Risk Update

Elon Musk Conflicts? — Clients and Characters Causing Creative Law Firm Conflicts

I guess it was only a matter of time before Elon appeared on the risk blog… and maybe he’s just created his own new conflicts category. Here’s the latest: “Elon Musk’s Tesla asked law firm to fire associate hired from SEC” —

  • “A partner at law firm Cooley LLP got an unexpected call late last year from a lawyer for one of the firm’s most famous clients, Elon Musk’s Tesla Inc., with an ultimatum.”
  • “The world’s richest man wanted Cooley, which was representing Tesla in numerous lawsuits, to fire one of its attorneys or it would lose the electric-vehicle company’s business, people familiar with the matter said.”
  • “The target of Mr. Musk’s ire was a former US Securities and Exchange Commission lawyer whom Cooley had hired for its securities litigation and enforcement practice and who had no involvement in the firm’s work for Tesla. At the SEC, the attorney had interviewed Mr. Musk during the agency’s investigation of the Tesla chief executive’s 2018 tweet claiming, wrongly, to have secured funding to potentially take the electric-vehicle maker private.”
  • “Cooley has declined to fire the attorney, who remains an associate at the firm, the people said. Since early December, Tesla has begun taking steps in several cases to replace Cooley or add additional counsel, legal documents show. Mr. Musk’s rocket company Space Exploration Technologies Corp., also known as SpaceX, has stopped using Cooley for regulatory work, according to people familiar with the matter.”
  • “The interaction with Cooley points to a bigger pattern for Mr. Musk: Long dismissive of regulators, he has recently aimed his ire at individuals with ties to regulatory agencies with which he has sparred.”

Bloomberg Opinion Columnist Matt Levine offers his always fresh commentary:

  • “One assumes that Musk was operating out of pure emotional grudge here, but I suppose it’s worth asking if that phone call was a good strategic move. Of course Cooley can’t actually fire the associate, which would be disastrous for its reputation. But that’s not the goal here. Other law firms that do a bunch of work with Tesla might have to ask prospective hires, like, ‘hey you haven’t done anything to annoy Elon Musk have you?’ And so current government regulators might think ‘hmm, I should go easy on Elon Musk so he doesn’t ruin my future career.'”
  • “But, look, if a regulator started an investigation into Elon Musk, and Musk called her up and said ‘do you know who I am, I will ruin your career,’ that would definitely make things worse for him, don’t you think? Like she’d tell her bosses and they’d throw the book at him, add charges of interfering with an investigation, etc. Threatening to ruin a regulator’s career for investigating you is a very bad look! Of course Musk didn’t do that. Instead he actually tried to ruin a regulator’s career for investigating him. Arguably that’s a smarter move? Like, the Cooley associate is no longer at the SEC and that investigation is closed, so Musk’s direct risk is lower.”
  • “And yet … if you’re at the SEC now, and you’re conducting a different investigation of Tesla, wouldn’t this make you want to be tougher on him? Or if you’re at the Justice Department, or some other government agency? His odds of actually ruining your career are low; there are a lot of law firms, most of them don’t work with Tesla, and Musk didn’t even succeed in getting this associate fired. As a matter of regulatory solidarity, and of punishing Musk for trying to intimidate regulators, wouldn’t you go a bit harder now?”