Lordstown Motors: Customers to Find, Trucks to Build

The Securities and Exchange Commission imposed a $25.5 million obligation in the Lordstown Motors securities enforcement case over alleged preorder and production misrepresentations, with credit for specified shareholder settlements. The company presented demand for its Endurance electric pickup alongside promises about the parts and timing needed to deliver it. If you worked with the customer files, supplier approvals or engineering schedules, the case turns on the differences you could see before investors could.

The February 29, 2024 settled order concerns Lordstown Motors Corp. and the statements supporting its move into the public market. This page follows those representations through the company’s sales, supply chain and financial reporting. Our page on misleading customer and operating metrics examines the broader problem of counting business that the customer records do not support.

Lordstown’s Investor Pitch Depended on Demand and Delivery

Lordstown formed in 2019 to develop electric trucks for commercial fleets and acquired General Motors’ assembly plant in Lordstown, Ohio. Its flagship Endurance was a full-size electric pickup. According to the order, the company sold investors a connected proposition: an established customer base, access to General Motors parts and a head start in getting an electric pickup to fleet buyers.

The agency alleged that Lordstown and its then-chief executive misrepresented each part of that proposition during and after the merger that took the company public. Lordstown’s own filings defined the commercial fleet market as commercial and governmental organizations with three or more vehicles. Whether the supposed customers actually operated fleets mattered to the market the company claimed it could serve.

Endurance Preorders Included Promises to Find Buyers

Lordstown’s preorder form required no payment and imposed no obligation to buy an Endurance. The order described a one-page, nonbinding letter of intent and reservation agreement, which the company generally disclosed as nonbinding. The alleged misrepresentation went into who had signed and what their interest meant.

The Securities and Exchange Commission said Lordstown had no orders or sales to report, making the preorder count especially important to investors. Management also believed fleet buyers would feel more comfortable buying from a new manufacturer if other fleets were buying too. The chief executive pressed the sales team to increase the total, but the agency alleged that the company had no procedures for evaluating counterparties or maintaining preorder data, and gave the team no guidance for identifying commercial fleet customers.

The public count grew from 27,000 to 100,000. The order describes how a short-seller report prompted Lordstown’s board to form a special committee to investigate the preorder allegations.

The committee’s analysis showed that, by the final count, 71% came from intermediaries or influencers. These included parties that would encourage or facilitate purchases, rather than buy trucks for their own use. The number grew while the claimed customer base changed beneath it.

The underlying files supplied more concrete contradictions. According to the order, a counterparty associated with 14,000 trucks had no apparent resources to buy that quantity, and the chief executive had questioned its financial strength. The agency also said another customer canceled a reservation for 5,000 trucks because of a misunderstanding, but the sales team kept counting it.

The final headline also included a verbal expression of interest in an unsigned lead-generation arrangement. As the order described it, the proposed memorandum’s purpose was:

The agency said that counterparty had expressly told Lordstown it had no fleet and did not intend to buy trucks. We see a promise to find buyers promoted into evidence that buyers were waiting.

General Motors Parts Access Still Needed Approval

Lordstown’s claimed access to General Motors parts depended on authorizations it had largely failed to obtain, according to the Securities and Exchange Commission. Management expected access to more than 200 parts, including approximately 100 critical parts needed to develop the Endurance. Those parts also mattered to the prototypes and safety testing required before trucks could reach customers.

The order explains the supply chain behind the promise. General Motors’ suppliers made the parts, and Lordstown needed the automaker’s permission to use each one. The supplier then needed authorization to assess whether it could produce the requested quantities, followed by a product agreement for General Motors’ approval. A parts relationship still had to become permission, capacity and an actual supply arrangement.

The agency described an October 2020 warning to the chief executive that only four of roughly 90 tooling authorizations had been completed. The order says that by December, General Motors was advising Lordstown to find backup solutions for most requested parts because supplying Lordstown would constrain its own supply chain. Yet, the agency alleged, Lordstown continued telling investors in its filings that it had access to the parts.

The money comparison shows how much that claim carried. Lordstown had estimated approximately $120 million in capital spending for plant retooling and other investments to complete the Endurance and its supply chain. The agency said sourcing necessary parts elsewhere increased capital expenditure by at least an additional $150 million. The backup sourcing alone exceeded the original estimate.

