigations

The FBI’s investigation also targets the Model 3 production targets, while the DOJ is examining Musk’s privatisation statements.

In its statement, Tesla said the DOJ has asked it “to voluntarily provide (the DOJ) with information” about the FBI and the DOJ’s probes.

The Wall Street Journal reported last week that former employees have been subpoenaed in the FBI probe.

Both the FBI and DOJ investigations involve possible criminal charges, while the SEC brings civil cases, which require a much lower burden of proof.

However, in August a court dismissed a civil shareholder lawsuit on the issue of Model 3 production targets, saying Tesla properly informed investors that the projections could be disrupted by various factors. The investors involved have since filed an amended complaint.

Tesla would only be at fault if it issued targets to investors that were recklessly or purposefully made without a basis in fact.

The company has said the delays were due to “production bottlenecks”.

In its filing, Tesla said it was not aware of any “material” developments in the open investigations.

“To our knowledge no government agency in any ongoing investigation has concluded that any wrongdoing occurred,” the company said, but added that any possible enforcement action could have an “adverse impact” on Tesla’s business.

Quarterly profits

Last week Tesla reported its first quarterly profit in two years, with wider margins and positive cash flow.

At the time, the company said it had taken in $52m in regulatory credits for zero-emissions vehicles.

In its quarterly statement, however, Tesla disclosed it had brought in an additional $137m in regulatory credits, which contributed to nearly half the profit for the quarter.

The company also said it plans to build about 3,000 Model 3 vehicles per week in Shanghai in the initial phase of its Gigafactory 3 there to reduce the impact of tariffs on vehicles imported into China.

Tesla said in October it had purchased land in Shanghai for the factory, its first outside the US.