DETROIT -- Tesla Inc. has turned over documents to the U.S. Justice Department after statements by CEO Elon Musk about taking the company private, the electric-car maker confirmed Tuesday.
The Palo Alto, Calif., company cooperated with the request and believes the matter should be resolved quickly once federal prosecutors review information they have received, according to a company statement.
News of a potential criminal investigation pushed Tesla stock down 5 percent in morning trading Tuesday, but the decline subsided a bit by early afternoon to 3.35 percent, at $284.96.
"We have not received a subpoena, a request for testimony, or any other formal process," Tesla's statement said.
Bloomberg News reported Tuesday morning that the Justice Department is running a criminal inquiry parallel to an investigation by the Securities and Exchange Commission. The news service cited two people familiar with the matter that it did not identify.
The Justice Department generally does not confirm or deny investigations, spokesman Nicole Navas Oxman in Washington said. The U.S. attorney's office in San Francisco took the same stance.
Tesla said it was contacted by prosecutors after Musk tweeted last month while driving to the airport that funding was secured to take the company private. The announcement raised the stock price 11 percent in one day, but it has since fallen.
Later the company admitted that funding wasn't lined up and eventually Musk abandoned the idea.
Tesla investors are arguing in several pending lawsuits that the move, in which Musk pledged to buy back outstanding shares from investors at an elevated price, amounted to market manipulation or fraud.
Stephen Crimmins, a former deputy chief of litigation for the SEC, said prosecutors probably are looking at Musk's tweets to be cautious. "It automatically becomes so high profile that the government enforcers have to be particularly conscientious in taking a look at things," he said.
Crimmins said Musk "speaks loosely," but his conduct probably doesn't rise to the criminal level. Prosecutors would have to prove Musk lied in order to move the stock price, which would be difficult, Crimmins said. Any loss to short-sellers would be for a short period and wouldn't be worth the risk of Musk intentionally manipulating the stock price, Crimmins said.
The SEC likely would pursue a civil remedy that would include a provision that someone at Tesla review Musk's tweets on corporate matters before they are sent out, he said.
News of the investigation comes one day after Musk was personally sued for defamation by Vernon Unsworth, a cave explorer influential to the rescue of boys from a Thai cave this summer. Musk accused Unsworth of being a pedophile after the British explorer criticized a mini-submarine Musk said could be used for the rescue.
The company also is facing whistleblower complaints from former employees, including Martin Tripp, who alleged that Musk had lied to investors about the company's production.
Information for this article was contributed by Drew Harwell and Devlin Barrett of The Washington Post.
Business on 09/19/2018