Tesla is under SEC investigation over how it handled fire risk with its solar power systems

Tesla is being investigated by the US Securities and Exchange Commission (SEC) over how it handled and possibly failed to properly disclose to investors previously reported fire risks with its solar power systems.

In 2019, Walmart sued Tesla over fires that started with solar power systems installed at its stores.

In the lawsuit, it was revealed that an issue with a specific part led to fire.

Tesla and Walmart ended up settling the matter, but it became clear that the problem was not limited to solar power systems installed at Walmart.

As part of his deposition for the lawsuit over Tesla’s SolarCity acquisition, CEO Elon Musk said that Tesla has been having some issues with certain legacy SolarCity solar installations. Tesla has a program, called Project Titan, to assess all solar installations and see if a part with a potential defect from a supplier needs to be changed.

Now Steven Henkes, a former Tesla field quality manager, filed a whistleblower complaint over the issue and was able to confirm that the SEC was investigating through a freedom of information act request.

Reuters reported:

“We have confirmed with Division of Enforcement staff that the investigation from which you seek records is still active and ongoing,” the SEC said in a Sept. 24 response to Henkes, declining his request to provide its records. The SEC official said the letter should not be taken as an indication by the agency that violations of law had occurred. Reuters was able to confirm the response.

Henkes said that the issue is affecting 60,000 residential Tesla solar customers and about 500 commercial and government customers.

The former employee says that when he became aware of the issue, he told Tesla management to shut down the affected system and inform the customers and the authorities, but Tesla took a different approach.

He alleges that Tesla instead told customers that they were just performing maintenance and didn’t tell them about the fire risk.

Henkes says that he was fired in 2020 and believes it was retaliation for raising the issue. He is suing Tesla for the dismissal.

But the new information here is that the SEC, at least as of September, is actively investigating the issue.

Electrek’s Take

The actual defect looks to be in the past, but that’s not what the SEC is looking into. The SEC is looking to see if Tesla tried to hide this issue from investors.

Information about this problem has been somewhat limited, and indeed, there were not many communications from Tesla other than regarding the Walmart lawsuit.

This could be a disclosure issue.