Tesla whistleblowers filed a complaint to the SEC in 2021, but the agency never interviewed them. Here’s what the complaint said
A Tesla Model Y on a Tesla car lot in Austin, Texas, May 31, 2023.
Brandon Bell | Getty Images
In the fourth quarter of 2021, a Tesla employee and a tech industry researcher jointly filed a whistleblower complaint to the U.S. Securities and Exchange Commission, expressing concerns that Elon Musk’s car company may have violated the law repeatedly, affecting shareholders, employees and customers.
The complaint contained a number of allegations about Tesla’s financials and its business practices, including that it improperly categorized repairs for years and that it had poor control over internal systems used for capturing business data that ultimately rolls up to financial and other company disclosures to shareholders.
In January 2022, the SEC assigned one person to look at one part of the complaint related to accounting firm PricewaterhouseCoopers’ work for Tesla, then closed that ticket a few months later, according to records reviewed by CNBC.
Agency staff have never spoken with the people who filed the complaint, those people say, and have never taken them up on their offer to review about 18,000 files they say they have for review, including internal Tesla emails, spreadsheets, screenshots, recordings and images, along with public records they gathered to support their allegations.
In response to questions from CNBC, the SEC declined to comment on the existence or nonexistence of a possible submission but said the agency evaluates all tips that are submitted. The whistleblowers could earn a financial reward if their complaint leads to the SEC taking some enforcement action and obtaining a monetary settlement or damages.
During the approximately two-year period since the complaint was first filed, Musk sold more than $39 billion of his shares in Tesla, including around $23 billion in 2022, to fund a leveraged buyout of Twitter, the social network he now owns and has rebranded X.
CNBC has reviewed a copy of the complaint — which is known as a TCR, an abbreviation federal agencies use to mean “tips, complaints and referrals” — along with follow-up correspondence to the financial regulator, public records and some of the internal Tesla materials that the whistleblowers wanted the agency to review. The identities of the people who filed the complaint to the SEC are known to CNBC, but they asked to remain unnamed and for their TCR to receive confidential treatment by the agency, citing a fear of retaliation by Musk against employees and critics, especially those who raise issues with government agencies or press. The whistleblower who was a Tesla employee no longer works there.
CNBC asked accounting, business and securities law experts to read a version of the complaint with the identities of the whistleblowers redacted to protect their privacy.
Ann Lipton, an experienced corporate and securities law trial attorney who now teaches at Tulane Law School and University of Chicago Law School, told CNBC, “Whistleblowers in general can come off like they have an ax to grind. This complaint contains a long list of concerns and some felt more serious than others — but the people who filed it sound plausible,” in part because they offered so many specific examples and records from within the company.
Some of the allegations in the redacted complaint, Lipton said, raise questions about whether Tesla has run afoul of federal securities law, including Section 13 of the Securities Exchange Act, Rule 13a-15 and Rule 15d-15, and the Sarbanes-Oxley Act. Broadly, these rules require companies and their management to maintain sufficient internal systems and processes to track and report financial and business information to auditors and shareholders, and to do so accurately and honestly and at regular intervals.
After reviewing the redacted version of the whistleblower complaint, Karen Nelson, a professor of accounting at Texas Christian University who previously served as an advisor to the Public Company Accounting Oversight Board, said the allegations about “internal control systems,” or how Tesla captures its financial and business information for eventual presentation to auditors and shareholders, were concerning.
If the information in the complaint is accurate, Nelson said, “Tesla’s information systems don’t seem to be very transparent and robust for internal people, which then leads to questions about how the auditor navigated those systems in their internal control testing, and became comfortable with using the data being produced by it.”
CNBC reached out to Tesla multiple times with detailed inquiries about this and other contentions. The company did not respond.
Here’s a detailed look at some of the more serious allegations about Tesla in the whistleblower complaint — and at the questions they raise about car quality and financial performance and why these would matter to shareholders or regulators, according to experts in the auto industry, securities and business law, and accounting.
Warranty repairs
Unlike traditional automakers, Tesla operates with a “direct-to-consumer” model meaning that it sells and services the cars it manufactures, rather than relying on franchised dealerships to do so.
When Tesla employees complete a repair, they must classify the job within broad pay type categories, including “warranty,” “extended service agreement,” “customer pay,” “rectification,” “goodwill” and others, according to internal communications, guides and policies available to employees via a Tesla intranet and reviewed by CNBC.
In their complaint, the tipsters included excerpts from Tesla policies, internal emails, customer service records and other documents to show that they believe employees have been miscategorizing repairs for years and that Tesla management has been aware of the problem.
Under standard warranty accounting practices in the automotive and other industries, companies set aside a portion of each sale to cover future repairs that will be conducted under warranty, Nelson explained to CNBC. These warranty reserves show up as liabilities on a company’s balance sheet and show up on the income statement as part of the costs of goods sold. Later, when repairs are recorded as “warranty,” the costs of these repairs are counted against the warranty reserves.
The complaint does not allege that Tesla deviates from this standard industry practice. It instead alleges that Tesla has allowed employees to miscategorize repairs and thereby hide some of its warranty costs.
