Tesla settles with Black worker who won two trials over racist discrimination

Published

2 months ago

March 15, 2024

admin

Workers assemble cars on the line at Tesla’s factory in Fremont. David Butow (Photo by David Butow/Corbis via Getty Images)

David Butow | Corbis News | Getty Images

Electric vehicle maker Tesla has settled a racist discrimination lawsuit in which a federal jury previously awarded $3.2 million in damages to Owen Diaz, a Black man who worked as an elevator operator at its Fremont, California factory in 2015.

Attorney Lawrence Organ, with the California Civil Rights Law Group, who represented Diaz told CNBC via e-mail: “The parties have reached an amicable resolution of their disputes. The terms of the settlement are confidential and we will not have additional comment.”

The same firm is representing current and former Tesla employees in a proposed class action lawsuit, Marcus Vaughn v. Tesla Inc., alleging that the racist discrimination and harassment of Black workers has continued at the automaker. Diaz is not part of that litigation.

Organ told CNBC by phone on Friday, “It took immense courage for Owen Diaz to stand up to a company the size of Tesla. Civil rights laws only work if people are willing to take those kinds of risks. Even though the litigation chapter of his life is over, there’s still a lot of work to do for Tesla.”

He said, “When I started this case, I suggested that the conduct would stop if Elon Musk would make a statement and a commitment to his employees that this is not tolerated. We haven’t heard that after seven years of litigation, a nine-figure verdict then a seven-figure verdict. Why isn’t he stopping this conduct? That’s what doesn’t make sense to me. Tesla is supposed to be the factory of the future. But this conduct is from the Jim Crow past.”

The U.S. Equal Employment Opportunity Commission has also sued Tesla, accusing the automaker of violating “federal law by tolerating widespread and ongoing racial harassment of its Black employees and by subjecting some of these workers to retaliation for opposing the harassment.”

Tesla has called the EECO’s allegations “a false narrative that ignores Tesla’s track record of equal employment opportunity.”

Diaz’s case

In 2023, as CNBC previously reported, Diaz testified in a San Francisco federal court that his colleagues at Tesla regularly used racist epithets to denigrate him and other Black workers, made him feel physically unsafe at the factory, told him to “go back to Africa” and left racist graffiti in restrooms.

Diaz’s Tesla colleagues also left a racist drawing in his workspace, he said. The drawing was a rudimentary reference to Inki the Caveman, a 1950s-era cartoon whose main character is a Black boy portrayed with large lips, wearing a loincloth, earrings, and a bone through his hair.

During his trials, Diaz recounted that he had encouraged his son to work at Tesla, but would later regret the referral because his son was also exposed to a racially hostile workplace.

In his first trial, a jury awarded Diaz a much larger verdict, including punitive damages, of $137 million after he and his attorneys persuaded the jury that he had endured serious racist discrimination and the company failed to take all reasonable steps to end and prevent that and further civil rights violations.

Diaz and Tesla sought a retrial to decide damages after Judge William H. Orrick reduced the jury’s awarded amount to $15 million. Diaz once again prevailed, securing the $3.2 million verdict.

Elon Musk on X

The settlement with Diaz comes as Tesla CEO Elon Musk faces widespread criticism for his handling of hate speech on X, formerly Twitter, which he owns and runs as CTO.

As NBC News recently reported, Musk has shared unverified claims of cannibalism in Haiti this month on X, and shared posts smearing Haitian migrants as likely cannibals.

Progressive news organization MotherJones also reported that “the tech billionaire has been retweeting prominent race scientist adherents on his platform,” and “spreading misinformation about racial minorities’ intelligence and physiology.”

Tesla, which lacks a traditional public relations office in North America, did not respond to a request for comment.

Technology

OpenAI dissolves team focused on long-term AI risks, less than one year after announcing it

Published

16 hours ago

May 17, 2024

admin

OpenAI dissolves team focused on long-term AI risks, less than one year after announcing it

OpenAI has disbanded its team focused on the long-term risks of artificial intelligence just one year after the company announced the group, a source familiar with the situation confirmed to CNBC on Friday.

The person, who spoke on condition of anonymity, said that some of the team members are being re-assigned to multiple other teams within the company.

