By Mike Spector and Chris Prentice
(Reuters) – U.S. prosecutors are examining whether Tesla committed securities fraud or wire fraud by misleading investors and consumers about the autonomous driving capabilities of its electric vehicles, three people familiar with the matter told Reuters .
Tesla’s Autopilot and fully autonomous driving systems make steering, braking and changing lanes easier, but are not fully autonomous. While Tesla has warned drivers to remain prepared to get behind the wheel, the Justice Department is reviewing other statements from Tesla and its chief executive, Elon Musk, suggesting its cars can drive themselves.
U.S. regulators have separately investigated hundreds of accidents, including fatalities, at Tesla with Autopilot enabled, prompting a massive recall by the automaker.
Reuters exclusively reported the U.S. criminal investigation into Tesla in October 2022 and is now the first to report the specific criminal liability federal prosecutors are examining.
Investigators are looking into whether Tesla committed wire fraud, which involves deception in interstate communications, by misleading consumers about its driver assistance systems, the sources said. They are also examining whether Tesla committed securities fraud by misleading investors, two of the sources said.
The Securities and Exchange Commission is also investigating statements Tesla made to investors about driver assistance systems, one of the sources said. The SEC declined to comment.
Tesla did not respond to a request for comment. Last October, the company revealed in a filing that the Justice Department had requested information from the company about Autopilot and fully autonomous driving.
The Justice Department declined to comment.
The investigation, which does not constitute evidence of wrongdoing, could result in criminal charges, civil penalties or inaction. Prosecutors are far from deciding how to proceed, one of the sources said, in part because they are reviewing voluminous documents provided by Tesla in response to the subpoenas.
Reuters could not determine that the specific statements reviewed by prosecutors were potentially illegal. Musk has aggressively touted the prowess of Tesla’s driver-assistance technology for nearly a decade.
Tesla videos demonstrating the technology that remain archived on its website say: “The person in the driver’s seat is only there for legal reasons. They do nothing. The car drives itself.”
A Tesla engineer testified in a 2022 trial over a fatal crash involving Autopilot that one of the videos, posted in October 2016, was intended to show the technology’s potential and did not accurately depict its capabilities. era. Musk nevertheless posted the video on social media, writing: “Tesla drives itself (without any human intervention) through urban streets to highways, then finds a parking space. »
In a conference call with journalists in 2016, Musk described Autopilot as “probably better” than a human driver. During an October 2022 call, Musk discussed an upcoming FSD upgrade that he said would allow customers to drive “to your job, to your friend’s house, to the grocery store without you touching the steering wheel.” .
Musk is increasingly focusing on self-driving technology as Tesla’s sales and profits plummet. Tesla recently cut costs through massive layoffs and scrapped plans for a long-awaited $25,000 model that was expected to boost sales growth.
“Throwing yourself into the wall to achieve autonomy is a blindingly obvious move,” the billionaire leader said on his social media platform X in mid-April. Tesla shares, down more than 29% year to date, jumped in late April when Musk visited China and made progress toward approving the sale of FSD in that country.
Musk has repeatedly promised self-driving Teslas for about a decade. “Simply failing to achieve an ambitious long-term goal is not fraud,” Tesla lawyers said in a 2022 court filing.
LEGAL CHALLENGES
Prosecutors looking into Tesla’s claims about self-driving cars are proceeding cautiously, recognizing the legal hurdles they face, people familiar with the investigation said.
They will have to demonstrate that Tesla’s claims crossed a line from legal salesmanship to material and knowingly false statements that unlawfully harmed consumers or investors, three legal experts not involved in the investigation told Reuters.
U.S. courts have previously ruled that “puffing” or “corporate optimism” about product claims does not constitute fraud. In 2008, a federal appeals court ruled that companies’ statements of optimism alone did not demonstrate that a company official intentionally misled investors.
Justice Department officials will likely seek Tesla’s internal communications as evidence that Musk or others knew they were making false statements, said Daniel Richman, a professor at Columbia Law School and former federal prosecutor. It’s a challenge, Richman said, but the safety risk involved in overselling self-driving systems “also speaks to the seriousness with which prosecutors, a judge and a jury would take the statements.”
FATAL ACCIDENTS
Tesla’s claims about Autopilot and FSD have also faced scrutiny in regulatory investigations and lawsuits.
Safety regulators and courts have expressed concern in recent months that corporate messaging about the technology — including the Autopilot and Full Self-Driving brands — has given customers a false sense of security.
In April, the Washington State Patrol arrested a man on suspicion of vehicular homicide after his Tesla, with Autopilot activated, struck and killed a motorcyclist while the driver was looking at his phone, according to police records. the police. In a probable cause statement, a trooper cited the driver’s admitted inattention to driving while he was on autopilot… trusting the machine to drive for him.
In Washington state, the driver remains “responsible for the safe and legal operation of their vehicle” regardless of its technological capabilities, a state patrol spokesperson told Reuters.
That same month, the U.S. National Highway Traffic Safety Administration launched an investigation into whether a Tesla recall of more than 2 million vehicles in December adequately addressed safety concerns related to Autopilot.
NHTSA declined to comment.
After the article was published, U.S. Sen. Edward Markey, a Massachusetts Democrat and longtime critic of the company’s driver assistance systems, said in a statement posted to X that he was “pleased to see » NHTSA and Justice Department officials “get tough on Tesla.” facing these dangers. »
The recall follows a long-running investigation launched by regulators after cars with activated autopilot repeatedly crashed into vehicles at first responder emergency scenes. Regulators then reviewed hundreds of crashes in which Autopilot was activated and identified 14 deaths and 54 injuries.
Tesla disputed the NHTSA’s findings but agreed to the recall, which used over-the-air software updates intended to alert inattentive drivers.
NHTSA’s investigation found “a critical safety gap between drivers’ expectations” of Tesla technology “and the system’s true capabilities,” according to agency records. “This gap has led to predictable misuse and preventable accidents. »
(Reporting by Mike Spector and Chris Prentice in New York, additional reporting by Hyunjoo Jin in San Francisco and David Shepardson in Washington; Editing by Brian Thevenot and Matthew Lewis)
News Source : finance.yahoo.com
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