Edge's News: Elon wins again! Musk is cleared by judge of wrongdoing for using $2.6BN

Elon Musk on Wednesday was cleared by a judge of wrongdoing in Tesla's 2016 purchase of SolarCity - a clean energy firm founded by his cousins.

Musk, 50, was sued by Tesla shareholders over his decision to buy the struggling firm for $2.6 billion.

They accused him of leaning on the board to buy the energy firm at a time when Musk's electric car firm was in a precarious financial position. 

The shareholders were seeking $13 billion in damages.

Yet on Wednesday a judge in Delaware ruled Musk did not unjustly enrich himself when he guided Tesla to acquire SolarCity Corp - a company founded in 2006 by his cousins Peter and Lyndon Rive, where Musk was chairman and the largest shareholder.

SolarCity grew to have more than 15,000 employees at its peak in 2015, but slashed 22 per cent of its workforce the following year, as Musk bought the firm. 

It has since been absorbed into the Tesla Energy brand, which raked in $801 million in 2021.  

Musk's mother Maye and the Rives' mother Kaye are twins, and their children grew up together in Pretoria, the South African capital.

The Case

The lawsuit filed by union pension funds and asset managers alleges Musk strong-armed Tesla's board to buy SolarCity for $2.6 billion in 2016, just as it was about to run out of cash. 

Peter Rive and Lyndon Rive Cousins of Elon Musk

Musk owned a 22 percent stake in SolarCity, which was founded by his cousins Peter and Lyndon Rive.

Central to the case were allegations that Musk, who also had a 22 percent stake in Tesla at the time of the deal, was nonetheless a controlling shareholder. 

Shareholders asked the court to order Musk, one of world's richest people, to repay to Tesla what it spent on the deal, which would represent one of the largest judgments ever against an individual.

On Wednesday, the judge in Delaware found in Musk's favour. The shareholders may now appeal. 

The ruling comes at a sensitive time for Musk, in the midst of finalising his $44 billion deal to acquire Twitter. It also followed a ruling from a separate court earlier in the day that denied a Musk bid to end oversight of his Tesla tweets.

'The preponderance of the evidence reveals that Tesla paid a fair price - SolarCity was, at a minimum, worth what Tesla paid for it, and the acquisition otherwise was highly beneficial to Tesla,' said the opinion by Vice Chancellor Joseph Slights of Delaware's Court of Chancery.

'Elon was undoubtedly involved in the deal process in ways he should not have been, but fortunately, the Tesla Board ensured nevertheless that the process led to a fair price.' 

The ruling can be appealed and a lawyer for the shareholders said he was evaluating potential next steps.

Randall Baron, attorney for the shareholders, said that Musk was conflicted and did not make an independent decision. 

'

The case is about loyalty,' he said. 

'The court's decision acknowledges that Elon Musk was conflicted and there were flaws in the process.'

The judge said Musk was more involved than he should have been, but a fair price for SolarCity outweighed claims the deal unjustly enriched Musk.

From almost the beginning of SolarCity in April 2015, it was mired in controversies, from solar panel fires to angry customers. In June 2018, nine percent of the workforce was cut.

The ruling follows a 10-day trial in July which included nearly two full days of testimony from Musk.

Union pension funds and asset managers alleged that Musk commandeered Tesla's negotiations for SolarCity while publicly claiming to be 'fully recused.'

Musk, on the stand, attacked a plaintiffs' attorney as a 'bad human being.' 

Slights, in his ruling, said Musk on several occasions was involved in board discussions of the deal, but he also noted several instances when the board stood up to Musk and declined to follow his wishes, such as the timing of the deal.

The all-stock deal was valued at $2.6 billion in 2016.

Tesla's stock price has since soared, inflating the value of what Musk received from the SolarCity purchase and in turn the damages sought by the plaintiffs.

Musk, the world's richest person with a fortune of around $265.6 billion according to Forbes, had owned about 22 percent of both companies at the time.

The Rive brothers have since left the company, which has been renamed Tesla Energy.  Lyndon Rive, 45, resigned in May 2017, and his brother Peter in September 2017.

'Our mutual grandfather was actually American, oddly enough, from Minnesota,' said Musk at a SolarCity event in October 2015, when Vanity Fair.com asked about his relationship with his cousins. 

'He had a little private plane that he would fly all over the place, all through Africa and Asia.  'He was the first to fly a private plane from South Africa to Australia without any electronic instrumentation, so I think we're lucky to be alive here. 

'Maybe that sort of adventurous spirit is in all of us.'