Sunday, August 9, 2020

Tesla Accounting Fraud

If you are incompetent at manufacturing and have to scrap a lot of parts, you can prevent or delay any financial statement impact of this by keeping the parts on the books as inventory even if you have already thrown them away. It is very simple, comically so, and it makes your gross margin and profit figures look better. The only problem is it is a crime!

[So, if you were a Silicon Valley company doing this, you would need to provide illegal sex and drugs to accounting firm employees, SEC employees, and journalists. One good time to do this and get them on tape for blackmail would be an "anything goes" festival in the desert, where you could have "boom boom tents". It might also help to learn that trade from a master.]

Based on emails that have come out in the Tesla and Martin Tripp litigation (he was a whistleblower whose phone Tesla bugged, and they tried to assassinate him), Tesla distinguished between "physically" scrapping and "virtually" scrapping parts.

In an email from Michael Bowling to Chris Lister and Jens Peter Clausen, Michael Bowling wrote to "request permission" to write off an inventory inaccuracy. He said that "during the inventory we realized 1718 modules in WIP that have already been scrapped physically [were] never scrapped virtually." In the email below, it said that for the week of April 2, 2018, scrap for the Model 3 was $1,920 per car!

It is strange that "permission" would be needed to do this. If a subordinate tells you that an asset on your balance sheet does not exist, you either write it off or you are a fraud. But Jens Peter Clausen wrote, "We properly want to go deep this quarter?" And Adithya Vijayakumar wrote that Mike was "working with the finance team to get the buy off on scrapping the modules for the second quarter."

That makes it sound like actual ground truth is not the final arbiter of what appears in Tesla financial statements.

This is not the first time there have been Tesla cost accounting irregularities. Remember that the government indicted someone in Tesla's accounts payable department for impersonating employees of one Tesla vendor (Hota Industrial Manufacturing of Taiwan) in order to substitute their payment information with the payment information of a different vendor, Schwabische Huttenwerke Automotive GmbH (SHW).


Anonymous said...

Chris Lister, Vice President of Operations at Tesla
He had worked as Senior Director, Manufacturing and Warehousing - Midwest Region for PepsiCo. How do you go from that to Director, Gigafactory Operations of a car company?

Can't tell whether Michael Bowling still works for Tesla.

Looks like Jens Clausen does not work there anymore.

Adithya Vijayakumar - Senior Process Engineer - Tesla

Anonymous said...

The fraud goes much deeper than that.

It's a totally worthless accounting fraud that cheats with every account they can to inflate their stocks (to along with all the lies and false promises publicly).

Anonymous said...

It's going to be ugly when this company does implode. A lot of gullible people are going to lose lots of money.