Tesla DOJ investigation may last for months, experts say

Tesla CEO Elon
Musk.
Scott Olson / Getty
Images

• 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 behavior 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 finalize 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 behavior 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.

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