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Tesla Loses General Counsel Just 2 Months After Being Hired

February 20, 2019

Tesla’s general counsel is leaving just two months after being hired in the wake of Elon Musk’s run-in with U.S. securities regulators. Shares of the electric car maker (TSLA) declined on the news.

Dane Butswinkas, the Washington trial lawyer who represented Musk in his legal battle with the U.S. Securities and Exchange Commission last fall, will return full-time to his legal practice in Washington, Tesla said in an emailed statement. Jonathan Chang, a vice president in Tesla’s legal department, takes over effective immediately.

Tesla’s stock erased gains in premarket trading and traded down as much as 2.3% as of 8:27 a.m. in New York. The announcement follows Musk surprising investors with news that Chief Financial Officer Deepak Ahuja was leaving at the end of the company’s Jan. 30 earnings call, renewing concerns about the trouble the chief executive officer has had retaining key managers.

“I’m grateful for the opportunity over the past seven months to have worked with both Elon and Tesla, first as outside counsel and most recently as general counsel,” Butswinkas, 57, said in the statement. “I am returning to my home in Washington, D.C., and to my trial practice at Williams & Connolly. I look forward to continuing my work with Tesla in an outside counsel role.”

Chang, 40, is taking over hours after Twitter missives from Musk that are reminiscent of problematic proclamations that put Tesla and its CEO in hot water with regulators.

Musk posted Tuesday evening that Tesla would make around 500,000 cars in 2019. Within hours, he backtracked to say he meant the company would be producing at an annualized rate of half a million vehicles by the end of this year.

If sent by another company executive, the posts may read like an innocuous mistake. But Tesla was supposed to have set up controls last fall to keep Musk, 47, from posting material information about the company without pre-approval. The SEC ordered the electric-car maker to employ or designate a securities lawyer to review Musk and other senior officers’ Twitter communications.

The SEC handed down the punishment after alleging Musk committed fraud by tweeting in August that he had “funding secured” to take Tesla private at $420 a share. The agency said this and other claims the CEO made on Aug. 7 were false and misleading and affected the company’s stock.

Both Musk and Tesla settled without admitting or denying wrongdoing and agreed to pay $20 million penalties. The company’s board formed a disclosure-controls committee comprised of three independent directors.

Tesla and Musk’s forecasts also remain a sticking point with federal authorities. The SEC has subpoenaed the company over projections made for Model 3 production rates during 2017 and other public statements relating to output of the sedan.

The Justice Department also asked Tesla to voluntarily provide information about production projections and the take-private statements and is investigating, according to a regulatory filing Tuesday. The company made the same disclosure in November, and said this week there haven’t been any material developments in these matters since then.

“To our knowledge no government agency in any ongoing investigation has concluded that any wrongdoing occurred,” Tesla said in the Tuesday 10-K filing. The company said it’s cooperating with the authorities and can’t predict the outcome of the investigations. It added that if the government decides to pursue enforcement action, it could have a material adverse impact on the business.

Chang has worked at Tesla for almost eight years and has managed most parts of its legal organization during his tenure, according to the company. He first began advising the carmaker in 2006 as outside counsel at the law firm Latham & Watkins. He’ll report directly to Musk.