Tesla Faces Investigations over Mysterious Project

What is Project 42?

Tesla is facing investigations, but this time, they aren't for self-driving cars or Autopilot. The newest investigations, reported by the Wall Street Journal, are being conducted by Manhattan federal prosecutors and the Securities and Exchange Commission and cover the company's mysterious Project 42.

Back in July, the Journal reported that Tesla board members, last year, looked into the secretive project, which called for a structure with a glass-walled building to be built near the company’s headquarters in Austin, Texas.

According to people familiar with the matter, Project 42 was internally described as a house for CEO Elon Musk. The Journal’s sources indicated that Tesla employees were working on plans for Project 42 in 2022. Limited information has surfaced about the project, with only a few details known, including a twisted hexagonal design and a glass enclosure that seemed to house a residential space with bathrooms, a kitchen, and bedrooms.

The company’s internal probe was to determine if there was any misuse of company resources and personal involvement by Musk.

Trouble began when the project drew scrutiny from Tesla's board members and lawyers after employees questioned how the automaker intended to use a purchase order for specialized glass worth millions of dollars. The order was flagged by Tesla’s finance and internal audit groups, but it's not clear if the glass was delivered to Tesla, and the status of Project 42 is unknown.

The Southern District of New York wants to learn more about that specialized glass order, and as a result, the U.S. Attorney's Office sent subpoenas to multiple current and former Tesla employees, according to Bloomberg.

Specifically, the prosecutors want information about communications with Omead Afshar, who, per his LinkedIn profile, holds a position in the "Office of the CEO at Tesla." 

Afshar is described by Bloomberg as a "key lieutenant to Elon Musk" and a central figure in the company’s investigation into the ordered materials. Results from that internal investigation remain undisclosed, but Bloomberg reported in July 2022 that Tesla fired some employees connected to the probe and reported last November that Afshar took a position at SpaceX.

Just because the lawyers are seeking information does not mean that civil or criminal proceedings will be filed. Nevertheless, a publicly traded company is prohibited from using its resources for a private project. 

Even if Musk intended to pay for the company resources, Tesla would still have been obligated to disclose such transactions. SEC regulations require public companies to reveal transactions greater than $120,000, a threshold that the special glass project looks to have exceeded.

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