With a “goodwill” repair, Tesla essentially foots the bill for labor, parts or accessories given to keep a customer happy. According to Tesla’s financial statements, the cost of goodwill repairs is not counted against warranty reserves and shows up on the income statement under sales, general and administrative costs.
Meanwhile, “customer pay” repairs are booked as revenue, specifically under the “services and other” category, according to its financial filings. Here, too, the repairs are not counted against warranty reserves.
By charging customers for repair work or by designating repairs as “goodwill” when they should qualify as “warranty” repairs instead, Tesla could be misstating fundamental financial information, the whistleblowers said, urging the SEC to investigate further.
“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.”
Indeed, Tesla’s goodwill expenses were unusually high for the industry, according to automotive industry veteran Nicholas Parks, who has owned and managed car dealerships in three states, including one in California that sold battery electric vehicles.
In just under two months in late 2021, Tesla was spending over $17 million on “goodwill” in the U.S. alone, which translated to about $70 worth of goodwill on the average repair order across approximately 247,000 repairs, according to internal Tesla dashboards referenced in the whistleblower complaint and reviewed by CNBC.
This is easily 10 times more money than traditional auto dealers would spend on goodwill per repair on average in two months, Parks told CNBC.
Nelson, the accounting professor, explained why miscategorization of repairs might be of interest to financial regulators and investors.
“Where you put stuff in a financial statement matters,” she said. “If I’m taking warranty costs out of the cost of automotive sales, and pushing them down into some other line further down the income statement, that will make my gross profit margin look higher. If I’m moving it from up above in cost of sales, and moving into other expenses, it’s also not as transparent about the quality of the product.”
Because Nelson did not review all the documentation the whistleblowers had to offer the SEC nor interview them, she would not give an opinion on whether Tesla may have run afoul of accounting requirements or securities laws. However, she did say she was “surprised” that the agency didn’t indicate more serious interest in the whistleblowers.
Inconsistent communications and policy apparently contributed to employees miscategorizing items as “goodwill” or “customer pay” that should have been billed under warranty, the filers’ complaint to the SEC said.
Tesla documents read by CNBC show that employees had to navigate a maze of directives available in internal systems, such as WARP (a Tesla-built enterprise resource planning system), intranets and group emails, to figure out how to track and classify billing for each repair.
In one internal “Goodwill Guide,” Tesla told employees that any “repair/replacement necessary to correct defects in the materials/workmanship of any parts manufactured/supplied by Tesla” should be covered by and categorized as “Warranty/Extended Warranty pay type (post-delivery).” That would apply to any customer’s car that was still under a warranty, while out-of-warranty cars would require a customer to pay for repairs.
For a specific issue — “blistering” headrests in car seats manufactured by Tesla — the company gave employees different directions about how to bill customers for service to replace the part. One internal Tesla document seen by CNBC said the blistering headrest “is not a defect, and therefore not covered under warranty” and that repairs should be offered as goodwill. Confusingly, that document linked to another page in the company intranet saying customers should have to pay to get their headrests fixed.
Tesla also treated replacement of defective tail lamps as “customer pay,” after determining that chemicals used in commercial car washes could cause stress cracks in their lenses, according to internal documents read by CNBC. But in a seemingly contradictory note, an internal e-mail in the second quarter of 2021 referencing the issue said, “First repair and replacement of parts can be covered under Goodwill – Vehicle Quality.”
The whistleblower complaint says that Tesla has been aware of inconsistencies in how employees treat repairs. During the second half of 2021, Tesla was working to improve data accuracy from its service division, according to internal records reviewed by CNBC. It set up score cards for each region to include assessments of pay type data, and goodwill and warranty costs. The company was aiming for better than 90% accuracy in service centers’ pay type data at that time, the internal records said.
Parks, the former automotive dealer, said with traditional dealerships, 99% or higher accuracy would be expected, and dealerships typically employ a number of specialists to ensure accuracy. “If dealership employees do not enter information about a repair correctly, then a claim may not get paid or you may end up having a warranty audit where the automaker comes in and charges back these claims and that’s painful,” he explained.
Questioning disclosures and data
In their 2021 complaint, the whistleblowers alleged that Tesla’s internal software and systems are constantly changing and have been rife with bugs and vulnerabilities throughout the years, and that third-party accountants or auditors may not have been given full access to, or thoroughly vetted, all of them.
The complaint said the whistleblower who had been a Tesla employee was authorized to access a wide array of records — including policies, internal emails, and sales- and service-related data — at Tesla through software and systems used daily by thousands of employees for normal work, including both custom-built and off-the-shelf programs.
CNBC spoke with one current and two former Tesla employees who corroborated that most people working for Tesla have broad access to apps and information inside the company by default. They also noted the array of apps within Tesla has grown through the years, as would be expected with a growing business in a complex industry. These people requested anonymity as they were not authorized to speak on Tesla’s behalf.
The complaint embedded images of what the whistleblowers said were emails, spreadsheets and screenshots of some of Tesla’s homegrown software and back-end systems. It said these showed that non-administrative and non-executive employees had access to read and edit data points, via a developer tool called MySQL Workbench, that could later feed into Tesla’s shareholder communications and financial statements.
