The U.S. Securities and Exchange Commission (SEC) has opened an investigation into Tesla in response to a 2019 whistleblower complaint alleging that the company failed to properly notify its shareholders, customers and the public of fire risks associated with solar panel system defects. According to the Reuters, the defects were a known hazard for several years.
The issue was originally brought to light by Steven Henkes, a former Tesla field quality manager, who filed a whistleblower complaint on the solar systems in 2019. Henkes recently filed a Freedom of Information Act request with the SEC on the status of his complaint, which is when the regulator disclosed the existence of the investigation.
According to Henkes’ complaint, Tesla and SolarCity, which was founded by Elon Musk’s cousins, Peter and Lyndon Rive, and acquired by Tesla in 2016, failed to disclose “liability and exposure to property damage, risk of injury of users, fire etc., to shareholders” of SolarCity solar modules, both prior to and after the acquisition.
In 2019, Walmart filed suit against Tesla over fires that the company alleged originated at PV installations designed, installed, owned and maintained by Tesla/SolarCity at its stores in three states.
Walmart counted seven fires in total, but only four that occurred on systems under contracts with Tesla and not SolarCity before the acquisition. These four started from March through November 2018, and include an array that was supposed to be de-energized but still caught fire in November 2018.
Walmart said that inspections of the systems revealed “widespread, systemic negligence and had failed to abide by prudent industry practices in installing, operating, and maintaining its solar systems,” and that this greatly increased the risk of fires. Company inspections allegedly found a large number of microcracks, hotspots and backsheet damage, which suggested the installation of damaged solar panels.
The lawsuit was settled shortly after filing.
Elon Musk, personally, is also facing an approximately $2.2 billion lawsuit filed by shareholders over Tesla’s purchase of SolarCity, which the suit alleges was an attempt to bailout Musk’s cousins’ struggling company, of which Musk was the largest investor and chairman. The shareholders’ suit also accuses Tesla’s board of having a lax approach to corporate governance.
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