District of Columbia Attorney General Karl Racine accused MicroStrategy co-founder and Executive Chairman Michael Saylor of evading $25 million in district taxes in a lawsuit filed Wednesday.
The lawsuit also names MicroStrategy as a defendant. Racine alleges the company conspired to help Saylor evade the taxes. The AG’s office said it’s seeking to recover a total sum of over $100 million in unpaid taxes and penalties.
Shares of MicroStrategy were down more than 6% Wednesday afternoon on the news. Saylor, who oversaw the company’s push into bitcoin, stepped down as CEO earlier this month. Under his leadership, MicroStrategy spent close to $4 billion acquiring bitcoin at an average price of $30,700, and he has said he considers the company’s stock a sort of bitcoin ETF.
Saylor allegedly claimed to reside in Virginia or Florida, which have lower or no personal income tax rates, while actually living in several different homes around D.C., including a penthouse apartment in the Georgetown neighborhood or on his yacht on the Georgetown waterfront or Potomac River when the apartment was undergoing renovations, according to the lawsuit. The suit includes several screenshots of posts that appear to be from Saylor’s Facebook page dating back several years and referencing the view from his “Georgetown balcony” and discussing his “home” while tagging Washington, D.C.
MicroStrategy allegedly “had detailed information confirming that Saylor was in fact a DC resident,” according to a press release, but it chose to withhold that information.
In a statement, MicroStrategy said, “The case is a personal tax matter involving Mr. Saylor. The Company was not responsible for his day-to-day affairs and did not oversee his individual tax responsibilities. Nor did the Company conspire with Mr. Saylor in the discharge of his personal tax responsibilities. The District of Columbia’s claims against the Company are false and we will defend aggressively against this overreach.”
Around 2014, the AG’s office claims in the lawsuit, MicroStrategy’s then-chief financial officer confronted Saylor about his alleged tax evasion being a potential liability for the company. Saylor and MicroStrategy ended up reaching an agreement where Saylor’s salary would be reduced to a nominal $1, the lawsuit claims, in order to reduce the risk authorities would discover the alleged scheme. Still, the AG alleges, Saylor continued to benefit from “fringe benefits” with a “high cash value,” such as use of the company plane.
“A decade ago, I bought an historic house in Miami Beach and moved my home there from Virginia,” Saylor said in a statement. “Although MicroStrategy is based in Virginia, Florida is where I live, vote, and have reported for jury duty, and it is at the center of my personal and family life. I respectfully disagree with the position of the District of Columbia, and look forward to a fair resolution in the courts.”
The suit is the first to be brought under a recently passed law called the False Claims Act, according to Racine’s office. The district law incentivizes whistleblowers to report tax fraud and allows the court to impose penalties up to three times the amount of the evaded taxes, according to the AG’s office.
The district suit follows a separate complaint filed by whistleblowers against Saylor in April 2021, accusing him of failing to pay income taxes from 2014 through 2020. The complaint was filed under seal but made public on Wednesday.
The AG’s office said it independently investigated the whistleblower case and found MicroStrategy had filed inaccurate W-2s with his Florida-based address and had failed to withhold taxes allegedly owed to the district. The new lawsuit alleges Saylor failed to pay income tax he owed to the district starting in 2005.
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