The news comes days after both team leaders, OpenAI co-founder Ilya Sutskever and Jan Leike, announced their departures from the Microsoft-backed startup. Leike on Friday wrote that OpenAI’s “safety culture and processes have taken a backseat to shiny products.”

The news was first reported by Wired.

OpenAI’s Superalignment team, announced last year, has focused on “scientific and technical breakthroughs to steer and control AI systems much smarter than us.” At the time, OpenAI said it would commit 20% of its computing power to the initiative over four years.

Sutskever and Leike on Tuesday announced their departures on X, hours apart, but on Friday, Leike shared more details about why he left the startup.

“I joined because I thought OpenAI would be the best place in the world to do this research,” Leike wrote on X. “However, I have been disagreeing with OpenAI leadership about the company’s core priorities for quite some time, until we finally reached a breaking point.”

Leike wrote that he believes much more of the company’s bandwidth should be focused on security, monitoring, preparedness, safety and societal impact.

“These problems are quite hard to get right, and I am concerned we aren’t on a trajectory to get there,” he wrote. “Over the past few months my team has been sailing against the wind. Sometimes we were struggling for compute and it was getting harder and harder to get this crucial research done.”

Leike added that OpenAI must become a “safety-first AGI company.”

“Building smarter-than-human machines is an inherently dangerous endeavor,” he wrote. “OpenAI is shouldering an enormous responsibility on behalf of all of humanity. But over the past years, safety culture and processes have taken a backseat to shiny products.”

Leike did not immediately respond to a request for comment, and OpenAI did not immediately provide a comment.

The high-profile departures come months after OpenAI went through a leadership crisis involving co-founder and CEO Sam Altman.

In November, OpenAI’s board ousted Altman, claiming in a statement that Altman had not been “consistently candid in his communications with the board.”

The issue seemed to grow more complex each following day, with The Wall Street Journal and other media outlets reporting that Sutskever trained his focus on ensuring that artificial intelligence would not harm humans, while others, including Altman, were instead more eager to push ahead with delivering new technology.

Altman’s ouster prompted resignations – or threats of resignations – including an open letter signed by virtually all of OpenAI’s employees, and uproar from investors, including Microsoft. Within a week, Altman was back at the company, and board members Helen Toner, Tasha McCauley and Ilya Sutskever, who had voted to oust Altman, were out. Sutskever stayed on staff at the time but no longer in his capacity as a board member. Adam D’Angelo, who had also voted to oust Altman, remained on the board.

When Altman was asked about Sutskever’s status on a Zoom call with reporters in March, he said there were no updates to share. “I love Ilya… I hope we work together for the rest of our careers, my career, whatever,” Altman said. “Nothing to announce today.”

On Tuesday, Altman shared his thoughts on Sutskever’s departure.

“This is very sad to me; Ilya is easily one of the greatest minds of our generation, a guiding light of our field, and a dear friend,” Altman wrote on X. “His brilliance and vision are well known; his warmth and compassion are less well known but no less important.” Altman said research director Jakub Pachocki, who has been at OpenAI since 2017, will replace Sutskever as chief scientist.

News of Sutskever’s and Leike’s departures, and the dissolution of the superalignment team, come days after OpenAI launched a new AI model and desktop version of ChatGPT, along with an updated user interface, the company’s latest effort to expand the use of its popular chatbot.

The update brings the GPT-4 model to everyone, including OpenAI’s free users, technology chief Mira Murati said Monday in a livestreamed event. She added that the new model, GPT-4o, is “much faster,” with improved capabilities in text, video and audio.

OpenAI said it eventually plans to allow users to video chat with ChatGPT. “This is the first time that we are really making a huge step forward when it comes to the ease of use,” Murati said.

Technology

BlackRock funds are ‘crushing shareholder rights,’ says activist Boaz Weinstein

Published

17 hours ago

May 17, 2024

admin

BlackRock funds are ‘crushing shareholder rights,' says activist Boaz Weinstein

Boaz Weinstein, founder and chief investment officer of Saba Capital Management, during the Bloomberg Invest event in New York, US, on Wednesday, June 7, 2023.

