
Tesla Faces Criminal Probe Over Whether It Misstated Production Figures - mudil
https://www.wsj.com/articles/tesla-faces-deepening-criminal-probe-over-whether-it-misstated-production-figures-1540576636
======
nlowell
This twitter thread has some additional information from Wochos vs Tesla in
which twelve different former employees told either Musk or Ahuja (CFO) that
their production plans were impossible.
[https://twitter.com/orthereaboot/status/1046754488353271808?...](https://twitter.com/orthereaboot/status/1046754488353271808?s=19)

~~~
torpfactory
I’ve been in plenty of meetings where engineering says something isn’t
possible. We (I’m one of the engineers) aren’t always right. It’s a defense
mechanism so we don’t agree to something we think will _probably_ fail and
thus sacrifice credibility.

~~~
rchaud
What should Musk argue in his defense then? "My engineers are too modest about
their abilities, so I took their estimations and multiplied them by 1,000,
because I truly believed they could do it?"

~~~
torpfactory
Yeah, 1000x seems a little out there. What if it was 2x? What about 5x? How
accurate are the projections required to be? If Musk truly believed they could
do it and the multiplier was 2x, who is at fault? I'm not sure it would be a
crime if Musk believed there was possibility (lacking intent to deceive, also
I'm definitely not a lawyer...).

~~~
digikata
And is it production estimate, or a production goal? If someone gives you a
goal of 1000x the current production, assuming you can request/specify
whatever you need to get there, that's very different than if they say, given
the exact production line we have now, what is the estimate of what we can
produce. Tesla was somewhere in between given they were at the stage of
thinking about setting up the production lines and going to setup them up
simultaneously.

------
exabrial
Every time I see a negative Tesla headline, I start to watch their stock
price. I'm convinced a lot of these sloppily written articles are designed to
move markets. [https://www.reuters.com/article/us-tesla-probe/tesla-says-
it...](https://www.reuters.com/article/us-tesla-probe/tesla-says-it-has-not-
received-subpoena-on-model-3-production-idUSKCN1N02LO?utm_source=applenews)

~~~
wbl
So you think the reporters are committing security fraud?

~~~
exabrial
To be clear about my statement: I think it's totally possible given the
sensationalism around Tesla. Whether it is happening or not is a whole
different matter. Hence my interest in watching their stock price when this
sort news hits the press.

~~~
FireBeyond
This is Fox News-like hysteria coaxing.

"Is it possible that Hillary is the anti-Christ?"

"We're not saying she is, but we're just asking the question, is it possible?"

------
hn_throwaway_99
I think the title of the article slightly overstates what is being reported.
"Misstated Production Figures" makes it sound as if Tesla lied about what it
_had_ produced, as opposed to just giving unrealistically rosy projections.

I can definitely see how Musk's "funding secured" tweet crossed the line into
potentially criminal behavior, but honestly, I have a hard time seeing how
overly optimistic projections can be criminal if there is even an iota of a
possibility that they could be met, no matter how unlikely.

~~~
dunpeal
> _I have a hard time seeing how overly optimistic projections can be criminal
> if there is even an iota of a possibility that they could be met, no matter
> how unlikely._

This is a public company, not an Avengers movie trailer.

They can't just conjure arbitrarily positive numbers out of thin air.

Their statements to investors and potential-investors must be fact based and
made in good faith.

Otherwise, what's wrong with Musk's tweet?

I'm sure there was "an iota of a possibility" that someone crazy enough would
buy Tesla at $420.

There's "an iota of a possibility" for a lot of far-fetched scenarios, but
public companies must be truthful and reasonable in their statements made to
the investing public - especially when they err on the side of optimism.

~~~
hn_throwaway_99
Musk's tweet would have been totally OK if it didn't include the words
"funding secured". That is a past-tense statement that was clearly false.

If he said "I'm planning to take Tesla private" that would have been fine,
even if the likelihood of Tesla going private was very remote.

~~~
RivieraKid
His subsequent tweet removes any doubt about what he meant:

> Investor support is confirmed. Only reason why this is not certain is that
> it’s contingent on a shareholder vote.

I'm convinced that he lied to hurt the short sellers.

~~~
toomuchtodo
> I'm convinced that he lied to hurt the short sellers.

Luckily, it'll be for a court to decide if it even goes that far.

~~~
tareqak
Musk and Tesla already settled with the SEC over this event a few weeks ago.

~~~
toomuchtodo
Thanks! I thought this was some other sort of malarkey besides that event.

~~~
village-idiot
There was tons of Malarkey, but it’s mostly over.

Musk was offered a settlement, he refused at the 11th hour, the SEC threatened
to sue for everything, then he settled for a higher amount than the initial
offer.

