Tesla investigated by the SEC over disclosure of fire hazard in SolarCity panel installations

Tesla's swift purchase of SolarCity back in 2016 may have been a little too quick, as the U.S. Securities and Exchange Commission has now initiated a probe into the solar roofing division. The investigation started because of a whistleblower claim that Tesla didn't disclose the fire risks resulting from defective SolarCity panels to its customers and shareholders alike.

Said whistleblower is Steven Henkes, an ex-Tesla field quality manager, who filed a Freedom of Information Act request with the SEC to make the probe public. Mr. Henkes, who worked for Toyota's quality assurance division before being hired by SolarCity, claims that his subsequent firing last summer was due to him raising the alarm over the safety profile of the solar installations. Back in 2019, Tesla got sued by Walmart as the retail giant claimed that the SolarCity roof installations caused fires in seven of the stores they were installed on.

The two eventually settled, but Mr. Henkes' lawsuit against Tesla energy argues that he warned management about fire hazards stemming from faulty connectors, but the company ignored his warnings. "The top lawyer cautioned any communication of this issue to the public as a detriment to the Tesla reputation. For me, this is criminal," he says in the SEC probe filing. The lawsuit, filed back in November, informs that more than 60,000 residential customers and 500 government or commercial accounts were affected. Besides the SEC, Mr. Henkes has also filed a complaint against Tesla Energy with the U.S. Consumer Product Safety Commission.

Tesla started a replacement program for the faulty solar roof installation on the hush-hush back in 2019, yet the SEC investigation initiated by Mr. Henkes focuses on Tesla's failure to communicate "liability and exposure to property damage, risk of injury of users, fire, etc., to shareholders." In its turn, the SEC clarified that a probe is just that, and not yet indicative of any criminal wrongdoing. Still, Tesla's shares were down 6.4% in yesterday's trading and 20% down from their November 4 peak.

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