Sen. Elizabeth Warren (D-MA) has sent a letter to Teslas board that accuses CEO Elon Musk of unavoidable conflicts, and potential misappropriation of corporate assets related to his $44 billion acquisition of Twitter.
Warren expressed concern over how Teslas board is dealing with Musk since becoming Twitters CEO, claiming that his actions may not be in the best interests of Tesla and its shareholders. Its the boards legal responsibility to address the situation, she said.
That responsibility includes ensuring that Mr. Musk is an effective CEO and that he fulfills his legal obligation to act in the best interests of Tesla and all of its shareholders, not just himself, she wrote in a letter to Tesla chair Robyn Denholm, on Sunday.
In the first weeks of his Twitter takeover, Musks leadership prompted concerns over whether hes funneling Tesla resources into Twitter, Warren wrote, citing reports that claim Musk used Tesla software engineers at Twitter.
It raises questions about whether Mr. Musk is appropriating resources from a publicly traded firm, Tesla, to benefit his own private company, Twitter, Warren wrote. Doing so would violate Musks legal duty to Tesla and prompt questions about the boards competence, she said.
Warren mentioned an anonymous employee who told CNBC that it felt almost impossible to turn down Musk without facing consequences later. That raises a larger question of whether employees were forced to work for Twitter rather than being invited to do so, Warren said.
Since Musks Twitter acquisition, multiple advertisers have pulled their ads from Twitter, leading to a drop in revenue. Warren said that Twitters desperation for revenue to cover its new debts could also create conflicts.
For example, Musk could shift Twitter algorithms so that praise of Tesla products receive greater attention and criticism of Tesla products will be suppressed. He could also have Twitter provide free ads to Tesla, or it could overcharge Tesla for advertising. Either way, Warren says its a conflict of interest.
Musk and Tesla are inextricably intertwined, Warren said, which means his actions as Twitters CEO, and how Twitter is operated and perceived, could harm Teslas brand.
This year, Tesla shares have dropped more than 62%, partly because of increasing concern among investors about Musks purchase of Twitter and his focus on that company at Teslas expense.
Teslas losses did not occur in a vacuum: while not all losses can be attributed to Mr. Musks decision to take over Twitter, there appears to be a direct link, with one analyst calling the Twitter deal an albatross that hangs over Tesla, Warren wrote.
She also included a dozen questions for the board about any informal or formal agreements between Tesla and Twitter. Additionally, she asked about any protections the board has in place to avoid conflicts of interest involving Musk, and if it has reviewed Musks actions related to the two companies.
Despite widespread concerns about Mr. Musks acquisition of Twitter while serving as CEO of Tesla, it remains unclear whether the Tesla Boardwhich has key decision making authority within the companyis adequately governing the company or if it has established clear rules and policies to address the risks to Tesla posed by Mr. Musks dual roles, Warren wrote.
Musk, Tesla, and Twitter did not immediately respond to Fortunes request for comment.
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