Jeenah Moon | Bloomberg | Getty Images

Boaz Weinstein, the hedge fund investor on the winning side of JPMorgan Chase’s $6.2 billion, “London Whale” trading loss in 2011, is now taking on index fund giant BlackRock.

On Friday, Weinstein‘s Saba Capital detailed in a presentation seen by CNBC its plans to push for change at 10 closed-end BlackRock funds that trade at a significant discount to the value of their underlying assets compared to their peers. Saba says the underperformance is a direct result of BlackRock’s management.

The hedge fund wants board control at three BlackRock funds and a minority slate at seven others. It also seeks to oust BlackRock as the manager of six of those ten funds.

“In the last three years, nine of the ten funds that we’re even talking about have lost money for investors,” Weinstein said on CNBC’s “Squawk Box” earlier this week.

At the heart of Saba’s “Hey BlackRock” campaign is an argument around governance. Saba says in its presentation that BlackRock runs those closed-end funds the “exact opposite” way it expects companies to run themselves.

BlackRock “is talking out of both sides of its mouth” by doing this, Saba says. That’s cost retail investors $1.4 billion in discounts, by Saba’s math, on top of the management fees it charges.

BlackRock, Saba says in the deck, “considers itself a leader in governance, but is crushing shareholder rights.” At certain BlackRock funds, for example, if an investor doesn’t submit their vote in a shareholder meeting, their shares will automatically go to support BlackRock. Saba is suing to change that.

A BlackRock spokesperson called that assertion “very misleading” and said those funds “simply require that most shareholders vote affirmatively in favor.”

The index fund manager’s rebuttal, “Defend Your Fund,” describes Saba as an activist hedge fund seeking to “enrich itself.”

The problem and the solution

Closed-end funds have a finite number of shares. Investors who want to sell their positions have to find an interested buyer, which means they may not be able to sell at a price that reflects the value of a fund’s holdings.

In open-ended funds, by contrast, an investor can redeem its shares with the manager in exchange for cash. That’s how many index funds are structured, like those that track the S&P 500.

Saba says it has a solution. BlackRock should buy back shares from investors at the price they’re worth, not where they currently trade.

“Investors who want to come out come out, and those who want to stay will stay for a hundred years, if they want,” Weinstein told CNBC earlier this week.

Weinstein, who founded Saba in 2009, made a fortune two years later, when he noticed that a relatively obscure credit derivatives index was behaving abnormally. Saba began buying up the underlying derivatives that, unbeknownst to him, were being sold by JPMorgan’s Bruno Iksil. For a time, Saba took tremendous losses on the position, until Iksil’s bet turned sour on him, costing JPMorgan billions and netting Saba huge profits.

Saba said in its investor deck that the changes at BlackRock could take the form of a tender offer or a restructuring. The presentation noted that BlackRock previously cast its shares in support of a tender at another closed-end fund where an activist was pushing for similar change.

At the worst-performing funds relative to their peer group, Saba is seeking shareholder approval to fire the manager. In total, BlackRock wants new management at six funds, including the BlackRock California Municipal Income Trust (BFZ), the BlackRock Innovation and Growth Term Trust (BIGZ) and the BlackRock Health Sciences Term Trust (BMEZ).

“BlackRock is failing as a manager by delivering subpar performance compared to relevant benchmarks and worst-in-class corporate governance,” the deck says.

If Saba were to win shareholder approval to fire BlackRock as manager at the six funds, the newly constituted boards would then run a review process over at least six months. Saba says that in addition to offering liquidity to investors, its board nominees would push for reduced fees and for other unspecified governance fixes.

A BlackRock spokesperson told CNBC that the firm has historically taken steps to improve returns at closed-end funds when necessary.

“BlackRock’s closed-end funds welcome constructive engagement with thoughtful shareholders who act in good faith with the shared goal of enhancing long-term value for all,” the spokesperson said.

Weinstein said Saba has run similar campaigns at roughly 60 closed-end funds in the past decade but has only taken over a fund’s management twice. The hedge fund sued BlackRock last year to remove that so-called “vote-stripping provision” at certain funds and filed another lawsuit earlier this year.

