Tesla Inc. announced its general counsel is leaving Wednesday, two months after hiring him in the wake of CEO Elon Musk's run-in with U.S. securities regulators. Hours before that news, Musk was sending tweets reminiscent of those that put him and the company in legal jeopardy last year.
Dane Butswinkas, the trial lawyer who represented Musk in his legal battle with the U.S. Securities and Exchange Commission, will return full-time to his trial practice at the law firm Williams & Connolly in Washington. Jonathan Chang, a vice president in Tesla's legal department, is taking over effective immediately.
The departure came on the heels of a production projection Musk tweeted, then backtracked from, late Tuesday. The developments renew concerns about retention of key executives and the CEO's social media habits—issues that distracted from Tesla's manufacturing achievements in 2018.
"This is another in a string of high-profile executive departures," said Jeffrey Osborne, an analyst at Cowen & Co. who rates Tesla the equivalent of a sell. "Investors have gotten numb to the turnover as it has been a lingering issue in technical, accounting, HR and now legal roles. This is just one more thing on the wall of worry for investors to consider."
Tesla's stock erased gains in premarket trading and traded down as much as 1.1 percent shortly after the open in New York. Musk, 47, already surprised investors at the end of an earnings call late last month with news that CFO Deepak Ahuja would be leaving. Last year, the company lost senior managers from its sales, accounting, finance, supply management, human resources and communications departments.
Musk tweeted Tuesday evening that Tesla would make around 500,000 cars in 2019. He corrected himself within hours to say he meant the company would be producing at an annualized rate of half a million vehicles by the end of this year.
Meant to say annualized production rate at end of 2019 probably around 500k, ie 10k cars/week. Deliveries for year still estimated to be about 400k.— Elon Musk (@elonmusk) February 20, 2019
If sent by another company executive, the posts might read like an innocuous mistake. But Tesla was supposed to have set up internal controls last year to keep Musk from posting material information about the company without pre-approval. The SEC ordered the electric-car maker to employ or designate a securities lawyer to review Musk and other senior officers' Twitter communications.
The SEC handed down the punishment after alleging Musk committed fraud by tweeting in August that he had "funding secured" to take Tesla private at $420 a share. The agency said this and other claims the CEO made on Aug. 7 were false and misleading and affected the company's stock.
Both Musk and Tesla settled without admitting or denying wrongdoing and agreed to pay $20 million in penalties. The company's board formed a disclosure-controls committee comprised of three independent directors.
Tesla and Musk's forecasts also remain a sticking point with federal authorities. The SEC has subpoenaed the company over projections made for Model 3 production rates during 2017 and other public statements relating to output of the sedan.
The Justice Department also asked Tesla to voluntarily provide information about production projections and the take-private statements and is conducting its own investigation, according to a regulatory filing Tuesday. The company made the same disclosure in November, and said this week there haven't been any material developments in these matters since then.
"To our knowledge no government agency in any ongoing investigation has concluded that any wrongdoing occurred," Tesla said in the Tuesday 10-K filing. The company said it's cooperating with the authorities and can't predict the outcome of the investigations. It added that if the government decides to pursue enforcement action, it could have a material adverse impact on the business.
Chang, 40, has worked at Tesla for almost eight years and has managed most parts of its legal organization during his tenure, according to the company. He first began advising the carmaker in 2006 as outside counsel at the law firm Latham & Watkins. He'll report directly to Musk.
Butswinkas, 57, will continue to work with Tesla in an outside counsel role, according to an emailed company statement.