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Tesla receives SEC subpoena over Elon Musk’s tweets and faces potential racial discrimination suit

Tesla disclosed the SEC subpoena over Musk’s online posts in its annual report

Tesla’s CEO, Elon Musk, in front of a screen showing a Tesla Model 3 car in China. (Aly Song/Reuters)
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SAN FRANCISCO — Government officials renewed pressure on Tesla over its handling of Elon Musk’s tweets and are probing allegations of racial discrimination at its facilities, according to the company’s annual financial filing.

It also detailed supply chain constraints and ongoing impacts of the coronavirus pandemic.

The company disclosed in its annual report last week that federal officials issued a subpoena on Nov. 16 looking for information on the company’s compliance with a settlement governing the CEO tweets. Musk and Tesla were each fined $20 million, and Musk relinquished his chairmanship of Tesla’s board, after a 2018 tweet in which he said he had secured funding to take Tesla private at $420 a share.

A settlement with the Securities and Exchange Commission required Musk to have his potentially market-moving statements vetted by a securities lawyer.

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Tesla said in its disclosure that the SEC-issued subpoena sought “information on our governance processes around compliance with the SEC settlement.”

The subpoena came 10 days after Musk issued a Twitter poll asking if he should sell 10 percent of his Tesla stock.

Since the settlement, Musk has sent eyebrow-raising tweets, including one in 2020 that sent Tesla’s stock plunging when he wrote “Tesla stock price is too high imo,” shorthand for in my opinion. Musk also wrote, “SEC, three letter acronym, middle word is Elon’s,” an apparent cloaked reference to a lewd act.

Tesla, meanwhile, faces pressure from another government entity — the state of California — over worker allegations of racist treatment at its facilities.

Tesla was ordered in October to pay former employee Owen Diaz nearly $137 million in a case that alleged racist abuse, discrimination and harassment at its Fremont, Calif., factory.

Jury orders Tesla to pay more than $130 million in discrimination suit, which alleged racist epithets and hostile work environment

Tesla said that on Jan. 3, the California Department of Fair Employment and Housing issued notice that it believed it had the grounds to file a civil complaint against it following an investigation “into undisclosed allegations of race discrimination and harassment at unspecified Tesla locations.” The company was issued a “Cause Finding and Mandatory Dispute Resolution” notice, it said.

Tesla, which disbanded its public relations team more than a year ago, did not respond to a request for comment. The California Department of Fair Employment and Housing said it could not comment or share additional information at this time. The SEC said it does not comment beyond public filings.

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The SEC matter has hounded Musk since he sent the controversial tweet in 2018. It has also led to a contentious relationship with the financial regulator. Musk said in a “60 Minutes” TV interview in 2018, “I do not respect the SEC. I do not respect them.”

Tesla, meanwhile, has pushed against the allegations of racist treatment of workers — while acknowledging efforts to improve conditions more generally.

Valerie Capers Workman, then Tesla’s vice president of people, issued a statement to workers after the verdict, which was posted on the company’s website.

“While we strongly believe that these facts don’t justify the verdict reached by the jury in San Francisco,” she wrote, “we do recognize that in 2015 and 2016 we were not perfect. We’re still not perfect.”

While the filing provided updates on legal challenges, the company also said it is still dealing with impacts of the coronavirus around the globe — and its effects on manufacturing.

“Our current production continues to be affected by the industry-wide semiconductor and other component shortages, requiring additional workaround manufacturing and production design solutions to be implemented which may be difficult to sustain,” Tesla said in its report.

“There has continued to be widespread impact from the coronavirus disease (“COVID-19”) pandemic,” Tesla added.

Tesla said on its earnings call late last month that it would not build a new vehicle model in 2022, choosing instead to focus on existing production and “scaling” its output. The financial statement shed light on efforts to improvise to meet production challenges.

“We have used alternative parts and programmed software to mitigate the challenges caused by these shortages, but there is no guarantee we may be able to continually do so as we scale production to meet our growth targets,” Tesla said in its report.

The company disclosed in its filing that its head count had swelled to nearly 100,000 workers — between Tesla and its subsidiaries.