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Business

Tesla’s top lawyer leaves after Elon Musk’s misleading tweet

By
Richard Morgan
Published Feb. 20, 2019
Updated Feb. 20, 2019, 10:44 p.m. ET

Elon Musk’s new babysitter at Tesla has already quit.

The electric-car maker’s top lawyer announced Wednesday he was aleaving after two months on the job — just hours after Musk was forced to backpedal on a misleading tweet about the company’s Model 3 sedan production.

Legal eagle Dane Butswinkas didn’t explain his quick exit in detail in a Wednesday statement, saying only that he wanted to return to his trial practice at the Washington, DC, firm Williams & Connolly. A source close to Tesla said his departure was the result of “a poor cultural fit.”

More precisely, corporate-governance experts say, it’s likely that Butswinkas — who as outside counsel had represented Tesla’s chief executive in his Twitter-fueled tangle with securities regulators last fall — got fed up with Musk’s antics.

“It shows how difficult it is for an independent board to control a strong founder,” said Eleanor Bloxham, CEO of The Value Alliance and Corporate Governance Alliance. “Governance is still not going smoothly at Tesla.”

Tesla’s only comment on the situation was to say Jonathan Chang, vice president of legal, had stepped up to succeed Butswinkas as general counsel.

Its shares on Wednesday fell as much as 2.2 percent before recovering to close at $302.56, down 1 percent.

Musk had tweeted late Tuesday that Tesla expects to produce around 500,000 Model 3s in 2019. But in a follow-up tweet four hours later, the CEO said the 500,000 figure was actually an annualized production rate. “Deliveries for year still estimated to be about 400k,” Musk wrote.

The social media snafu recalled memories of Musk’s Aug. 7 tweet declaring he had “funding secured” to take Tesla private at $420 a share. The Securities and Exchange Commission had called that tweet fraudulent, noting that it partly looked like an attempt to impress his then-girlfriend, the pop singer Grimes, with a marijuana joke.

In response, the SEC last September slapped both Musk and Tesla with fines of $20 million each, forced Musk to give up his chairman role for three years and barred him from tweeting about Tesla’s business without a lawyer’s approval.

Nevertheless, Musk’s most recent social media problem exposed that the supervised-tweeting mandate is “either nonexistent or non-functioning,” says Paul Hodgson of governance-research firm BHJ Partners.

“Since it was such an important element of the SEC settlement, Tesla should expect a full investigation or, at the very least, a letter asking for evidence of its internal review process,” Hodgson said.

The SEC declined to comment on Wednesday.

Musk had already gone public with his contempt for the first SEC settlement, telling CBS’ “60 Minutes” in December that none of his tweets had been censored.

“Hello, First Amendment,” Musk said in flippant defiance. “Like, freedom of speech is fundamental.”

Butswinkas is the latest in a string of executives to leave Tesla as it struggles to ramp up production of its Model 3, which Musk has called a “bet-the-company” project.

In January, after missing Wall Street’s fourth-quarter forecasts, Tesla said financial chief Deepak Ahuja would retire after 11 years with the company.