In one example, the tipsters said screenshots showed other Tesla employees changed the status of material used in manufacturing from “scrap” to “work in progress.” Scrap refers to material generated from a manufacturing job that is unusable waste.
In another example, the complaint said screenshots showed Tesla employees had manually changed the status of “used” cars to “new” in a program that tracked vehicle deliveries data. This could affect Tesla’s delivery numbers, they said, though they didn’t try to estimate the overall impact and instead encouraged the SEC to investigate further.
In early 2022, the whistleblowers wrote to the SEC expanding on their initial complaint. They described multiple databases and a separate, paper-based process for auditors that had been used over time at Tesla for tracking vehicle sales and deliveries. The ever-changing systems led to inconsistent measurements and definitions of “deliveries,” they alleged.
CNBC reached out to Tesla for comment on these specific allegations in the complaint and received no response.
Deliveries are the closest approximation of sales reported by Tesla in quarterly disclosures, and one of the numbers Wall Street watches most closely. If they were recorded inaccurately, the company could have met or beat analysts’ expectations for deliveries on the basis of flawed or falsified data.
In the fourth quarter of 2021, just before the whistleblowers sent their followup email, Tesla reported that it had reached 308,000 vehicle deliveries — a number that handily beat analysts’ expectations.
Issues related to accurate tracking of deliveries would potentially merit an investigation into the reliability and accuracy of Tesla’s disclosures and financial reporting, and analysis of whether Tesla meets the standards and has safeguards in place that would be required under the Sarbanes-Oxley Act, the whistleblower complaint said.
Under Sarbanes-Oxley, a company’s management is required to disclose the efficacy of its internal controls and identify weaknesses, such as the ability of unauthorized users to access sensitive data. Sarbanes-Oxley also requires auditors to check and report on these controls, so that investors can confidently rely on the financial statements and so that companies can avoid having to restate financials later on.
Business and securities law expert Lipton told CNBC if there are weaknesses in either “disclosure controls” or the “internal controls over financial reporting” at Tesla, there could have been a “potential violation of the substantive requirement that such controls be maintained” under Section 13 of the Exchange Act, and there might have been “false statements by the company, Musk, the CFO, or PwC regarding the effectiveness of internal controls.”
“To the extent we’re talking about false statements, the kind of bottom-line trouble that might be involved depends on the level of fault,” Lipton said. “If the controls turn out to be faulty, but there was no flaw in the assessment — that is, top management and PwC reviewed everything, but the problems were too far down the chain to detect easily — then they may not be facing penalties for false statements. Obviously, matters become more serious if they intentionally or recklessly or perhaps even negligently misstated the state of the internal controls.”
Going concern
In 2022, Tesla boasted net income of $12.56 billion and cash reserves of $22.10 billion, but Musk sometimes reminisces about earlier days when the company nearly went bankrupt. The whistleblower complaint alleged that, given Tesla’s financial status in 2018, when it was ramping up production of its lowest-cost Model 3 sedan, it should have been more transparent with shareholders at the time. The complaint said Tesla should possibly have issued a “substantial doubt” statement, also known as a going concern warning, in its 2018 SEC filings, which it did not.
In 2019, Musk discussed Tesla’s near-bankruptcy under oath in the Delaware Court of Chancery, which the whistleblowers referenced in later correspondence to the agency. Their initial complaint also referenced internal materials pertaining to the company’s bank account balances, but the SEC did not follow up to ask for the documentation.
Accounting expert Nelson told CNBC, in general: “Management should provide an explicit substantial doubt statement in the financial statements if it is probable that the company will not be able to meet its obligations within one year from the date the financial statements are issued. However, if they have plans that will alleviate that doubt, then they should disclose those plans but do not need to make a substantial doubt statement,” following accounting standards of the Financial Accounting Standards Board that have been in effect since mid-December 2016.
Auditors’ work for other Musk companies
Tesla’s auditing firm since 2005, PricewaterhouseCoopers, has also done tax-related consulting work for Musk enterprises SpaceX and The Boring Company, according to internal Tesla materials the whistleblowers offered to the SEC. In correspondence to the agency expanding on their complaint, the whistleblowers alleged this raises questions about the firm’s independence and objectivity in judging Tesla’s financials.
Besides offering internal materials from Tesla, the whistleblowers pointed to obscure public records from the California Alternative Energy and Advanced Transportation Financing Authority that they say also showed PricewaterhouseCoopers did non-audit work for Musk companies while serving as Tesla auditor.
Although there are only four major auditing firms, there are dozens of reputable firms Musk’s privately held enterprises could have turned to for tax consulting.
Securities law expert Lipton said that generally, auditors are not supposed to do certain kinds of consulting services for their audit clients or for affiliates of their clients if “a reasonable person would question your independence.”
According to records reviewed by CNBC, the SEC assigned an employee to look into possible conflicts of interest in January 2022 but closed that ticket in April without interviewing the whistleblowers or evaluating their documentation.
PricewaterhouseCoopers declined to comment. Tesla did not respond to multiple inquiries for comment.