BlackRock has pitched shareholders via mailings and advertisements. “Your dependable, income-paying investment,” BlackRock has told investors, is under threat from Saba.

Saba plans to host a webinar for shareholders on Monday but says BlackRock has refused to provide the shareholder list for several of the funds. The BlackRock spokesperson said that it has “always acted in accordance with all applicable laws” when providing shareholder information, and that it “never blocked Saba’s access to shareholders.”

“What we want is for shareholders, which we are the largest of but not in any way the majority, to make that $1.4 billion, which can be done at the press of a button,” Weinstein told CNBC earlier this week.

WATCH: CNBC’s full interview with Saba Capital’s Boaz Weinstein

Technology

As Tesla layoffs continue, here are 600 jobs the company cut in California

Published

21 hours ago

May 17, 2024

admin

As Tesla layoffs continue, here are 600 jobs the company cut in California

As part of Tesla’s massive restructuring, the electric-vehicle maker notified the California Employment Development Department this week that it’s cutting approximately 600 more employees at its manufacturing facilities and engineering offices between Fremont and Palo Alto.

The latest round of layoffs eliminated roles across the board — from entry-level positions to directors — and hit an array of departments, impacting factory workers, software developers and robotics engineers.

The cuts were reported in a Worker Adjustment and Retraining Notification, or WARN, Act filing that CNBC obtained through a public records request.

Facing both weakening demand for Tesla electric vehicles and increased competition, the company has been slashing its headcount since at least January. CEO Elon Musk told employees in a memo in April that the company would cut more than 10% of its global workforce, which totaled 140,473 employees at the end of 2023.

Previous filings revealed that Tesla would cut more than 6,300 jobs across California; Austin, Texas; and Buffalo, New York.

Musk said on Tesla’s quarterly earnings call on April 23 that the company had built up a 25% to 30% “inefficiency” over the past several years, implying the layoffs underway could impact tens of thousands more employees than the 10% number would suggest.

According to the WARN filing, the 378 job cuts in Fremont, home to Tesla’s first U.S. manufacturing plant, included people involved in staffing and running vehicle assembly. There were 65 cuts at the company’s Kato Rd. battery development center.

Tesla didn’t respond to a request for comment.

Among the highest-level roles eliminated in Fremont were an environmental health and safety director and a user experience design director.

In Palo Alto, home to the company’s engineering headquarters, 233 more employees, including two directors of technical programs, lost their jobs.

Tesla has also terminated a majority of employees involved in designing and improving apps made for customers and employees, according to two former employees directly familiar with the matter. The WARN filing shows that to be the case, with many cut from the team at Tesla’s Hanover Street location in Palo Alto.

Tesla faces reduced demand for cars it makes in Fremont, including its older Model S and X vehicles and Model 3 sedan. Total deliveries dropped in the first quarter from a year earlier, and Tesla reported its steepest year-over-year revenue decline since 2012.

An onslaught of competition, especially in China, has continued to pressure Tesla’s sales in the second quarter. Xiaomi and Nio have each launched new EV models, which undercut the price of Tesla’s most popular vehicles.

Tesla’s stock price has tumbled about 30% so far this year, while the S&P 500 is up 11%.

Musk has been trying to convince investors not to focus on vehicle sales and instead to back Tesla’s potential to finally deliver self-driving software, a robotaxi, and a “sentient” humanoid robot. Musk and Tesla have long promised customers self-driving software that would turn their existing EVs into robotaxis, but the company’s systems still require constant human supervision.

Other recent job cuts at Tesla included the team responsible for building out the Supercharger, or electric-vehicle fast-charging network, in the U.S.

Tesla disclosed plans in its annual filing for 2023 to grow and optimize its charging infrastructure “to ensure cost effectiveness and customer satisfaction.” Tesla said in the filing that it needed to expand its “network in order to ensure adequate availability to meet customer demands,” after other auto companies announced plans to adopt the North American Charging Standard.

Since cutting most of its Supercharger team, Tesla has reportedly started to rehire at least some members, a move reminiscent of the job cuts Musk made at Twitter after he bought the company and later rebranded it as X. Musk told CNBC’s David Faber last year that he wanted to rehire some of those he let go.

Read the latest WARN filing in California here: