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More allegations against Tesla’s SolarCity CEO

Shareholders suing Tesla
More allegations against Tesla's SolarCity CEO
Posted at 12:13 PM, Sep 24, 2019
and last updated 2019-09-24 18:23:11-04

BUFFALO, NY (WKBW) — Unsealed court documents from a lawsuit filed by shareholders reveals new accusations against Tesla’s CEO Elon Musk.

According to the complaint, shareholders claim Tesla was hiding financial information and misled investors prior to the $2.6 billion acquisition of SolarCity in 2016 and his involvement with SpaceX.

Tesla's SolarCity facilty in Buffalo.

The suit was first filed in 2016. Musk co-founded SolarCity in 2006 with his cousins, Lyndon Rive and Peter Rive. Musk served as chairman of the board of SolarCity. He owned 21.9% of the shares at time of the acquisition.

The plaintiff's brief is filled with unsealed comments about SolarCity’s finances. “SolarCity was never profitable and incurred massive and growing operating losses.”

7 Eyewitness News received a statement issued by a spokesperson for Tesla.

”These allegations are based on the claims of plaintiff’s lawyers looking for a payday, and are not representative of our shareholders who support our mission and ultimately voted in favor of the acquisition. The accusations made in the plaintiff’s brief are false and misleading, as Tesla and SolarCity published all material information in its proxy and other public filings for all shareholders to consider before deciding on the transaction. Providing clean, renewable energy generation through solar has been a critical part of our mission ever since 2006, and our acquisition of SolarCity has enabled and continues to enable a significantly faster path to achieve our goals.”

Prior to the acquisition, SolarCity reported “over $2.2 billion in net losses.”

Musk also founded SpaceX. It’s described as a private, aerospace manufacture and space transport service company. That company was stated as keeping SolarCity afloat. The documents outline that as chair, CEO, CTO and a major stockholder in SpaceX, Musk was able to secure the company to purchase $90-million in SolarCity bonds in March of 2015.

Robert Galbraith, senior research analyst, Public Accountability Initiative, Buffalo.

"It looks like Elon Musk used at least two of his other companies to bail out SolarCity when it was not performing well," Robert Galbraith, senior research analyst, Public Accountability Initiative, Buffalo.

The non-profit organization is watchdog group that keeps a close eye on public policy, private profit, government and corporate accountability.

"There's no denying the fact that musk is a multi-billionaire. His net worth – most recent estimate - was like $19.5 billion. The people of New York gave him a further $750 million," said Galbraith.

The Cuomo administration handed over $750-million to Musk to build SolarCity in south Buffalo as part of the controversial 'Buffalo Billion'.
But all that money came with a promise to create an economic and hiring engine.

"And throughout SolarCity 's saga in Buffalo, we've had bad news after bad news. Whether it was the panels allegedly – improperly installed on Walmarts catching on fire – constantly – short of just towing the line when it comes to job hiring targets. We've had several changes in the technology they are using," Galbraith explained.

According to the court documents, solar panel installation rates were dropping with, “approximately half of SolarCity’s new customers canceling.” It states that the sales division was “broke” and “drenched in a sea of red”.

Plaintiffs also allege that Musk was deeply involved in evaluating and negotiating “the economic terms” of the deal.

The statement from Tesla said these allegations are not "recent" and that it is the same information made public two and a half years ago. It also claims the allegations are "deeply misleading", nothing was "hidden" and information was "plainly disclosed to stockholders in the proxy."

Tesla and Panasonic employee about 800 workers at the Buffalo facilty. But this coming April, Musk must have 1,460 employees or he will face a more than $41 million state fine.