
Ex-SolarCity employees: We were fired after reporting millions in fake sales - fabian2k
https://arstechnica.com/tech-policy/2018/07/3-ex-solarcity-employees-claim-company-oversaw-bogus-sales-to-inflate-valuation
======
foxyv
My partner worked for various solar companies (But not Solar City) as a
canvasser hoping to get some sales experience. As a result we got to see first
hand how corrupt and underhanded their sales departments could be.

Canvassers were exploited mercilessly and commissions never appeared as new
requirements were added to the payouts. Paychecks bounced periodically.
Canvassers would be told to go door to door in areas where solicitation was
illegal even though the company knew it was illegal and risked getting their
employees arrested. Managers would hire friends and use fake leads to make
them look good.

I kind of hoped that Solar City would be an exception but I'm not surprised.
It seems like the entire solar industry is focused more on extracting
government subsidies than on creating long term revenue streams. I don't think
management is very confident of the long term prospects of residential solar.
Especially considering pushback from utility companies.

~~~
linuxftw
> It seems like the entire solar industry is focused more on extracting
> government subsidies than on creating long term revenue streams.

Some might argue this is the exact nature of government subsidies.

People are always going to make choices in their economic self-interest.
Either solar needs to be the most cost effective solution for their energy
needs, or the government needs to artificially inflate the cost of other
energy (or reduce any subsidies to other energy to make solar more
competitive).

Every time a hurricane knocks out a town's electric grid and federal funds are
used to repair it, that's a subsidy. When government authority to exercise
eminent domain acquires easements or land to erect power distribution, that's
a subsidy. Not to mention utilities being absolved from responsibility for the
pollution they create.

~~~
krageon
I don't think you've sufficiently proven the argument which the rest of your
statements hinge on: "People are always going to make choices in their
economic self-interest". It's an attractive (if somewhat cynical) point, but
it's no more reasonable than any other generalisation. Not very.

~~~
jtx22
Its patently obvious. No sane individual will systematically go against their
economy self interest.

~~~
maneesh
You may wish to look into behavioral economics [1], a system of psychology +
decision making that looks deeply at how individuals often do go against their
economic (and other) self-interests.

[1]
[https://en.wikipedia.org/wiki/Behavioral_economics](https://en.wikipedia.org/wiki/Behavioral_economics)

------
mikro2nd
A trend that's been growing for quite a (long!) while now is exemplified by
this article: " _Tesla did not respond to Ars’ request for comment on Sunday._
"

Who in their right minds realistically expects _any_ organisation to respond
to some random journalistic enquiry _on a Sunday_?

The other major variant of this shyster tactic is along the lines of, "Company
X failed to respond _immediately_ when asked for comment." No company is able
to respond _immediately_ , particularly not on an issue that's likely
contentious. Any response would need to be run by their PR and legal people at
the very least.

It's a cheap and nasty way to make companies look/feel uncaring about the
issue being reported, but imho it does nothing but reflect poorly on the
reporter and publication using these smelly tactics, and leaves me wondering
what other agendas they may have running.

~~~
princekolt
> Who in their right minds realistically expects any organisation to respond
> to some random journalistic enquiry on a Sunday?

Jeez. Considering the story was posted today, what this probably means is that
they requested commentary _on_ Sunday, waited for the entirety of Monday, and
didn't hear back until today, when they decided to post it.

~~~
Marsymars
In my experience, legit journalistic sources are also open to delaying a story
to include commentary if the commentary source asks for some reasonable
additional time to respond.

~~~
theyinwhy
Psht, delaying a story is so 2010.

------
shafyy
"This tactic allegedly resulted, this person said, in tens of hundreds of
millions of dollars in phantom revenue."

SolarCity had revenues of ~$480M in 2016 [0]. "Tens of hundreds of millions"
would mean billions of dollars of phantom revenue. Even if that fake revenue
would be distributed over a couple of years, it would have been a significant
proportion of SolarCity's revenue. Just seems unrealistic that the SEC or any
other agency didn't realize that.

Or what do they mean by "Tens of hundreds of millions?". Did they mean to
write "Tens OR hundreds of millions?". Even then the same logic applies.

[0] [https://www.statista.com/statistics/505770/revenue-of-
solarc...](https://www.statista.com/statistics/505770/revenue-of-solarcity-
corp-breakdown/)

~~~
adamson
That construction is so weird that I'm going to assume it was a typo and that
they meant "tens or hundreds"

~~~
shafyy
Ok. So it could be either $40M or $400M - that's a huge range. Let's assume
something in the middle, like $200m. Does it seem credible to you guys that
nobody except the three plaintiffs noticed that SolarCity faked half of their
2016 revenue?

~~~
mistercow
Well first off, I don’t see a time range here. This could easily be stretched
over multiple years.

Secondly, if someone says “tens or hundreds of millions”, I assume that
they’re giving a rough estimate based on incomplete information. If I’m
evaluating the credibility of such an estimate, then I’ll consider the most
conservative end of the range, which in this case is $20M. If we suppose that
that was spread over three years, then we’re talking about 1-2% of total
revenue. That doesn’t sound so implausible, right?

