The co-founder of MicroStrategy (MSTR), Michael Saylor may be on the hook for tax fraud after Washington D.C. Attorney General Karl Racine accused him of evading $25 million in payments.
An AG has sued Michael Saylor over an alleged $25 million in tax evasion.
In a press release on Thursday, Sept. 1, Racine's office referred to Saylor as “a billionaire technology executive who has resided in the District of Columbia for more than a decade but who has never paid any D.C. income taxes — despite earning hundreds of millions of dollars.”
Saylor allegedly evaded more than $25 million in taxes “by pretending to be a resident of other jurisdictions with lower personal income taxes.”
Racine identifies MicroStrategy as a defendant in the lawsuit as the company, now helmed by CEO Phuong Le, allegedly “collaborated with Saylor to facilitate his tax evasion.”
Saylor, reportedly no longer a billionaire, may be on the hook for a hefty payment.
Saylor allegedly owes $25 million in back taxes. However, D.C. has something called the False Claims Act (FCA).
The FCA states “it is illegal to knowingly conceal, avoid, or decrease an obligation to pay the District.” The act also allows D.C. to collect up to three times the amount that someone owes on back taxes (this is called treble damages).
This isn’t the first time Saylor has been targeted for tax fraud, but it's the first time that MicroStrategy is a defendant in the suit. “With this lawsuit, [the Office of the Attorney General] is seeking to recover unpaid income taxes and penalties from both Saylor and MicroStrategy that could total more than $100 million,” the press release says.
Racine used the lawsuit against Saylor and MicroStrategy as an example for others, stating, “D.C. residents and their employers are now on notice that attempts to evade the District's income tax laws by falsely claiming that they reside in another jurisdiction will be investigated and, if substantiated, held accountable.”
MSTR stock falters amid the controversy.
MicroStrategy stock fell 7.6 percent from Wednesday’s market close to mid-morning on Sept. 1. The stock is currently on a downtrend that began on Aug. 12 around the appointment of new leadership, having lost nearly 40 percent of its value during that time. MSTR is down 61.46 percent YTD but remains up in the long term.
MSTR stock has had a freckled history. In 2000, prior to the dot-com bubble burst, MicroStrategy’s share price exceeded $3,000. The shares are currently trading at $214.99. The outcome of the lawsuit against Saylor and MicroStrategy could mark the fate of the co-founder and the company.