Workers at Tesla say it has used its dubious closed repair model to fraudulently reclassify the warranty work it does for design defects and engineering flaws. CNBC does a great job of explaining the whistleblower complaint.

“Were Tesla to accurately categorize its ‘goodwill’ repairs as warranty repairs, it would likely need to restate earnings for every quarter since at least 2017,” the tipsters wrote in their submission. “It should also be noted that nothing has ever stopped the company from appropriately sizing its warranty reserve even as its service employees handed out too much ‘goodwill’ repair coverage.”

This helps explain why Tesla has a bizarrely unsafe track record of dumping huge quantities of low quality intentional design defective cars onto public roads.

If the horrible Tesla customer experience has been fraudulently recorded as “goodwill” and therefore booked as earnings by ignoring warranty offsets, the company is even more dysfunctional/abusive than reported before.

To put it another way, such methods of “smoothing” or boosting financial performance reports has a very tawdry history including the 1980s Savings & Loan Scandal and the 2007 Great Recession. Warranty repair reserves are like loan loss reserves (estimates of future losses) and aren’t meant to be reclassified into short-term gains while diminishing important safety reserves (e.g. needed when growing warranty failures actually are addressed).

The article goes on to cite “goodwill” spend running ten times higher than normal, which presumably means warranty reserves were hugely diminished.

In just under two months in late 2021, Tesla was spending over $17 million on “goodwill” in the U.S. alone…

Perhaps most interesting is the detail about Tesla running internal software full of bugs and vulnerabilities, while failing to get even above 90% data accuracy.

Specifically it mentions that access controls are so lacking that data is getting modified easily by basically anyone with a keyboard. The database is open to tampering, yet it’s supposedly the basis of reporting financials to the market.

…screenshots showed Tesla employees had manually changed the status of “used” cars to “new” in a program that tracked vehicle deliveries data.

Easy way to report new car numbers above expectations? Just cook the books. No wonder an obvious fool, throwing all safety aside in a mad rush, could become so wealthy so fast. What if nobody ever verified the number of cars reported sold was anything even close to the number of cars sold?

“A million cars” could have been 900K, or even 600K.

After all, Tesla already had been caught fraudulently doubling their battery range estimates to misrepresent themselves as leaders. The whole industry was balking at Tesla lies before someone did the hard audit and found the truth was a Nissan LEAF had better range (and none of the Tesla death).

So it seems there are quite a few very serious allegations with extensive documentation, pointing to a culture of pervasive fraud coming right from the top of Tesla.

Enron executives went to jail for less.

All of it sounds to me like evidence of classic SOX violations.