Finally, SolarCity’s 2016 revenue was $730M, not $400M.

~~~
shafyy
That does sound plausible and also not newsworthy :-)

------
Sgt_Apone
_This tactic allegedly resulted, this person said, in tens or hundreds of
millions of dollars in phantom revenue. He added that more than a dozen people
reported the practice to the relevant human resources representatives, and CEO
Elon Musk himself, who never replied._

So employees were pumping up projected sales figures for (at least) personal
benefit in the form of bonuses. What happens when these figures don't
materialize?

~~~
a2tech
Nothing. Its a pretty common problem in sales. Lots of sales people are
constantly moving jobs and pushing their numbers up.

~~~
sk5t
Who are these poor souls paying out bonuses and commissions on unrealized
revenue?

~~~
Declanomous
Commission typically isn't paid out until the company is paid in my
experience. Bonuses are different, but some companies I work for actually
tracked how many orders were actually fully paid for vs. how many were entered
into the system. A concerning number of salespeople would basically sign
people up if anything the customer said could be construed as being
interested, and their numbers would look great until you looked at the number
of sales that fell through.

I never has the most sales in a single month when I worked sales, but I
regularly had the highest realized revenue because every single person I
signed up actually wanted what they were purchasing.

~~~
jdo20bbx
This was all over the cell phone industry when I worked networks side. This
was pre-iPhone era, just to give an idea how long ago.

I traveled around metro areas measuring signal quality, simple upgrades or
maintenance, often stopping at nearby retail outlets rather than laptop in the
truck.

I’d get to know the store staff and they’d talk freely around me about “fake”
signups to juice numbers.

The trick was sign em up at end of month, cancel them before a bill got sent.
That way the store appeared to hit their monthly target.

They’d often do fleet style signups; construction company would come in legit
looking for 10 lines, the store would sign up 20 phones for construction
company. Then return half before the 14-day no questions asked period.

This was going on all the time, across multiple stores, as far as I could
tell. The details would change, from construction to startup or new business
needing phone in a hurry.

~~~
jstarfish
Heh, the same game gets played in retail commissions.

Didn't hit numbers for the month? Buy a bunch of your own product, wait a few
days until the next cycle starts, then return it all.

------
jsight
I think Solar City didn't have a great reputation when they were independent,
and I think those problems linger.

In Tesla's defense, they have trimmed back sales considerably and it seems
like they are moving to a retail model in the future. I think that has the
potential to be a lot more sustainable and less ripe for abuse.

At least, I hope so.

~~~
vkou
Keep in mind that the only reason for why non-utility deployment of solar
makes economic sense was due to extremely generous subsidies, and net meter
billing.

Which are not going to stick around forever.

------
rconti
We just had solar installed (yesterday, actually!)

I worked with 3 companies; a local large-ish San Jose company, a much smaller
local company, and SunRun (national).

Ultimately most of the quotes and sizing came back near identical; the very
local company had a really nice guy come out and pitch pretty convincingly and
ultimately tell me "even if you don't go with us, don't use SunRun, please.."
and showed me some negative Yelp reviews and stuff.

Well, I was leaning towards that guy because I liked the idea of using a local
company, but after a fair bit of digging I started finding some suspicious
stuff.. I had contacted one company, but he presented a business card from
another contracting company, and so on. Ultimately there were 3 company names,
it was hard to find reviews, the address looked more like a freight forwarding
company.. and when you start digging into contractor licenses the guy's
associated with companies in SoCal that had been apparently sued out of
existence.

I think the problem is, there's such a gold rush in solar, that everyone is
just jumping in. The margins must be good, and demand is high. I don't
actually think the guy was an outright scammer, I just think there are a lot
of third rate contractors trying to set themselves up as solar experts and
just over-promising and under-delivering.

Thankfully, this helped me end up with the larger, reputable local company
that seems to have the size and professionalism that comes with it, while
still helping me feel like I'm able to support a local company, with real
local _employees_ , everything under one roof. But you have to look.

------
rossdavidh
So, I have no idea what the truth is, but didn't Solar City get bought out by
Tesla? In that case, it would seem like it would have been better to clear the
books with an audit of past sales, so as to make the price Tesla would have to
pay for Solar City, something easier for Tesla to pay. But, I am not a finance
person.

~~~
slivym
The Tesla purchase of Solar City cannot be thought of like a normal purchase-
because of Musk's role. Solar City had all sorts of problems before the
purchase - it lost >20% of its workforce in 2016 and cut the salaries of it's
founders to $1. There was also some really questionable self-dealing like
SpaceX buying SolarCity bonds.

It makes perfect sense for Musk as a person to use Tesla to support Solarcity
- one of his enterprises supporting another. But that's not how public
companies work, you can't force Tesla shareholders to overpay SolarCity
shareholders for a buyout simply because Musk personally wants to see
SolarCity succeed.But when you view it in that context is makes perfect sense
to see why Musk didn't try very hard to drive a hard bargain purchasing SC.