How the SEC handles whistleblower tips
The people behind the whistleblower complaint have followed up repeatedly with the SEC since late 2021, contacting different attorneys and other appropriate authorities within the agency to ensure they were aware of the tip.
After filing their TCR submission, the whistleblowers said, they emailed and left voicemails for multiple SEC employees, following up on the tip and emphasizing the substantial quantity of records they were making available to the SEC for review. The SEC employees they reached out to included successive San Francisco bureau chiefs for the agency, as well as other SEC attorneys and whistleblower program staff in 2023.
In October 2022, about a year after the whistleblowers submitted their complaint, the Office of the Inspector General publicly voiced concern that the financial regulator, under Chair Gary Gensler, was not properly staffed and that turnover at the senior officer level was abnormally high, over 20%. High attrition in the agency and other factors, the Inspector General’s office wrote, could result in “improper handling of TCRs” and may “impede SEC investor protection efforts.”
According to Alex Platt, a professor at the University of Kansas School of Law, whose SEC whistleblower research was published in the Yale Journal of Regulation, around 30 to 50 SEC staffers have been assigned to the office that screens tips, complaints and referrals. Platt said he believes this office is under-resourced.
Since the agency began offering a bounty for whistleblower tips in 2011, it had received about 52,400 tips and issued 216 awards as of September 2021. From the start of the program through the end of 2020, Platt’s research found, the average SEC whistleblower award amounted to around $6.2 million, with the median around $1.5 million.
“Generally, you take how much the SEC gets from its enforcement action, and the whistleblowers get between 10% and 30%, based on multiple factors, including how helpful they were,” Platt explained.
Whether a tip gets selected for investigation, enforcement, and awards depends on whether it matches the SEC’s current enforcement priorities, the professor said. Attorneys who are former agency officials have the greatest success in obtaining awards for their clients, using their unique access and insight into the agency’s priorities to pick the “right” clients and shape their submissions, Platt told CNBC.
An SEC spokesperson disputed Platt’s characterization that the agency pays more careful attention to submissions from whistleblowers who have attorneys with prior SEC experience.
The spokesperson said in an email to CNBC: “The priority of the whistleblower program is to incentivize individuals to come forward and report possible violations of the federal securities laws to the SEC. The whistleblower office encourages all individuals with information about fraud or wrongdoing involving potential violations of the federal securities laws to submit their whistleblower tips and any additional information electronically through the Commission’s online TCR portal.”
Nvidia CEO Jensen Huang, right, speaks alongside President Donald Trump about investing in America, at the White House in Washington, on April 30, 2025.
Jim Watson | AFP | Getty Images
Six Senate Democrats on Friday released an open letter asking President Donald Trump to reconsider his decision to allow tech giants Nvidia and Advanced Micro Devices to sell AI semiconductor chips to China in exchange for 15% of revenue from the sales.
The letter — signed by Senators Chuck Schumer, D-N.Y.; Mark Warner, D-Va.; Jack Reed, D-R.I.; Jeanne Shaheen, D-N.H.; Christopher Coons, D-Del.; and Elizabeth Warren, D-Mass. — was in response to an Aug. 11 announcement by Trump that Nvidia and AMD would pay the U.S. government a 15% cut of revenue from chip sales to China in exchange for export licenses.
“Our national security and military readiness relies upon American innovators inventing and producing the best technology in the world, and in maintaining that qualitative advantage in sensitive domains. The United States has historically been successful in maintaining and building that advantage because of, in part, our ability to deny adversaries access to those technologies,” the letter states.
“The willingness displayed in this arrangement to ‘negotiate’ away America’s competitive edge that is key to our national security in exchange for what is, in effect, a commission on a sale of AI-enabling technology to our main global competitor, is cause for serious alarm,” the letter continues.
Senators also warned that selling advanced AI chips — specifically Nvidia’s H20 and AMD’s MI308 chips — to China could help strengthen its military systems, a claim that Nvidia denies.
In a statement to CNBC, a Nvidia spokesperson said: “The H20 would not enhance anyone’s military capabilities, but would have helped America attract the support of developers worldwide and win the AI race. Banning the H20 cost American taxpayers billions of dollars, without any benefit.”
The letter from Senate Democrats also requests a detailed response from the administration by Friday, Aug. 22, regarding the current deal involving Nvidia and AMD, as well as any similar arrangements being made with other companies.
“We again urge your administration to quickly reverse course and abandon this reckless plan to trade away U.S. technology leadership,” the letter states.
A request for comment from the White House and AMD was not immediately returned.
Despite Trump allowing chip sales to resume, it has already become clear that China isn’t welcoming Nvidia back with open arms, instead urging tech companies to avoid buying U.S. companies’ chips, according to a Bloomberg report.
“We’re hearing that this is a hard mandate, and that [authorities are actually] stopping additional orders of H20s for some companies,” Qingyuan Lin, a senior analyst covering China semiconductors at Bernstein, told CNBC.
In a separate report, The Information said regulators in China have ordered major tech companies, including ByteDance, Alibaba, and Tencent, to suspend Nvidia chip purchases until a national security review is complete.
