Some folks, especially in the media, like to talk about Elon Musk like he’s a celebrity rather than a government contractor. They fawn over him, ask him for autographs, and glorify his futuristic plans as if he were Henry Ford or a Wright brother.
There’s no way of stopping members of the free press from glorifying Musk’s ambitions and embellishing his accomplishments, but that’s not what’s of critical importance here. What matters is how these stories influence the judgment of regulators and other decision-makers.
Everyone knows that there is, unfortunately, one set of law-enforcement standards for celebrities and one for everyone else. Matthew Broderick killed a mother and daughter while driving but ultimately received only a $175 fine with a careless-driving conviction. Justin Bieber escaped a DUI charge by donating to charity and taking anger-management classes. Jay-Z stabbed a record executive but was only found guilty of a misdemeanor and given three years of probation.
Well, Elon Musk is in legal and contractual dilemmas of his own right now, and for weeks the million-dollar question has been which set of rules the government will apply in his case. His settlement with the Securities and Exchange Commission is a welcome development, but the Justice Department and the Air Force still have key decisions to make.
Of concern in the SEC case is how, in August, Musk tweeted that he was considering taking Tesla private at $420 and already had funding secured. Later, it became clear that Musk’s statement about funding was misleading at best, as he had merely been approached by the Saudi Arabian sovereign-wealth fund about doing so and did not in fact have anything “secured.” This misinformation made share prices initially rise by 11 percent and then quickly tumble after Musk’s backtracking efforts.
In the fraud charges released, the SEC wrote, among other things, that Musk knew that he “had not agreed upon any terms for a going-private transaction” and “had never discussed a going-private transaction at a share price of $420 with any potential funding source.” In a settlement with the agency — which a court still has to approve — Musk and Tesla have agreed to pay $20 million each. Musk will also be removed from the company’s chairmanship for three years.
This indicates that Musk is, thankfully, being treated the way a non-celebrity would be. However, the settlement does not mark the end of the story. The Department of Justice also opened a criminal-fraud investigation into this matter this month, and it’s important that it remain just as objectively forceful as the SEC has been.
And SpaceX shouldn’t be off the hook either. While it’s now common knowledge that Musk smoked marijuana on the Joe Rogan Show, few realize how there can be ramifications for this behavior. Because of the Federal Acquisition Regulation (FAR), the Air Force cannot provide “a contract of any dollar value unless that individual agrees not to engage in the unlawful manufacture, distribution, dispensing, possession, or use of a controlled substance while performing the contract.” Beyond that, FAR also stipulates that all its contractors make “a good faith effort to maintain a drug-free workplace,” something that the CEO who publicly smoked pot on a highly watched program — and had an employee subject to an FBI bust for running a Silk Road drug market — probably can’t be said to do.
We all know that the CEO of any run-of-the-mill company would not be held to these lax Justin Bieber standards; he would feel the full force of the law, and for good reason. Taxpayers fund the government and deserve to have it as well-functioning as possible, where contractors behave as they should, and there is a reasonable degree of certainty that every dollar will be used efficiently and appropriately.
Given that Elon Musk has reaped over $5 billion in government support, enforcing the law has even more importance. The SpaceX and Tesla CEO can be a hero with an invisible cape to everyone else, but it’s critical that he remains just another businessman and government contractor in the eyes of the DOJ, SEC, and Air Force. The integrity of our government and legal system depends on it.