------
mathattack
Although this is just hearsay, this is something the company will need to
react to. High commission sales orgs frequently create bad incentives. It’s
hard to work around this, because the most aggressive tend to thrive in this
kind of world, until they cross the line. But if you give up commissions, you
will lose the highest producing salespeople to your competitors.

------
freebs
Sounds like they should try to reduce the cost of the shingles and power wall,
might be easier to sell :P

------
jerf
Kinda hope these accusations are mostly true in a way, since Ars doesn't seem
to show any compunction about naming names filed in a lawsuit. Would suck for
the named persons if it turns out to be entirely false. I miss when
journalists at least pretended to have standards.

~~~
shafyy
It does seem like the involved persons' names are public, no?

~~~
godzillabrennus
Yes but few bother to read lawsuits. Most read news coverage of lawsuits.

~~~
Sgt_Apone
So, while it's public information, they shouldn't report the names because
most people won't read it? I'm not sure I follow.

~~~
FeepingCreature
The binary categories of "public" and "nonpublic" are just approximations for
exposure.

------
cletus
Ok, I can write out the script for this knowing only the headline.

\- Elon defenders will jump in and claim it's all lies

\- Elon haters will chime in with "j'accuse!"

I honestly don't know the truth about this (few would) but let me point some
things:

1\. I would find it strange if sales people were paid bonuses (let alone
commissions) on non-real sales.

2\. Even if bonuses were paid when no money was paid by the customer, this
would eventually get reconciled and at some point pretty quickly that
salesperson would get flagged.

3\. Knowing that "tens or [sic] hundreds of millions of dollars" was in
nonexistent sales would make an officer of the company guilty of any number of
securities infractions. Not that this isn't possible of course but the
severity of this has to be weighed against the benefits to make it more or
less likely that it occurred given the potential outcomes.

4\. Was SolarCity a public (note: "public" != "publicly listed") company? If
so, there are financial reporting issues too. As well as any obligations to
shareholders or financiers.

5\. SolarCity was no stranger to lawsuits or government investigations [1].

6\. The buyout by Tesla is, on paper, suspect. One way to describe it is: one
of Elon's companies (Tesla) bought (arguably "bailed out") a second of Elon's
companies (SolarCity) that owed a lot of money it would arguably default on to
a third of Elon's companies (SpaceX). Not much happened here remotely
resembling at arm's length.

7\. People who get fired, rightly or wrong, have their own motivations for
speaking out and rarely is it ever to say "yeah, I screwed up" but that's the
case at least some of the time. Not that I'm saying it is here (again, no
knowledge of the specifics) but just bear that in mind.

8\. Ex-employees might be suing (or considering suing) their ex-employer for
any number of reasons which may or may not be valid. I suspect if they had
good counsel they'd say nothing. If they had bad or no counsel they'd speak
about this publicly. So which is it? Who knows.

Anyway, just take a deep breath and fight your natural (and irrational)
instincts to either pile on or defend Elon because none of us really know what
happened (yet?). [1]:
[https://en.wikipedia.org/wiki/SolarCity#Litigation_and_inves...](https://en.wikipedia.org/wiki/SolarCity#Litigation_and_investigations)

~~~
SmellyGeekBoy
This behaviour is happening in sales departments in companies all over the
world. The only reason it's of any interest here is because SolarCity has
Musk's name associated with it.

------
shashanoid
[deleted]

~~~
shafyy
Pic or it didn't happen.

~~~
shafyy
Ah come on, a little but of humor.

------
neo4sure
Does anyone know who owns arstechnica? I have noticed a pattern of negative
reporting directed towards anything associated with Elon Musk.

~~~
s73v3r_
Because he's done a lot of negative things lately.

------
exabrial
Wow I'm surprised to see Ars hey in on the Tesla bashing... Interesting

------
_zachs
Seems like nothing more than mud-slinging from disgruntled, fired employees.

If SolarCity would have had "...tens of hundreds of millions of dollars in
phantom revenue that would put them at over a billion in revenue, which I'll
leave to you to look up how inaccurate that statement is.

~~~
PhasmaFelis
The line is "tens _or_ hundreds of millions of dollars."

It didn't occur to you that that might be a misprint? Nobody says "tens of
hundreds."

------
mkirklions
Why are we blaming the employees when these kind of things come from high
pressure management.

Everyone is aware the Elon works his employees to death at Tesla, SpaceX, and
apparently SolarCity.

I feel like these tech companies are great for consumers and shareholders, but
employees are worked like dogs to keep the profit flowing.

~~~
matthewmacleod
That's a shite excuse. "Just following orders" etc.

~~~
jessaustin
If your neighbor was one of the salespeople, then sure go ahead and slag her
for it. If you're a prosecutor with jurisdiction and you think there's a case,
jump on it. Since most of us don't personally know any of the people involved,
there's not much point in selecting these nobodies for our two minutes of
hate. The character we're going to have to deal with again is the dude at the
top, so naturally he's the one whose behavior we'd like to affect.

------
megamindbrian2
Solar City commits fraud to make Elon's stock look good. Nice.

Side note: just watched Back 2 the Future again and saw what 2015 is supposed
to look like. I didn't see anything about putting explosive batteries and
flammable material next to every house.