What remains is convincing a judge that the settlement is just.

~~~
toomuchtodo
> What remains is convincing a judge that the settlement is just.

"Judge approves Elon Musk's settlement with SEC" (Published 9:36 AM ET Tue, 16
Oct 2018 Updated 3:29 PM ET Tue, 16 Oct 2018)

[https://www.cnbc.com/2018/10/16/judge-approves-elon-musks-
se...](https://www.cnbc.com/2018/10/16/judge-approves-elon-musks-settlement-
with-sec.html)

~~~
brisance
It depends on whether Musk stays within the terms of the settlement, and
whether the SEC has the courage to pursue any breaches.

The SEC is not exactly at the forefront of enforcement though, despite its
title. The Madoff Ponzi scheme was discovered by Harry Markopolos, who
reported it to the SEC, and the SEC sat on it for many years before any action
was taken.

------
gumby
standard paywall avoider: [https://archive.is/3FHRo](https://archive.is/3FHRo)

Mods: could you update link?

~~~
dang
We don't change links like that because it's important for users to see what
site an article is from. But it's ok to post workarounds in the threads, as
you and others did.

[https://news.ycombinator.com/newsfaq.html](https://news.ycombinator.com/newsfaq.html)

[https://news.ycombinator.com/item?id=10178989](https://news.ycombinator.com/item?id=10178989)

~~~
gumby
Thanks for the explanation.

------
dreamdu5t
It'd be great if we held politicians and the news media to the same standard.

------
bob_theslob646
_UPDATE_ : Tesla says it has not received subpoena on Model 3 production.

Seems like very sloppy reporting at the WSJ especially when information like
this can move markets.

> (Reuters) - Tesla Inc (TSLA.O) said on Friday it had not received a subpoena
> from the U.S. Department of Justice regarding production guidance for its
> Model 3 sedans, in response to a Wall Street Journal story that said the
> electric carmaker was facing a deeper criminal probe.[4]

>The FBI is reportedly looking into whether Musk or the company made
projections which they knew they couldn’t meet. [2]

This is wild! This makes 0 sense because Musk admitted a few months ago that
he was wrong about automation at the factories. If that is the case, Musk
really did believe he could produce those numbers.

How is it possible to try someone of misstating something that was
"impossible", when they constantly do the "impossible."

This is what he said a few months ago on CBS This Morning on April 12, 2018:

"“Excessive automation at Tesla was a mistake,” Musk wrote, responding to a
Wall Street Journal reporter’s tweet. “Humans are underrated.” He also talked
about this with CBS News’ Gayle King, adding “we had this crazy, complex
network of conveyor belts….And it was not working, so we got rid of that whole
thing.”"[3]

For those that cannot read the WSJ article, this is what I think are the
important statements that the WSJ stated:

> A few months later in July, Mr. Musk sounded confident that Tesla would be
> producing 20,000 Model 3s a month in December 2017, in line with his
> previous pledge of having 5,000 vehicles a week by year’s end. “Looks like
> we can reach 20,000 Model 3 cars per month in Dec,” he tweeted on July 2,
> 2017, days before the first Model 3 rolled off the production line.[1]

> In the early weeks of production, the company’s body shop, where the
> skeleton of the cars would take shape, wasn’t fully functional, according to
> an October 2017 article in The Wall Street Journal. Tesla was still hand-
> building parts of the Model 3s, and the body shop wasn’t fully installed
> until September, according to people quoted in the article that were
> familiar with the situation. [1]

> Now the FBI is comparing the company’s statements with its production
> capability during 2017. [1]

[1] ([https://www.wsj.com/articles/tesla-faces-deepening-
criminal-...](https://www.wsj.com/articles/tesla-faces-deepening-criminal-
probe-over-whether-it-misstated-production-figures-1540576636))

[2] ([https://www.zerohedge.com/news/2018-10-26/fbi-
investigating-...](https://www.zerohedge.com/news/2018-10-26/fbi-
investigating-if-tesla-misstated-info-about-model-3-production))

[3] ([https://techcrunch.com/2018/04/13/elon-musk-says-humans-
are-...](https://techcrunch.com/2018/04/13/elon-musk-says-humans-are-
underrated-calls-teslas-excessive-automation-a-mistake/))

[4] ([https://www.reuters.com/article/us-tesla-probe/tesla-says-
it...](https://www.reuters.com/article/us-tesla-probe/tesla-says-it-has-not-
received-subpoena-on-model-3-production-idUSKCN1N02LO?utm_source=applenews))

~~~
_Microft
The WSJ article doesn't claim that Tesla received a subpoena. It's former
employees who received subpoenas.

~~~
bob_theslob646
>But it hasn’t been previously reported that the Justice Department is
focusing on Tesla’s Model 3 production issues dating to early last year and
that the criminal securities-fraud probe is intensifying.

Does that _not_ imply that the "Justice Department is focusing on Tesla’s
Model 3 production issues."

Why else would Tesla release a statement?

------
Theodores
The production line is what you always see on TV when cars are being talked
about. Yet this is 'final assembly' and just the integration of the other bits
and bobs. Clearly 'final assembly' is important but it is not everything.
Components and sub-assemblies matter too.

