The co-founder and former CEO of Microstrategy, Michael Saylor has been accused of evading $25 million in district taxes in a lawsuit filed by Karl Racine, attorney general of the District of Columbia.
The lawsuit, brought forward by a whistleblower’s claims, names Microstrategy as a defendant too. The AG’s office alleges that the company helped Saylor evade the taxes and is looking to recover $100 million in unpaid taxes and penalties.
The lawsuit states that Saylor evaded $25 million in D.C. taxes by pretending to be a resident of Virginia From 2005 to 2012 and Florida from 2012 to the present.
Saylor “embarked on a scheme to fraudulently misrepresent himself to be a resident of Florida — a jurisdiction without any personal income tax,” according to the complaint.
The AG also states that Saylor obtained Florida driver’s license, state voter registration and a house on Miami Beach, to make his claims seem feasible.
“Since at least 2012, Saylor has bragged to his confidants about his successful plan to create the illusion of residing in Florida in order to evade the District’s personal income taxes,” cites the complaint referring to his social media posts.
The filing states that Microstrategy executives were aware that Saylor’s claims of residing in Florida were false and that the company funded his transportation including a private driver that took him between the company’s headquarters and his D.C. penthouse.
Saylor allegedly asked the company to file tax documents with the IRS using his Florida address since 2013. Sometime in 2014, the company’s CFO brought forward the fact that Saylor’s actions are a liability to the company.
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Saylor reduced his compensation to $1 in response to the CFO’s concerns, according to the AG. However, he continued to receive “high cash value of fringe benefits” such as use of the company’s plane and one-time “gross-up” payments.
The complaint states that Microstrategy’s Audit and Compensation Committees were aware of Saylor’s tax evasion activities and ‘actively assisted’ in helping him avoid his obligations.
“I respectfully disagree with the position of the District of Columbia, and look forward to a fair resolution in the courts,” said Saylor in a statement.
Microstrategy also claimed that the accusations are false and that they “will defend aggressively against this overreach.”
The AG is asking the court to make Saylor pay alleged unpaid taxes, plus interest, penalties, and attorneys fees.
A whistleblower may be awarded up to 30% of the funds collected by the District, if the suit is successful.
