Money & The Economy

DOJ Ramps Up Criminal Probe Into Tesla’s Model 3 Production Problems



Federal investigators are examining whether Tesla misstated information related to the Silicon Valley company’s production of the Model 3, a car some believe could revolutionize the auto industry.

FBI agents are also trying to determine if the company misled investors about the company’s business model going back to 2017, The Wall Street Journal reported Friday, citing unnamed sources. The probe come as Tesla celebrated only its third profitable quarter in the company’s history.

Tesla disclosed in September that it was under an FBI investigation, 10 days before CEO Elon Musk and company officials struck a settlement with the Securities and Exchange Commission over civil charges in a separate case involving Musk’s Twitter activity.

The company “received a voluntary request for documents from the Department of Justice about its public guidance for the Model 3 ramp” earlier this year and was “cooperative in responding to it,” Tesla said in a statement addressing the report.

FBI agents have asked former Tesla employees recently for testimony in the case, WSJ noted. Former employees received subpoenas, and FBI agents are seeking to interview them, the source said. Analysts have criticized production on the Model 3 since the company first unveiled the car in 2017.

Musk promised investors that Tesla would make 5,000 Model 3s per week to keep his legion of critics at bay. He said in a February 2017 phone conference that he was pushing suppliers to be ready for a weekly run rate of 4,000 vehicles by September of that year. But the numbers never materialized, and now investigators want to know if those numbers were inflated.

The company’s body shop wasn’t fully functional during the early part of production, WSJ reported in October 2017. Tesla was still hand-building parts of the Model 3s, people familiar with the company’s production line told reporters at the time. Tesla is still reeling from an SEC probe earlier this summer into whether Musk lied to investors about taking the company private.

Musk and Tesla agreed to resolve the probe without admitting or denying wrongdoing. The plan called for their combined $40 million in penalties to be distributed to affected shareholders, the SEC has said.

Musk told his Twitter followers in August that he has secured “funding” to take the company private at $420 per share, far more than the company was worth at the time of the tweet. His tweet followed a report suggesting Saudi Arabia became a major Tesla shareholder earlier in 2018.

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