Tesla Is A GAAP Accounting Dumpster Fire

“If there is any brilliance to TSLA, it is in the accounting slight of hand” (from @georgia_orwell)

Unfortunately, the key regulatory agencies in the Government, like the SEC, have been co-opted by the big banks and by Wall Street lawyers who built a lucrative practices assisting big banks in  breaking the law.  As we’ve seen,  when caught the banks at worst receive a small financial wrist-slap that could be considered the cost of doing business. The same holds true with the big accounting firms. Witness this quote from a Wall St Journal article detailing the rationale used to justify burying accounting fraud in Mattel’s financials:

[S]senior finance executives and Mattel’s auditor, PricewaterhouseCoopers, decided to change the accounting treatment of the Thomas asset, effectively burying the problem…It was known within Mattel that if we took this approach, at worst we might get a slap on the wrist from the Securities and Exchange Commission” (this disclosure is from a whistleblower who was the director of Mattel’s tax reporting at the time).

Mattel considered disclosing the accounting “error” and restating its financials. But instead, the Pwc partner in charge of the Mattel account figured out a way to completely bury the issue, after which the partner was seen “walking down the hall, high-fiving people, after this decision was made.”

I’m certain that the PwC partner would have never buried the accounting fraud if he thought there was any risk of an SEC audit or of a whistleblower emerging to tell the truth.

It’s becoming increasingly apparent that Tesla’s accountant, Price Waterhouse (PwC), is readily complicit with looking the other way on Tesla’s accounting frauds, if not in fact helping the Company implement illegal accounting gimmicks.

In light of the Mattel situation, I am certain that PwC is fully aware of TSLA’s openly reckless accounting.  PwC earned $9 million in fees from Mattel while the accounting fraud scheme occurred. TSLA’s revenues are 3x larger than Mattel’s so I’m sure PwC is getting paid significantly more than $9 million in fees either to look the other way or to help with the accounting deception.

The Solar City acquisition deposition was a dumpster fire for the Tesla.  As it turns out, a lawsuit file by certain Tesla shareholders who assert the deal should have never happened  is working its way through the court system.  Notes from a recent deposition disclosed that Solar City’s form audit firm, Ernst & Young, testified that Solar City was insolvent at the time Tesla’s board “agreed” to pay $2.6 billion to acquire the zombie company.

The deposition of Kimble Musk, Elon’s brother, reads like a chapter from “The Gang That Couldn’t Shoot Straight.” The skilled questioning by the plaintiff’s attorney made it clear that the acquisition of Solar City was rife with extreme conflicts of interests.

After Kimbal was deposed it was clear that the acquisition served as a quasi-bailout for Kimble and possibly Elon, as they both had Solar City shares pledged as collateral against various loans, some of which were extended by Wall St banks. Solar City may well be the Company’s undoing rather than the implosion of the EV operations.

It’s likely that Tesla will be left alone by the regulators, who serve as hand-puppets for the big Wall St banks, until firms like Goldman Sachs and Morgan Stanley – financial advisors to both Tesla and Elon Musk – have completely milked any possible fees from the Company.

Eventually Telsa’s business model will dissolve from intensifying, superior competition and an inability to service its massive and growing load of debt and other fixed obligations.  This is happening already, as numbers for October from the U.S. and the EU show a stunning decline in Tesla registrations across all three models.  The only unknown is China.  But auto sales in China are falling like a rock every month. In October auto deliveries plunged 6%. The industry fundamentals are not conducive to the fairytale told by Musk that TSLA will eventually sell 12,000 cars per month in China.

Perhaps in the end justice will be properly apportioned and served on PwC for its role in helping Tesla and Elon Musk perpetrate what will eventually emerge as a largest financial fraud in U.S. history…but I’m not holding my breath

3 thoughts on “Tesla Is A GAAP Accounting Dumpster Fire

  1. “It’s likely that Tesla will be left alone by the regulators, who serve as hand-puppets for the big Wall St banks, until firms like Goldman Sachs and Morgan Stanley – financial advisors to both Tesla and Elon Musk – have completely milked any possible fees from the Company.”

    Jay Clayton, the 32nd Chairman of the Securities and Exchange Commission, formerly represented prominent Wall Street firms, including Goldman Sachs.

    He has also helped multiple corporations raise money through initial public offerings, including Alibaba Group, Ally Financial, Och-Ziff Capital Management, Oaktree Capital Management, Blackhawk Network Holdings, and Moelis & Company.

    During the financial crisis of 2007–2008, Clayton advised Bear Stearns in its fire sale to JPMorgan Chase in 2007, Barclays Capital in the purchase of Lehman Brothers’ assets following their bankruptcy, and Goldman Sachs in connection with the investment by Berkshire Hathaway.

    Clayton disclosed to the U.S. Office of Government Ethics that his other corporate clients had included TeliaSonera AB, Ally Financial, Deutsche Bank, UBS, Volkswagen, SoftBank Group, The Weinstein Company, Pershing Square Capital Management, and Valeant Pharmaceuticals. Clayton’s individual clients included Ocwen’s former head William Erbey, Paul Tudor Jones, former Attorney General of Ireland Peter Southerland, CDW founder Michael Krasny and LinkedIn founder Reid Hoffman.

    Any questions as to why the SEC has been effectively neutered against the neo-feudal corporate overlords?

  2. Sleight, not slight. (But what else can one expect from Twatter.)
    Nice article nontheless. So there is no reason left to go long the stock of any company using the big accountancy firms?

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