— CNBC’s Kristina Partsinevelos contributed to this report
Technology
Bill Gates meets Willy Wonka: How Epic’s 82-year-old billionaire CEO, Judy Faulkner, built her software factory
Judy Faulkner, founder and chief executive officer of Epic Systems Corp., during the Forbes Healthcare Summit in New York, Dec. 5, 2023.
Michael Nagle | Bloomberg | Getty Images
Do not go public. Do not acquire or be acquired. Software must work.
These are the first three of the 10 commandments splashed across bathrooms and breakrooms at Epic Systems’ sprawling 1,670-acre campus in Verona, Wisconsin, just southwest of Madison.
It’s not the wackiest part of working at the health-care software giant. Once a month, most of the company’s 14,000 employees pack into an underground auditorium called Deep Space for a mandatory staff meeting, which some jokingly refer to as “work church.” Executives go over company news and objectives. They also lead a grammar lesson, such as whether it’s OK to end sentences with a preposition and when to use “who” or “whom.”
Epic’s CEO is 82-year-old Judy Faulkner, who started the company in a Wisconsin basement in 1979 and has helmed the enterprise ever since. En route to building a business with $5.7 billion in annual revenue, Faulkner has kept significant distance from her tech peers, both physically and otherwise. Epic is about 2,000 miles east of both Seattle and Silicon Valley, and the company has never taken money from venture capitalists.
“I’ve described her as a female cross between Bill Gates and Willy Wonka,” Dr. Eric Dickson, CEO of UMass Memorial Health, said in an interview. The hospital system is an Epic customer, Dickson said, adding that he’s known Faulkner for around 20 years.
While Wonka is, of course, a fictional character, Gates for many years was the world’s wealthiest person, thanks to his enormous stake in Microsoft, before donating his way to 14th on the Forbes billionaires list. At the top of the leaderboard is Tesla’s Elon Musk, followed by Oracle’s Larry Ellison, Meta’s Mark Zuckerberg and Amazon’s Jeff Bezos.
Faulkner ranks 430th, with an estimated net worth of $7.8 billion, based on what Forbes says is her 43% ownership of Epic. The publication lists Epic as among the five largest private U.S. tech software and services companies by revenue.
Epic is best known for its dominance in electronic health record, or EHR, software. An EHR is a digital version of a patient’s medical history that’s updated by doctors and nurses. About 42% of acute care hospitals in the U.S. use Epic, putting it way ahead of Oracle Health, which is in second place at 23%, according to an April report from Klas Research. Oracle acquired its way into the market with the $28 billion purchase of Cerner, a deal that closed in 2022.
Epic says its technology is used in 3,300 hospitals and 71,000 clinics and by 325 million patients worldwide. Starting Monday, thousands of health-care executives will descend on Epic’s corporate headquarters for the company’s Users Group Meeting, one of its largest annual on-campus events.
As ubiquitous as Epic’s technology is across much of the health-care sector, doctors, hospital administrators, startups and patients have their share of complaints about the software’s user experience and its interoperability, or ability to work with other tools.
“With half a million or so clinicians using Epic, there will be some who find it easy and some who find it difficult,” an Epic spokesperson said in a statement.
Some folks might question Epic’s commitment to its third commandment, but there’s no doubting the company’s allegiance to the first one.
From Epic’s early days, Faulkner has been averse to the idea of running a public company and what she’s called the “tyranny of the quarter.” She said she came to that view after researching public companies and reading shareholder comments.
“They were vitriolic, in many cases, because the only thing they were looking at was return on their investment,” Faulkner told CNBC. “Sometimes, there’s a lot more than that.”
Without the benefit of public stock, Faulkner’s wealth doesn’t multiply at the same rate as that of her fellow tech founders and CEOs. She’s fine with that.
Faulkner, who rarely grants interviews, agreed to sit down for a half-hour chat with CNBC at Epic’s headquarters, where office buildings are themed, with many inspired by fiction, including “The Wizard of Oz,” “Alice in Wonderland” and the Harry Potter stories.
The interview took place in the Andromeda building in a conference room called The Cottage, which is connected to her office. Two of the walls are plastered with quotes such as “The geek shall inherit the Earth” and “All lasting business is built on friendship.” Faulkner’s dog Tundra, a fluffy Samoyed, also made an appearance.
‘The Trust Protector Committee’
A sign on the Epic campus says “Epic Intergalactic Headquarters.”
Courtesy: Epic
Faulkner celebrated her 82nd birthday Monday. While she has yet to publicly disclose when she plans to step down from her role, Faulkner confirmed that she has a succession plan in place that ensures Epic will remain privately held and constructed firmly as she envisioned long after she’s gone.
Faulkner has never sold any of her voting shares, and that stock will be transferred into a trust after her death, according to Faulkner and Epic. The plan for now is that the trust will be governed by a voting committee made up of Faulkner’s husband, Dr. Gordon Faulkner, a retired pediatrician; her three children, and five longtime Epic employees, though Faulkner said she might include some additional staffers to make sure enough voices are represented.
Members of the committee can’t vote for the company to go public or be acquired, among other rules, as she has previously disclosed. Some of the provisions are less consequential, such as a recommendation that the trust’s telephone hold music should be classical.
