Tesla shareholders have filed a lawsuit against company founder Elon Musk, in which he is accused of using his control over Tesla to buy out SolarCity, founded by his cousins, and save it from bankruptcy.
The union retirement funds and asset managers in charge of the case are demanding that Musk pay Tesla the $ 2.6 billion deal value and profits from his SolarCity stock. If they win, it will be one of the most severe sentences ever against one person.
Ann Lipton, a professor at Tulane University School of Law, noted that this would be a very unusual lawsuit, given Musk’s status, his personal ties to Tesla’s board members, and those board members’ financial ties to SolarCity.
Plaintiffs allege that Musk was negotiating and even pushed Tesla’s board of directors to raise rather than lower the price of SolarCity. The higher price benefited Musk, who was SolarCity’s largest shareholder with about 22%, and the four Tesla board members who directly or indirectly owned SolarCity shares. Plaintiffs also allege that Musk’s two cousins, who founded SolarCity, benefited greatly from the deal.
Musk said that he was “completely removed” from negotiations with the board of directors and that shareholders themselves voted to approve the deal. He also said that what the plaintiffs regard as evidence of control is nothing more than strong leadership.
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