Elon Musk Is Not A Nice Guy, And A Legal Ethics Controversy Proves It

The legal ethics world is all in a fluster over a recent controversy involving Elon Musk, the world’s richest man. This means that readers at Ethics Alarms should be flustering too.

This is the story: An SEC  attorney had interviewed  Musk during the agency’s investigation of the Tesla CEO’s 2018 tweet claiming to have secured funding to potentially take the electric-vehicle maker private. The claim proved to be false, resulting in a settlement that required Musk to resign and also to pay 20 million dollars in fines. In 2019, Musk’s personal lawyer called the managing partner at Cooley, LLP, and demanded that the firm fire the SEC lawyer, who had left the agency to become as associate at the large firm that handles Tesla’s business. The targeted lawyer had no connection to Tesla’s legal work at the firm; the sole reason for the demand was revenge. Musk wanted him to lose his job because he was angry about their interaction at the SEC.

The case has similarities to the Coca-Cola incident Ethics Alarms discussed last year, in which the corporation wrote the law firms with which it did business and demanded, as a condition of continuing to receive Coke legal fees, that the firms meet the diversity and equity quotas dictated by the company’s general counsel in all of their work for all of their clients, not just Coke. The position here was and is that the demand by Coca-Cola was unethical, and for any law firm to accede to it would be a breach of legal ethics. (Coke quickly sent the GC off to another position in which he could indulge his social justice fetishes.)

Cooley refused to fire the attorney, who remains an associate at the firm. Musk, meanwhile, is carrying through on his threat. Since early December of 2020, Tesla has begun taking steps to replace Cooley in many matters.  Musk’s rocket company, Space Exploration Technologies Corp. or SpaceX, has stopped using Cooley for regulatory work.

First of all, good for Cooley. The increasing trend of clients using their financial power to try to influence how law firms operate is a profound threat to justice and the legal system, and a sinister example of the business of law corrupting the profession of law. Of course, there is nothing wrong or unethical about a company choosing to employ a different law firm for any reason whatsoever. There is a great deal wrong with a company’s owner seeking personal vengeance on a lawyer who had only been doing his job. It’s not illegal, but the conduct is unethical—petty, mean-spirited, vicious and unjustifiable.

There is another legal ethics problem raised by the facts, however. Did you see it?

The story, which is hardly flattering to Musk and which has attracted plaudits for the law firm, was broken today by the Wall Street Journal. How did the Journal learn about it? The assumption is that someone at Cooley leaked it. But the demand from Tesla to its law firm was a client-lawyer communication, and legal ethics Rule 1.6, Confidentiality of Information, forbids a lawyer (or obviously a law firm) from revealing such communications to anyone without the client’s permission. Doing so to intentionally harm a client makes the breach even more serious. Now Tesla/Musk has a legitimate reason to drop Cooley; he and the company also have a valid ethics complaint and a lawsuit.  Some of that $20 million may be coming back.

Or could it be that Musk had someone at Tesla leak the story? It would be the ideal way to send a message to other law firms that Musk won’t be bluffing when he says, “Do what I want, or else.”

9 thoughts on “Elon Musk Is Not A Nice Guy, And A Legal Ethics Controversy Proves It

  1. It’s neither attorney-client privilege for you nor a journalist protecting a source for me, so I could have told you from personal observation several years ago that Elon Musk is not a nice person. I happened to be having a beer in a craft brewery tasting room one evening in Cocoa Beach, Fla. just south of Cape Canaveral. Some of the “rocket scientist” regulars, which is local slang for anyone who works at the Cape, were having a few understandable beers since they’d been told that day they were being laid off. Three guys in SpaceX polo shirts came in and started trash-talking those newly-unemployed NASA types specifically and NASA in general. Chris, the brewery owner, stood up for his regulars and “86’ed” the SpaceX newcomers for it. One of the three, it turned out, was Elon Musk. Who sent an email to all SpaceX employees the next morning declaring Cocoa Beach Brewing Co. “off-limits” to anyone who works for the company. (In an act of defiance, multiple beer-drinking SpaceX employees forwarded the email to Chris.) Who told me later, “it’s a good thing I own our building because I’m sure he’d have paid more than it’s worth to buy it so he could evict me.”

  2. Wait, was anyone under the impression that *any* zillionaire CEO is a nice guy? Nice guys generally don’t succeed in that role. It’s a job that’s tailor-made for assholes. Some just hide it better than others.

    That’s not to downplay the piss-poor ethics displayed in this story, just noting that the framing amuses me, implying as it does that it was possible for anyone in 2022 to think of Musk as a nice guy. Entertaining as a troll, perhaps, but “nice” was never on the table, was it?

    “I’m shocked – shocked! – to find that gambling is going on in here!”

    This story is a great example of how ethics failures often cascade, because too few people have strong enough ethical instincts to act as circuit breakers. Instead, most people, when wronged, open the floodgates of justifications, and a cycle of unethical retribution begins. One bad deed deserves another, and so on.

  3. I don’t trust Elon Musk any more than the next guy. I’ve thought for several years now that he’s this generation’s P.T. Barnum, smart but ready to scam anyone–any company, any government–coming his way. That said, I don’t know why anyone should want to leap to the defense of a former SEC lawyer. There are more than enough stories regarding the abuse of power federal prosecutors/bureaucrats have to make me think that the two deserve each other’s actions/reactions. As for Cooley, they’re really no better and that’s from personal experience.

  4. A zillionaire CEO is not just an asshole, but a petty and vindictive one. Color me unsurprised. Ethics is what you do when no consequences can fall on you, and often you don’t know it until the consequences do fall. Martin Shkreli, “Pharma Bro,” who was just banned from the drug industry for life and ordered to repay $64 million in profits, was someone who thought he was, and found out otherwise. In the meantime, the fact that he was a smug asshole before Congress and that he hiked the price of a lifesaving drug by 5,000% leaves almost everyone in the world except maybe his mom with zero sympathy for him.

    Elon Musk may be untouchable right now, but it’s not just good ethics but good practically to beware how you treat people on the way up, because you will see them again on the way down. He’s already been dinged once. Does he really want to risk being dinged again and having prosecutors who want to not just do their jobs, but make a trophy of him?

    P.S. This isn’t to defend Federal prosecutor/regulator types who lord their power over others or law firms who abuse their prominence for whatever purpose. I think the “Law and Order” writers weren’t too far from the truth when they gave an SEC lawyer the line “The SEC doesn’t make threats. There are those who cooperate with us and those who don’t, and we have very long memories.” Abuse of power, prominence, or prestige is never ethical, but it’s especially unethical when it’s done for petty and vengeful purposes. You want to drive around in your Ferrari and show up for events with a hottie on each arm, fine, but don’t use your prominence to mess life up for some guy who makes less than 10% of what you do just because he said something you didn’t like or because he was just doing his job. You want to flash a badge and put someone away who deserves it, more power to you, but don’t use it as a license to pursue a personal vendetta against someone because your evidence fell short, or you just don’t like the guy. You want to show up to accept another self-serving bar association award in a suit that costs as much as five of most guys’ suits, go right ahead, but don’t use your position to make damn sure that anyone who decides to leave your firm has to move out of the area. It all falls under the same headline: “being a sonofabitch.”

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