“I like classical music,” she said. “I think when I was a child that it was played in our house a lot, just on the radio, just on the record player.”
For further safekeeping, Faulkner established an oversight board called “The Trust Protector Committee,” Epic said, consisting of three health-care leaders — all Epic users. Its job is to sue members of the trust’s voting committee if they don’t follow the rules.
The names of members of the voting committee and oversight board won’t be released, Faulkner told CNBC, but she said she’s identified who she would like to participate.
After running Epic for the past 46 years, Faulkner has amassed her fair share of admirers and critics, with some in the latter camp even taking Epic to court.
But Faulkner continues to flout conventional business practices and has built Epic, despite its flaws and complexities, into the most powerful technology company in U.S. health care.
Reflecting on her approach to leadership and decision-making, Faulkner said, “Just have the guts to do what you know is the right thing to do.”
CNBC spoke with two dozen Epic customers, former Epic employees, industry experts and people close to Faulkner for this article, some of whom asked not to be named in order to speak freely. Details about Faulkner’s personal, educational and professional history were obtained from Faulkner directly, her Epic website testimonials, Epic, obituaries, news reports and publicly available records.
Sometimes when I do something that’s tough, I think of my mother, who went to jail in her 80s for protesting at a nuclear arms site, and I think, ‘I’m my mother’s daughter.’
Judy Faulkner
CEO of Epic
Faulkner and her two siblings grew up in Erlton, New Jersey, now a part of Cherry Hill. Her father, Louis Greenfield, was an independent pharmacist who ran his own store, complete with a soda fountain. Her mother, Del Greenfield, was a peace activist who was involved with the South Jersey Peace Center and the Oregon Physicians for Social Responsibility, which shared in the 1985 Nobel Peace Prize for its work in preventing nuclear war.
“Sometimes when I do something that’s tough, I think of my mother, who went to jail in her 80s for protesting at a nuclear arms site, and I think, ‘I’m my mother’s daughter,'” Faulkner said.
Faulkner’s parents, who both died in 2007, are honored at Epic’s campus. Employees can get ice cream at Lou’s Soda Fountain, while Del’s Nobel Prize certificate hangs in the hallway across from The Cottage.
Faulkner discovered a love of math as a seventh grader, when her teacher would leave puzzles on the blackboard each day, she said in one of her testimonials, the short stories and anecdotes she shares once a month on Epic’s website. She earned her undergraduate degree in math from Dickinson College in 1965.
After learning how to program during a summer job, Faulkner then enrolled in the University of Wisconsin–Madison’s nascent computer science program and was in graduate school there until 1970.
At UW–Madison, Faulkner took a course about computing in medicine that was taught by a pioneering physician, Dr. Warner Slack, one of the first people to recognize the promise of the technology within health care.
Faulkner began working with Slack and his team, and she was tasked with developing a system that could keep track of patient information over time. She eventually built what would become the kernel for Epic, though it took years of urging from potential users before she would actually launch the company in 1979. In the interim, she taught college-level computer science.
When Faulkner finally opened Epic for business, she did so with a small amount of cash from some colleagues at an initial valuation of $70,000. Now the company is worth many billions of dollars, though estimates of its valuation differ.
Some of the original shareholders eventually sold their stock back to the company.
“They got very good returns,” Faulkner wrote in a testimonial.
An accidental entrepreneur
Epic’s Deep Space Auditorium.
Epic Systems
Faulkner has publicly described herself as “the accidental CEO.”
She told CNBC she read books and took daylong or multiday courses to learn more about management, business and leadership. But she didn’t always follow their advice.
“I never got an MBA, which I think is a really good thing,” Faulkner said. “They would have taught me, ‘Here’s how you do venture capital.’ We didn’t do it. ‘Here’s how you go public.’ We didn’t do it. ‘Here’s how you do budgets.’ We don’t have budgets. We say, if you need it, buy it. If you don’t need it, don’t buy it.”
At the company’s Users Group Meeting last year, Faulkner took the stage dressed as a swan, with a plume of feathers in her hair. Every UGM meeting has a theme — this one was “storytime.” In costume, Faulkner told the thousands of health-care executives in attendance about her aversion to the public market.
“Why be owned by people whose interest is primarily return of equity?” she said.
She’s equally opposed to selling the business, which she makes clear in the company’s second commandment.
That hasn’t stopped other executives from trying to change her mind.
In 2017, at the Digital Healthcare Innovation Summit in Boston, former General Electric CEO Jeff Immelt revealed that he’d spoken with Faulkner about acquiring Epic.
Faulkner shut him down immediately.
“It was a five-minute meeting — perhaps the shortest in history,” Immelt said, according to a report from Healthcare IT News. The report said he’d also considered buying Cerner.
Faulkner confirmed the encounter with CNBC.
“Others have asked to come and persuade us, and I’ve heard our staff say to them, ‘Just leave your car running,'” she said.
Faulkner has said in testimonials that she’s avoided buyers in order to remain independent and preserve Epic’s unique culture, and she doesn’t make acquisitions, calling them a distraction.
But no matter how much she loves her company and her job, at some point, somebody else is going to have to run Epic.
