A former Tesla employee has filed a formal whistleblower complaint with the Securities and Exchange Commission, alleging the automaker failed to disclose to shareholders that authorities had uncovered an alleged drug trafficking effort involving an employee at its Gigafactory plant in Nevada dealing “substantial” amounts of cocaine and possibly meth. [Update: The employee’s attorney got it wrong in his initial statement. It was just one employee, not a group.]
Karl Hansen, a former member of Tesla’s internal security department and its investigations division, joins ex-Gigafactory technician Martin Tripp as the second Tesla employee seeking whistleblower status with the SEC. But Hansen’s offering up claims that go far beyond the alleged manufacturing issues highlighted by Tripp.
“I hope that shining a light on Tesla’s practices will cause appropriate governmental action against the company and its management,” Hansen said in a statement.
Tesla CEO Elon Musk denied the claims in an interview with Jalopnik’s sister site Gizmodo.
“He is simultaneously saying that our security sucks (it’s not great, but I’m pretty sure we aren’t a branch of the Sinaloa cartel like he claims) and that we have amazing spying ability,” Musk said. “Those can’t both be true.”
A DEA spokesperson didn’t have an immediate comment when reached by Jalopnik. A SEC spokesperson declined to comment.
A summary of Hansen’s Aug. 9 complaint was released Thursday by attorney Stuart Meissner, who’s also representing Tripp. Meissner said in an email that his client authorized the release of the summary and “and I would not be distributing such without such authorization, as I do not want other whistleblowers to think that we distribute their identity or even discuss their matters publicly at all , as we do not, unless they request such.”
One of Hansen’s most startling claims is that Tesla failed to reveal information sent by the U.S. Drug Enforcement Administration, regarding evidence of “substantial drug trafficking” by a Tesla employee at the Gigafactory.
In an earlier statement issued by Meissner, he said that “several” employees were allegedly involved in drug trafficking, but he has since issued a correction stating that the claims pertain to only one employee and “referred to several members of the cartel allegedly located in Mexico who were NOT Tesla employees.”
Meissner told Jalopnik in a phone interview that the DEA explained it received an anonymous phone call from a tipster who gave detailed information about an employee at the Gigafactory who was allegedly dealing “substantial quantities” of cocaine and possibly meth.
From there, Meissner says, the DEA reached out to Tesla to investigate the issue internally.
Hansen claims in the summary that Tesla received a written notification from a U.S. Drug Enforcement Administration/Storey County Sheriff’s Office task force in May, “alleging that a Tesla employee may be a participant in a narcotics trafficking ring involving the sale of significant quantities of cocaine and possibly crystal methamphetamine at the Gigafactory on behalf of a Mexican drug cartel from Sonora Mexico.”
Hansen said that he told Tesla on June 12 that he had “corroborated connections between a certain Tesla employee at the time and various alleged members of the Mexican drug cartel identified in the DEA report as located in Mexico, that he urged Tesla to disclose his findings to law enforcement and to the DEA task force, but that Tesla refused to do so and instead advised him that Tesla would hire ‘outside vendors’ to further investigate the issue.”
Hansen claims he reported the results to three supervisors, but says that the public nor Tesla’s board of directors were notified of the findings. He goes on to allege that the Tesla employee who was the subject of the DEA trafficking tip wasn’t “terminated upon receipt of the DEA tip or anytime during the entire time that Mr. Hansen was employed by Tesla, to his knowledge.”
A spokesperson for the DEA didn’t have an immediate comment when reached by Jalopnik.
In a statement released Thursday evening, Storey County Sheriff Gerald Antinoro said his office “cannot confirm nor deny the existence of an ongoing investigation of drug activity that is connected to the Gigafactory.”
“The Storey County Sheriff’s Office has no record of having ever been contacted by Karl Hansen,” the statement said.
A Tesla spokesperson said in a statement that Hansen’s allegations were taken “very seriously when he brought them forward.”
“Some of his claims are outright false,” the spokesperson said. “Others could not be corroborated, so we suggested additional investigative steps to try and validate the information he had received second-hand from a single anonymous source.”
“Because we wanted to be sure we got this right, we made numerous attempts to engage further with Mr. Hansen to understand more about what he was claiming and the work that he did in reaching his conclusions,” the statement continued.
“He rejected each of those attempts, and to date has refused to speak with the company further. It seems strange that Mr. Hansen would claim that he is concerned about something happening within the company, but then refuse to engage with the company to discuss the information that he believes he has.”
BuzzFeed reported that the DEA said it wouldn’t disclose the existence of an ongoing or pending investigation to a third party. The summary of Hansen’s claims released by Meissner mention that an internal investigation was conducted by Tesla after receiving a “written notification” from a task force involving the sheriff’s office and the DEA.
Hansen also alleges that he discovered that $37 million of copper and raw materials had been stolen from Tesla’s Gigafactory between January and June. But he claims that he was “instructed not to report the thefts to outside law enforcement” and “that he was directed to cease his internal investigation into the issue,” according to the summary of his claims.
Jalopnik first reported in May that an operations associate manager at Tesla’s assembly plant in Fremont, California, alleged in a May lawsuit that he was fired after telling supervisors about a colleague that was stealing company-owned auto parts.
Hansen was terminated on July 16 after raising the issues to Tesla, according to the release. Meissner said he’d been hired by Tesla within the past year.
Following Tripp’s departure, Hansen claims, Tesla “went so far as to install specialized router equipment within its Nevada Gigafactory designed to capture employee cell phone communications and/or retrieve employee cell phone data.”
Hansen alleges Musk was made aware of his findings.
“It seems that the manner in which it was handled, in telling my client not to report it back to the authorities that requested it be investigated raises an issue of potential obstruction of justice, which is a serious crime,” said Meissner, a former assistant district attorney in Manhattan. “If senior people at Tesla were involved in that, well, I think that’s very material for shareholders to know.”
An SEC tip is a formal whistleblower complaint that could lead to Hansen becoming eligible for a financial award, if securities laws violations are confirmed by the agency.
Meissner said in the interivew that the SEC is an appropriate agency to investigate Hansen’s claims.
“The SEC can and does often refer matters to law enforcement all the time,” he said, pointing to the fact the SEC has an office in place for whistleblowers to seek protection.
“It behooves anyone to go through the SEC first and then do whatever else you want to do,” he said, adding that: “I do believe that all these issues, although they may not appears so at the surface, are of concern to the SEC and its jurisdiction.”
The latest allegations come amid a particularly tumultuous time for Tesla, as it’s facing a separate inquiry by the SEC over Musk’s tweet last week that he planned to take the company private, despite lacking most of the fundamentals to do so at this time.
Update (7:38 p.m., August 16): This story has been updated to include statements from the local sheriff’s office and a Tesla spokesperson.