MicroStrategy (MSTR) and its founder Michael Sayler have reached a $40 million settlement with the District of Columbia. This settlement is the largest amount recovered in Washington’s history of tax fraud, as reported by the New York Times on Monday.
Before the market opened, the value of MSTR shares increased by more than 3%.
The settlement, which will be made public on Monday, is the result of lawsuits filed in 2021 and 2022. Those actions allege that Saylor avoided paying more than $25 million in income taxes. He apparently did this by falsely claiming to have lived in Virginia and Florida from 2005 to 2020, with the help of MicroStrategy. In recent years, Saylor has not paid any income taxes to the district.
MicroStrategy and Saylor did not admit any wrongdoing, but agreed to the settlement. The settlement includes additional interest and fines. They chose to settle to avoid further legal costs and to save time. After resigning as CEO in 2022, Saylor, who is now executive chairman of MicroStrategy, was accused of falsely reporting where he lived to evade taxes.
“Michael Saylor and his company, MicroStrategy, have defrauded the District and everyone who lives in it for many years,” said Brian L. Schwalb, Attorney General.
“Saylor even boasted about his method of avoiding taxes, telling his friends to do the same and claiming that anyone who paid taxes to the district was making a mistake.”
The lawsuit explains that in 2012, Saylor began a scheme to misrepresent that he was a Florida resident. He did so by purchasing property in Miami Beach, obtaining a Florida driver’s license and registering to vote in that state.
The lawsuit was brought by former Attorney General Karl Racine and is the first of its kind under a 2021 change to the federal anti-fraud statute, the False Claims Act. This change allows individuals to report tax fraud to Washington. A tip from an individual in 2021 alleging Saylor’s tax fraud led Racine to file the district’s case in 2022.
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