WASHINGTON, D.C.– AG Racine today announced a tax fraud lawsuit against Michael J. Saylor, a billionaire technology executive who has resided in the District of Columbia for more than a decade but who has never paid any DC income taxes—despite earning hundreds of millions of dollars. The lawsuit also names MicroStrategy—a publicly-traded data tracking company Saylor co-founded—as a defendant, alleging that it conspired to help him evade taxes he legally owes.
In its suit, the Office of the Attorney General (OAG) alleges that Saylor illegally avoided more than $25 million in DC taxes by pretending to be a resident of other jurisdictions with lower personal income taxes. OAG also alleges that MicroStrategy had detailed information confirming that Saylor was in fact a DC resident, but instead of accurately reporting his address to local and federal tax authorities and withholding DC taxes, collaborated with Saylor to facilitate his tax evasion. OAG is bringing this tax fraud enforcement action under a recently updated law that enables the District to hold individuals who fail to pay significant amounts of taxes accountable—and allows whistleblowers who report tax fraud to collect a percentage of any monetary recovery obtained by the District in cases that they originate. With the suit, OAG is seeking to recover tens of millions of dollars in unpaid income taxes and penalties.
“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,” said AG Racine.
This lawsuit is the first suit brought under the authority of the District's recently passed False Claims Act that encourages whistleblowers to report instances where DC residents evade the District's tax laws by misrepresenting their residence. Led by Chairman Mendelson, the Council unanimously passed the law and provided OAG with the authority to enforce it.
The law also permits the court to punish the tax evader by imposing “treble damages” or three times the amount of the taxes evaded.
Michael Saylor is the billionaire founder and former CEO of Northern Virginia based software company MicroStrategy, Inc. and the founder of the DC-based Constitution Foundation (a nonprofit that does business as Saylor Academy). He has publicly called the District’s Georgetown neighborhood home since about 2005. He lives in a 7,000 square foot penthouse on the Georgetown waterfront and has docked at least two of his luxury yachts in the District for long periods of time. Saylor’s net worth is estimated to be more than $1 billion, and he has earned hundreds of millions of dollars in ordinary income and capital gains since 2005.
Under District law, residents are required to pay income taxes. For tax purposes, residents include individuals who have homes in the District where they intend to remain or to return to after any absences, and individuals who maintain a residence in the District for at least 183 days during the year. Under the District’s False Claims Act (FCA), it is illegal to knowingly conceal, avoid, or decrease an obligation to pay the District. Those who break the law can face extremely steep costs because the District can recover three times the amount that is owed (treble damages).
In 2021, the Council updated the FCA to expand OAG’s tax fraud enforcement authority—and to incentivize whistleblowers to come forward and help identify and hold tax cheats accountable. The updated law allows private citizens to bring lawsuits on behalf of the District against high-earning companies or individuals who are underpaying or evading taxes. If the suit is successful, the whistleblowers may be awarded up to 30% of the funds collected by the District.
Lawsuit Against Michael J. Saylor & MicroStrategy
In April 2021, whistleblowers represented by Cadwalader, Wickersham & Taft, filed a lawsuit against Michal J. Saylor, alleging that Saylor had defrauded the District and failed to pay income taxes he legally owed from 2014 through 2020. The suit alleges that Saylor engaged in an elaborate scheme to create the illusion that he lived in Florida, a state without personal income tax, while he actually resided in the District. The complaint includes detailed allegations that Saylor was physically present in DC for most of each year, despite claiming to be a Florida resident—including allegations detailing flight logs from MicroStrategy’s corporate jet and location-tagged social media posts. The whistleblowers’ complaint also alleges that Saylor openly bragged to friends and acquaintances about evading DC taxes and encouraged others to follow his example.
After independently investigating the tax fraud allegations against Saylor, OAG intervened in the whistleblower lawsuit and filed its own complaint against both Saylor and MicroStrategy. The District’s lawsuit lays out allegations that Saylor avoided paying more than $25 million in DC income taxes by claiming to be a Florida or Virginia resident—and it adds new allegations against MicroStrategy. The District alleges that MicroStrategy had multiple sources of information regarding Saylor’s true location and residency, but that the company actively conspired with Saylor to enable his fraud, including by filing inaccurate W-2s with the address of his property in Florida rather than his home in DC, and by failing to withhold and remit DC taxes.
With this lawsuit, OAG is seeking to recover unpaid income taxes and penalties from both Saylor and MicroStrategy that could total more than $100 million.
A copy of the District’s complaint against Saylor and MicroStrategy is available here. It was filed on August 22, 2022.
A copy of the whistleblower’s complaint is available here. It was originally filed under seal on April 14, 2021, and was unsealed on August 31, 2022.
This matter is being handled by Assistant Attorneys General Jason Jones, Sarah Levine, Jessica Micciolo, and Charlie Sinks, with the assistance of Investigator Jonathan Thervil, under the supervision of Section Chief Graham Lake of the Workers’ Rights and Antifraud Section of OAG.