- The fact that the DOJ has requested documents from Tesla does not mean the SEC’s reported investigation has uncovered evidence of wrongdoing.
- And the DOJ’s inquiry doesn’t indicate whether the agency will eventually bring criminal charges against Tesla.
- But that doesn’t mean the DOJ’s inquiry will be brief, and there’s always the chance that the agency will discover new elements of the company’s behaviour to examine, experts said.
It’s too early to tell where the Department of Justice’s (DOJ) inquiry into Tesla will lead, but it will likely require the company’s attention for months, if not years, former DOJ lawyers told Business Insider.
Bloomberg reported on Tuesday, citing two people familiar with the matter, that Tesla is facing a criminal investigation by the DOJ into public comments the company and its CEO, Elon Musk, made about taking the company private. (The DOJ declined Business Insider’s request for comment.) The SEC is also reportedly investigating those comments.
Tesla said on Tuesday that it had received and cooperated with a voluntary request for documents from the DOJ but had not received a subpoena.
The DOJ and SEC’s inquiries were reportedly motivated by tweets Musk published in August in which he said he had “funding secured” to convert Tesla into a private company and needed only shareholder approval to finalise a deal. Subsequent news reports and statements from Musk suggested that he might not have had legally binding agreements in place to finance a go-private deal at the time he published the tweet.
An inquiry doesn’t suggest wrongdoing
The fact that the DOJ has requested documents from Tesla does not mean the SEC’s reported investigation has uncovered evidence of wrongdoing, according to Jeffrey Cramer, a managing director at the consulting firm Berkeley Research Group and former DOJ lawyer. Since the SEC’s reported investigation into Musk and Tesla’s comments about going private is relatively new, it’s unlikely the agency has come to any definitive conclusions.
“The SEC just hasn’t had time to do a thorough investigation,” Cramer said. “Where there’s smoke, it doesn’t mean there’s fire.”
And the DOJ’s inquiry doesn’t indicate whether the agency will eventually bring criminal charges against Tesla, said Renato Mariotti, a partner at the law firm Thompson Coburn and former DOJ prosecutor. The burden of proof for criminal cases, which the DOJ investigates, is higher than for civil cases, which the SEC investigates. For the former, illegal activity must be proven beyond a reasonable doubt to warrant a conviction. For the latter, the SEC only needs to find a preponderance of evidence of wrongdoing to levy fines. Most often, DOJ cases don’t end with the agency bringing charges, Mariotti said.
“The odds are never likely that the DOJ will end up charging,” Mariotti said.
The inquiry could last months or years
But that doesn’t mean the DOJ’s inquiry will be brief. It will likely take months, if not years, according to Mariotti, and there’s always the chance that the agency will discover new elements of the company’s behaviour to examine, an occurrence that happens “not infrequently,” Cramer said.
“Once agents start talking to people and looking at documents on one topic, you don’t know what they’re going to find,” he said.
Ultimately, the DOJ will look into Tesla until it feels confident that it can determine whether or not Musk or the company broke the law, Tony Phillips, a lawyer at the law firm McKool Smith and former DOJ trial attorney, told Business Insider. That means the agency’s probe could loom over the company in the coming months.
“This will be a serious issue for the company, quite likely for a while,” he said.
Business Insider Emails & Alerts
Site highlights each day to your inbox.