By analogy:

Things at Tesla happen in 'Elon time' and most fans of the brand are happy
with that. For them it is like having a baby, with hopes that the baby will
grow up to be a child reading '5000 words a month' before their first year of
school, in a school that isn't fully built yet. They know that there can be
problems 'building the school', 'sourcing books' and what-not and are okay
with that. So long as they can see progress they are happy. After all the
school has done an excellent job of 'educating older kids' albeit a smaller
number of them.

Yet others who sent their kids to schools that follow a more orthodox
curriculum come along wanting to do-down this rival school. They find what
hasn't been done and latch on to 'the lack of progress on the main hall'. They
ignore the 'well stocked library' and 'completed classrooms' and go running
off to the authorities. How can the kids sit their exams with no assembly
hall, they ask? And no, a 'hastily elected tent' won't do.

The authorities who aren't directly in the teaching game have to take on board
the nay-sayers complaints. The opinions of the parents don't matter to them,
they are listening to these outsiders wanting to do everything down. They
don't know if these are technicalities or whether the parents were tricked
into something that was never going to happen. So it all gets serious.

------
andromedavision
Being public seems like such a distraction. Doesn't seem worth it.

------
JackFr
So if on the misleading investors scale, Theranos is a 10, this seems to be
like 3.

~~~
rchaud
Apples to oranges. Theranos was never public, which is why they managed to
escape scrutiny for years and "achieve" a multi-billion dollar valuation for a
product that didn't even work.

Tesla on the other hand has been public for a while and actually makes working
cars. They are however strapped for cash and the CEO may have made material
misstatements about production capability in order to borrow more money.

Theranos' fraud seemed to be driven by simple greed. I don't think Musk is a
fraudster, but his ego and immaturity is starting to overshadow what he's
trying to accomplish.

~~~
acover
Aren't they no longer strapped for cash?

~~~
Pharmakon
Maybe? The recent numbers looked really good, so they might be out of the
woods. Assuming they can keep the numbers up, and assuming the numbers weren’t
the result of accounting tricks, I’d say it’s looking good for Tesla paying
off their debts next year. If the numbers were massaged though, or if they
aren’t maintained, they could be in trouble. Well have a better idea when
independent analysis of the quarter comes out, and a much better idea when
they start paying off their debts in 2019. I’d be cautiously optimistic
personally, but not shocked if it turns out badly either.

------
qaq
I guess FBI has nothing better to do

------
mlpinit
[https://outline.com/YuuEJJ](https://outline.com/YuuEJJ) \- avoid paywall

~~~
QuantumGood
You have to enter the link from the homepage; the link doesn't work on its own
(today, from Chrome).

------
TekMol
I'm not getting the article, just a teaser which is 381 chars long.

Yet the html alone of this page ist over 1 megabyte.

The meta tags make up 7200 bytes. 20 times more metatags then content.

------
rukittenme
I am _never_ taking a company public. Why would anyone subject themselves to
this?

~~~
lamlam
No one takes a company public for fun. They do it for funds. Especially for
something like a car company that requires a lot of initial investment to get
going. They can't start making money right away like a SaaS company might.

~~~
paulddraper
Not wanting to take a company public reminds me of the story of one of
Schwarzenegger's critics.

"I never want to you look like you."

"Don't worry, you never will."

------
Latteland
This time the shorts have them. This is very different that no demand, out of
money in q3, can't make them, Wells notice, break, no batteries available, no
lithium, all the execs keep leaving, autopilot broke, there's not really a big
waiting list. This time it's different.

------
leesec
Personal view here but this is insane. Sure many people ( even his own
employees ) told him it was impossible. That does not mean Elon thought it was
impossible. People have been telling him that for forever now. Why are people
so hellbent on attacking this wonderful innovative company?

~~~
deepGem
Personal view again. I aM convinced that the shorts are behind these media
smear campaigns. Scumbags are guaranteed to lose their bets and they are doing
their best to minimise damage. They don’t care abou innovation or climate
change. All thy care is about their fucking money. Sorry about the rant and
yes I am long TSLA. I have had enough illogical Twitter spats with some noted
shorts to come to this conclusion.

~~~
threeseed
This is fanciful. No short seller held a gun to Musk's head and told him to
call people pedophiles, tweet about funding he never had, smoke weed on some
idiot's podcast or have the personal life of a hip hop artist.

Also just because they're innovative and are solving climate change doesn't
mean we all just have to look away all the time.

~~~
deepGem
True and I don’t claim that musk is right always. He is human, makes mistakes,
that doesn’t mean he is a criminal, which is what the shorts are implying with
these smear campaigns.

------
dragontamer
This is "news about potential news".

> Federal Bureau of Investigation agents are examining whether Tesla misstated
> information...

FBI agents look into a LOT of stuff. That's literally their job. Frankly, I'm
not going to think one-way or the other unless the FBI comes up with an
official statement.

I think investors might need to be worried: you know, buy the rumor sell the
news sorta thing. Investors / speculators are super interested in trying to
predict the future, even with unreliable information like this one.

But for the typical person, we shouldn't make an opinion of the matter until
the FBI at least brings forth a case.

