Former Employee Sued by Tesla Claims Whistleblower Status

• Posted on: Jul 25 2018

Former Tesla, Inc. (“Tesla”) (NASDAQ: TSLA) employee, Martin Tripp (“Tripp”), has been sued in Nevada federal court by the car behemoth for allegedly hacking into the company’s manufacturing system and sharing trade secrets, claiming that he had tried to sabotage the company. Tripp denies wrongdoing, contending that he was trying to alert the public about alleged improper practices that the company was engaging in, including using punctured batteries in cars, making excess waste, and participating in unsustainable practices and procedures.  Tripp said that he spoke out only because he saw “some really scary things” at Tesla. 

An Employee Gone Rogue?

Telsa claims that Tripp intentionally tried to injure the company, stating that his actions were “willful and malicious” and “done with the deliberate intent to injure Tesla’s business.” (The complaint can be found here). The company alleged that Tripp had hacked its Manufacturing Operating System and transferred several gigabytes worth of confidential and proprietary data, including photos and a video of Tesla’s battery module production line, to outside entities. Tesla further alleged that Tripp had tried to recruit additional sources inside the company’s Gigafactory 1 battery plant to share data outside the company. Tesla has requested access to Tripp’s computers, USB drives, and cloud accounts, in order to measure the extent to which trade secrets were taken.

Tesla is suing Tripp for violations of the Defend Trade Secrets Act of 2016 (18 U.S.C. § 1836, et seq.), the Nevada Uniform Trade Secrets Act, and the Nevada Computer Crimes Law, as well as breach of contract and breach of fiduciary duty. Tesla claims to have suffered “cruel and unjust hardship,” including “lost business, lost profits, and damage to its goodwill.” Tesla is seeking unspecified compensatory and punitive damages.

Tripp has denied tampering with any software and contends that he did not have the ability to make the changes in questions. He claims that he was simply whistleblowing (i.e., telling the public that, among other things, Tesla knowingly manufactured batteries with punctured holes and used scrap and waste material in its vehicles).  During an interview with The Washington Post, Tripp confirmed that he did, in fact, serve as an anonymous source for the June 4, 2018 article in Business Insider, titled “Internal Documents Reveal Tesla is Blowing Through an Insane Amount of Raw Material and Cash to make Model 3s, and Production is Still a Nightmare.”

Tesla has dismissed Tripp’s contentions as false, maintaining that Tripp vastly exaggerated his claims in order to hurt the company. 

To Tesla, Tripp is a disgruntled former employee who is lashing out because he was passed over for a promotion due to job performance problems and a tendency to be combative and disruptive towards colleagues. Tripp argues otherwise, claiming that he was fired for whistleblowing. “I am being singled out for being a whistleblower. I didn’t hack into the system. The data I was collecting was so severe that I had to go to the media,” he told CNNMoney. 

Tripp Files A Claim With The SEC

On July 6, 2018, Tripp filed a whistleblower claim with the Securities and Exchange Commission (“SEC”), alleging that Tesla misled investors and put its customers at risk.

In a statement issued by Tripp’s lawyer about the filing, Tripp claims that Tesla knowingly manufactured batteries with punctured holes possibly impacting hundreds of cars on the road; misled the investing public as to the number of Model 3s actually being produced each week by as much as 44 percent; and lowered vehicle specifications and systemically used scrap and waste material in vehicles, all to meet production quotas.

If his tip results in a successful enforcement action, Tripp would be eligible to receive an award from the SEC for his information. Under the SEC Whistleblower Program, whistleblowers who provide the SEC with original information that leads to a successful enforcement action in which the SEC recovers more than $1 million are eligible to receive an award that ranges between 10 percent to 30 percent of the money collected. Since the inception of its whistleblower program in 2011, the SEC has awarded more than $266 million to whistleblowers.