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Some probes face legal hurdles

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Tesla, SpaceX and Neuralink face array of investigations

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Experts debate political interference risk in Musk-related

probes

By Mike Spector, Rachael Levy, Marisa Taylor and Chris

Prentice

NEW YORK/WASHINGTON Jan 2 (Reuters) - Last month, in the

waning days of the Biden administration, the SEC set a tight

deadline of several days for demanding that Elon Musk pay a

settlement or face civil charges relating to alleged securities

violations during his $44 billion takeover of Twitter in 2022.

Musk broke the news himself in a social-media post: "Oh

Gary, how could you do this to me?" he wrote, referring to SEC

Chair Gary Gensler.

He added a smiley-face emoji but attached a legal letter

condemning the "improperly motivated" ultimatum: "We demand to

know who directed these actions-whether it was you or the White

House."

An SEC spokesperson declined to comment on the incident. The

White House did not respond to a request for comment.

The SEC is not the only investigative agency Musk has defied

and accused of political harassment. The billionaire has long

railed against government oversight, portraying himself as a

victim of bureaucratic zealots stifling his companies'

potentially life-saving innovations.

The White House will soon be occupied by Donald Trump - whom

Musk spent more than a quarter-billion dollars to help elect -

rather than Joe Biden, who appointed Gensler. Trump has already

named a new SEC chair to replace Gensler, who plans to resign

when Trump is inaugurated.

Musk's potential to have extraordinary clout with the new

administration raises questions about the fate of federal

investigations and regulatory actions affecting his business

empire, of which at least 20 are ongoing, according to three

sources familiar with SpaceX and Tesla operations and the

companies' interaction with the U.S. government, as well as five

current and former officials who have direct knowledge of

individual probes into Musk's companies.

The inquiries include examinations of the alleged securities

violations; questions over the safety of Tesla's Autopilot and

Full Self-Driving (FSD) systems; potential animal-welfare

violations in Neuralink's brain-chip experiments; and alleged

pollution, hiring-discrimination and licensing problems at

SpaceX.

Musk, Tesla, SpaceX and Neuralink did not respond to comment

requests. Before the election, Musk posted: "I have never asked

for any favors, nor has he offered me any."

A Trump-transition spokesperson called Musk a "brilliant"

entrepreneur and said Trump's administration would ensure law

and order, "treating all Americans equally."

The Musk-related cases could languish or be dropped by

Trump-appointed agency and department heads, the current and

former U.S. officials said.

 Trump's DOJ picks, for example, include lawyers who

defended him in criminal and impeachment trials and a nominee

for FBI chief whom Musk vocally supported and who has repeatedly

vowed to pursue Trump's enemies, one current and three former

DOJ officials said.

Lower-level DOJ officials could also exercise prosecutorial

discretion to avoid aggressively pursuing Musk companies in

light of his relationship with Trump, said Barbara McQuade, a

former U.S. attorney in Detroit during the Obama administration

who also worked as a federal prosecutor during the George W.

Bush and Clinton administrations.  "To the extent they want to

please the boss, I think they know how to do that."

Some legal experts downplayed the risk of political

interference from Musk, noting that an investigation's lack of

progress could signal insufficient evidence.

It's also possible that prosecutors who believe they have

strong cases will push forward regardless of Musk's role, legal

experts said.

"I don't think there's as much risk of Musk infiltrating to

influence cases," said Robert Frenchman, a white-collar defense

lawyer at Dynamis in New York. "Most prosecutors bring cases

they think they can win."

Representatives of the DOJ and all departments and agencies

with pending inquiries into Musk or his companies did not

comment on the probes or their ability to enforce regulations

against Trump allies during his second term. The EPA and

National Highway Traffic Safety Administration (NHTSA) said they

would continue fulfilling their legal and regulatory

responsibilities.

'FIRST BUDDY'

Since the election, Musk has called himself Trump's "first

buddy," frequented Trump's Florida Mar-a-Lago club, shared

Thanksgiving with the president-elect's family and weighed in

publicly on his cabinet appointments.

Trump appointed Musk to co-lead a new "Department of

Government Efficiency," a private entity advising on slashing

budgets and regulations. It remains unclear what authority the

role will carry.

Musk has touted his newfound influence and given specific

examples of how he might use it. Before the election, Musk said

he would seek to use his efficiency-czar post to advance

national driverless-vehicle regulations that would almost

certainly benefit Tesla and eliminate "irrational" rules such as

one resulting in a pollution fine against SpaceX.

NHTSA officials have repeatedly scrutinized Tesla for nearly

a decade, at times enraging Musk. During one 2016 call, he

screamed profanities at regulators launching the first of

several investigations into Tesla's Autopilot driver-assistance

system after a fatal crash, according to two people familiar

with the matter. There are currently five ongoing and open NHTSA

probes covering driver-assistance technology and other

operations in Tesla vehicles.

Tesla has blamed Tesla drivers in defending itself against

lawsuits and investigations over accidents involving FSD and

Autopilot, saying it had warned drivers to pay attention.

A DOJ probe into whether Tesla and Musk exaggerated its

vehicles' self-driving capabilities is among those where

investigators have faced challenges. Prosecutors have grappled

with demonstrating that Musk and Tesla crossed a line from legal

salesmanship into knowingly making false claims that misled

investors and harmed consumers.  The probe had stalled before

the election in part due to the legal hurdles, a person familiar

with the investigation said.

 Another probe, by the U.S. attorney's office in Manhattan,

involves the driving range of Tesla vehicles and followed a

Reuters investigation that found the automaker had rigged its

in-dash displays to give drivers "rosy" projections about how

many miles they could drive on battery power. It was unclear how

far the probe has progressed.

"To our knowledge no government agency in any ongoing

investigation has concluded that any wrongdoing occurred," Tesla

said in quarterly SEC filings.

Reuters was the first to report some Trump auto-policy

advisors have recommended killing a requirement that automakers

report data on crashes involving automated-driving systems, a

measure that could cripple NHTSA's ability to investigate and

regulate the emerging technology's safety.

ROCKETS AND NASA

SpaceX already faces little regulatory scrutiny because the

government has outsourced much of its space missions to Musk's

rocket-and-satellite firm, according to two former SpaceX

officials and a current government official familiar with the

company's interactions with NASA, the EPA and the Federal

Aviation Administration (FAA).

During a September summit, Musk labeled "insane" an EPA

inquiry that resulted in SpaceX agreeing to a proposed $148,378

fine for dumping pollutants, which Musk said were actually

"drinking water."

The FAA separately in September proposed fining SpaceX

$633,000 for allegedly failing to follow license requirements

and not getting approval for changes during two launches in

2023.

Musk called for FAA chief Mike Whitaker to resign in

September, shortly after the FAA fined SpaceX and delayed one of

its launches. Whitaker said last month he would step down before

Trump's term.

The Wall Street Journal reported in October that Musk has

been in regular contact with Russian President Vladimir Putin.

Three sources familiar with SpaceX's government interactions

said any scrutiny into Musk's contacts with a U.S. adversary

would be unlikely under Trump, who has picked tech billionaire

Jared Isaacman to run NASA. Isaacman has financed and joined two

private space missions involving SpaceX.

NASA declined to comment and Isaacman and a media

representative for Isaacman's company did not respond to a

request for comment.

Musk did not respond to requests for comment regarding his

reported contacts with Putin. In one instance, he responded with

two laughing and crying emojis to a social-media post on X

suggesting that Musk critics were attempting to portray him as a

Russian agent.