Starting Production Was Not Delivering a Truck

Lordstown’s internal schedules distinguished starting production from delivering a certified vehicle, while its public statements promised deliveries by September 2021. According to the order, the production and engineering teams expected safety testing to take several months after production started. A truck still had to satisfy federal motor vehicle safety requirements before sale and delivery. Our page on product capability and commercial readiness claims follows similar gaps between what a company can demonstrate and what it tells investors.

By October 2020, the agency said, supply problems had pushed the internal production target to November 2021 at the earliest, with delivery likely into 2022. The teams kept the chief executive informed. Nevertheless, he directed a public release to retain the earlier delivery promise because, as the order quotes his explanation, he:

The agency alleged that the chief executive knew delivery could not coincide with the planned start of production. Investors got a delivery date intended to hurry the engineering team.

The Merger Carried the Claims Into the Public Market

Lordstown became publicly traded through its October 2020 merger with DiamondPeak, a special purpose acquisition company. The order follows the representations through merger materials, registration filings, press releases and interviews. The same commercial story reached investors before the merger and continued afterward. For someone involved in preparing those materials, an operational warning and the public statement approved after it can show how a known problem disappeared from the presentation.

Momentus offers a parallel in the merger process. In its July 2021 enforcement announcement, the Securities and Exchange Commission alleged that Momentus represented a failed in-space test as successful, and that Stable Road Acquisition repeated the claim without reviewing the test results. Both cases put the underlying work beside the claims used to attract investors. The test report and the supplier approval answer questions a presentation can skate past.

Lordstown’s Audit Firm Had Helped Prepare the Statements

The Securities and Exchange Commission also alleged that Lordstown filed financial statements without an independent audit because its accounting firm had helped prepare those statements and performed bookkeeping. According to the order, Clark Schaefer Hackett & Co. initially audited Lordstown’s financial statements while it was private. The firm later audited the same financial year under public-company audit standards for the merger.

The accounting work included calculating stock compensation expense and preparing financial statement notes. During the later audit, the order says, Lordstown identified and corrected a $271,103 understatement of stock compensation expense that the firm had previously both prepared and audited.

The agency said the firm audited its own work and lacked independence. Its audit opinion then appeared in the merger materials and subsequent filings. For accounting staff, the engagement letters and preparation work can expose an audit independence problem behind the assurance given to investors.

The Settlement Connected SEC Relief to Shareholder Claims

The $25.5 million obligation stood against approximately $675 million Lordstown raised through the merger, from DiamondPeak’s trust funds and a private investment in public equity. The agency called the obligation disgorgement: money it required Lordstown to give up from the violations it alleged.

Lordstown agreed to stop the securities-law violations described in the order. The monetary obligation could be fully satisfied through arrangements for shareholder claims: an effective, court-approved bankruptcy plan providing $3 million to $10 million for the Ohio class claims, and a binding agreement providing at least $15.5 million for the Delaware class claims.

What Evidence Is Needed for Whistleblowing?

In a case about preorder counts and production promises, useful evidence connects the public statement to the customer agreement, supplier decision or engineering update behind it. The allegations in the Lordstown order make the connections tangible: a canceled reservation still counted, a lead-generation arrangement treated as demand, and an internal delivery schedule that differed from the public one. Our securities fraud evidence page examines how those internal records connect to disclosures.

The industry records sit in different hands. Sales staff may know what a counterparty agreed to, purchasing staff may know which authorizations arrived, and engineers may know what remained before testing and certification. We work with you to connect that knowledge to who received the information and what investors were told afterward.

The 2018 study The Significance of Whistleblowing as an Anti-Fraud Measure, published in the Journal of Forensic & Investigative Accounting, found whistleblower complaints were the most common detection method in its sample of occupational fraud cases. Its analysis covered 4,943 frauds with complete data. Here, the person who knows what a reservation actually represented can explain what the published total concealed.

For information leading to a qualifying SEC action with sanctions over $1 million, eligible whistleblowers can share 10% to 30% of qualifying sanctions collected. A whistleblower case under the False Claims Act can pay 15% to 30% of what the government recovers. These are separate programs, and we assess a securities fraud report around the information you hold and the SEC award opportunity it may support.

You Know What the Order Book Contained

If the customer commitments, parts approvals or engineering updates you handled contradict the investor story, speak to one of our Whistleblower Experts about where the accounts diverged. We build your strongest SEC whistleblower case with you and bring in securities fraud whistleblower lawyers who understand operating disclosures. We stay beside you as that inside knowledge becomes the evidence for an SEC enforcement action.