Faulkner has remained mum about who will be her eventual successor, other than to say that the person will have to be a software developer and a longtime Epic employee.
The obvious choice, according to 10 former Epic employees who spoke with CNBC, is Sumit Rana, who was named president of the company last August. The 49-year-old joined Epic right out of college in 1998 and helped build the company’s patient portal called MyChart.
Rana, who was a toddler when Faulkner founded Epic, has been participating in more high-profile speaking engagements of late, including representing the company during the opening panel at the Centers for Medicare & Medicaid Services’ Quality Conference in July.
Faulkner declined to say whether Rana is the top contender for the job.
“That’s the company’s business,” she said. “Sumit is a wonderful employee, and he would make a good CEO, but we’re not publicly announcing anything.”
A building on Epic’s Farm Campus.
Courtesy: Epic
While Faulkner doesn’t say much about the company’s succession plans, she hasn’t been shy about her plans for her personal wealth.
In 2015, she signed The Giving Pledge and agreed to donate 99% of her assets to charity, a decision that was inspired in part by a dinner she had with Berkshire Hathaway CEO Warren Buffett that year.
Buffett created The Giving Pledge with Bill Gates and Gates’ then wife, Melinda French Gates, in 2010, encouraging the world’s richest people to give away the majority of their wealth.
Following Faulkner’s pledge, she launched a family foundation called Roots & Wings with her husband in 2020. Roots & Wings provides grants to nonprofits that support low-income children and families. Faulkner’s daughter, Shana Dall’Osto, serves as executive director of the organization.
Faulkner has been selling her nonvoting shares back to the company, giving the proceeds directly to Roots & Wings.
“I’ve never cashed a single share for myself,” Faulkner told CNBC.
‘Bet the ranch’
Installing an EHR is an extremely complicated and costly project for health systems. If it doesn’t go well, it could “blow up” the whole business, Dr. Robert Grossman, CEO of NYU Langone Health, told CNBC in an interview.
“We bet the ranch on Epic, let’s be very honest,” he said.
Fans of Epic say the company is fully tuned in to its customers’ needs.
“They don’t just operate and dial in,” said Michael Mayo, CEO of Baptist Health in northeast Florida. “They visit our campus. They’re immersed here. They know our teams across our IT [information technology] component and our caregivers. They are in our facilities. And when we went live, which is a pretty scary time, they were in full force here.”
Each health system that uses Epic has a point person called a “BFF,” or “best friend forever,” who is available to answer questions and help solve problems. Epic doesn’t outsource any incoming calls to third parties, the company says, so staff members are responsible for picking up the phone 24/7.
Faulkner also makes herself easily accessible to customers, executives said.
Mike Slubowski, CEO of Trinity Health, which operates 93 hospitals across 26 states, said Faulkner always answers his emails within the day, if not the hour.
She holds recurring meetings with senior health-care executives by phone or video call to answer questions and talk through an organization’s specific needs and ideas. Executives told CNBC that Faulkner takes copious notes and is receptive to feedback. If she doesn’t have an answer, she promptly calls someone who does.
“She’ll stop right there and say, ‘Get so-and-so on the phone,'” said Dickson, of UMass Memorial Health. “I don’t know what so-and-so was doing prior to getting the call, but it’s clear that when Judy calls, you drop what you’re doing.”
Pete Durlach, corporate vice president for health and life sciences at Microsoft, said he’s been in meetings with Epic staffers who have gotten these impromptu calls. Microsoft and Epic have been close partners for around two decades, a relationship that’s gotten tighter as cloud and artificial intelligence technologies have advanced, he said.
Epic employees at work.
Courtesy of Epic
“People definitely answer the phone when Judy calls,” Durlach said.
Epic doesn’t advertise or have a traditional marketing department; the company has relied heavily on word of mouth. Faulkner has also proven to be an effective salesperson.
Ardent Health CEO Marty Bonick said that when he was debating whether to convert some of his hospitals to using Epic products, Faulkner ultimately helped sway him.
Ardent Health owns 30 hospitals and 280 outpatient care sites across six states. When Bonick joined Ardent in 2020, he said, roughly two-thirds of Ardent’s hospitals were using Epic. Bonick said he’d never worked with Epic and wanted to make sure that switching over the remainder of Ardent’s hospitals would be worthwhile.
Bonick said he told Faulkner that he’d heard Epic’s product was expensive and difficult to implement.
“She came back with a presentation that she delivered personally, and spent probably over 90 minutes,” said Bonick, who was ultimately sold on the conversion. “I had to say, ‘OK, time out. I’ve got another meeting to go to,’ but she really was not watching the clock.”
Graveyard of competitors
Epic is used by all 20 of the top hospitals from the U.S. News & World Report rankings, and by the country’s seven largest health plans, according to the company.
Its dominance has come with plenty of controversy.
Epic faces accusations of anticompetitive practices in two lawsuits from the past year. One was filed in September by data startup Particle Health, which alleges that Epic has used its EHR market power to “snuff out” competition in other emerging health-care markets.
Epic said in response it would “vigorously defend itself against Particle’s meritless claims.”
The second lawsuit was filed in May by CureIS Healthcare, a managed care services company that claims Epic has engaged in a “multi-prong scheme to destroy” CureIS’ business. CureIS alleges Epic has interfered with its customer relationships, blocked access to necessary data and raised unfounded security concerns, according to a complaint.
An Epic spokesperson told CNBC at the time of the filing that the company “believes in free and fair competition, and we also believe our customers are in the best position to choose the right solutions to meet their needs — whether with Epic or by adopting other products and services.”
Epic’s competitors have also long accused the company of being territorial over its data and impeding efforts to share patient information between vendors.
In a blog post last year, Oracle Executive Vice President Ken Glueck wrote that “everyone in the industry understands that Epic’s CEO Judy Faulkner is the single biggest obstacle to EHR interoperability.”
Interoperability, in this case, refers to the exchange of electronic health data from one health-care organization to another. Since health data is siloed, stored across dozens of formats and protected by federal laws such as the Health Insurance Portability and Accountability Act, or HIPAA, it’s a complex undertaking.
Over the years, startups such as Practice Fusion and DrChrono have tried to crack the EHR market with promises of greater openness and more user-friendly products, but they have never become more than niche offerings. Some failed completely.
Epic promotes its own interoperability tools such as Care Everywhere and EpicCare Link, which allows customers and their affiliates to exchange data with one another. Epic also participates in larger data exchange networks.
The Oz office building on Epic’s campus.
Courtesy: Epic Systems
Attention to detail
One of Epic’s biggest feats in its 46 years is managing to attract high-level tech talent far away from the nation’s engineering and business hubs, especially given the harsh Midwestern winters in Wisconsin.
That’s where Epic’s headquarters comes into play. It’s a campus that industry executives and former employees likened to a techie’s Disney World.
All 28 office buildings are themed. They’re clustered into mini-campuses, with names such as Prairie Campus, Wizards Academy Campus and Storybook Campus.
The offices are designed by architecture firm Cuningham, which has also worked on projects at Disney theme parks all over the world. John Cuningham, the founder of the firm, said he’s worked with Faulkner for 30 years, and that she’s always been very involved in the process.
Epic’s first campus, for instance, has more than 80 bathrooms, and Faulkner wanted to know the details of all of them.
“Each one,” he said. “Light fixtures, faucets, mirrors, wallpaper, tile, sinks. I mean, I was thinking, ‘Oh, she’ll last for 10.’ She did all 85, and she still does that,” he said.
I went down the slide, like everybody.
Warner Thomas
CEO of Sutter Health
On Epic’s grounds, a metal wizard stands in the courtyard of a castle, giant chocolate chips mark the entryway to a faux chocolate factory, and a hanging bridge leads to the company’s very own treehouse.
Inside a building inspired by “Alice in Wonderland,” there’s a slide that takes employees into a small room where everything is upside down. It’s popular with visitors.
“I was kind of blown away,” Warner Thomas, CEO of Sutter Health, a nonprofit health system in Northern California, told CNBC about his first trip to Epic’s campus. “I went down the slide, like everybody.”
The buildings are brimming with trinkets, ceramics, mosaics and paintings that Epic employees get to help source. Faulkner recruits a small group of volunteers to go with her to local art fairs and buy decorations for the campus. Some pieces cost thousands of dollars, according to former employees.
Faulkner said she had just returned from an art fair ahead of her interview with CNBC.
‘Everybody knows Judy’
A cow-print bike on Epic’s campus.
Courtesy: Epic
Despite the fantastical themes on-site, employees are tasked with very real responsibilities. Since Faulkner places such a strong emphasis on supporting her customers, she holds her staff to high standards.
Most employees work in person five days a week. Hours can be long and burnout is common, former employees say. In June, The Economist analyzed 900 companies across 19 industries, and found that Epic had the worst work-life balance in the software and IT services category. Several former employees told CNBC their work at Epic was all-consuming.
Epic said the average employee works between 44 and 45 hours a week, based on monthly time sheet submissions between June 2024 and June 2025. The company said its turnover rate last year was 7%.
“People at Epic are dedicated and work hard,” an Epic spokesperson said in a statement.
Epic workers are entrusted with big projects, expected to interact directly with customers and generally take on a lot of responsibility. For some employees, that includes working alongside hospitals as they implement Epic’s technology.
“Some of these implementations really sucked,” said Brendan Keeler, a former Epic employee who frequently blogs about the company online. “So much of the success of an implementation was just a function of the politics of the hospital.”
Epic recruits the vast majority of its employees straight out of college, so its staff is relatively young. All new staffers go through extensive training, including a five-hour corporate philosophy class where they’re taught how to be a successful employee.
Faulkner said she used to teach the class by herself but that she now has help from one or two other people.
Faulkner’s influence is present in every corner of Epic’s campus, in its product and across much of the health-care industry.
“Everybody knows Judy Faulkner,” said Thomas, of Sutter Health.
She’s still got a lot to do. The health-care industry is reckoning with rising costs, staffing shortages, the impact of AI and the Trump administration’s hefty cuts in the areas of medical science and research.
And Faulkner isn’t ready to quit.
“It’s interesting and it’s challenging and it’s worthwhile,” Faulkner said.
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