MicroStrategy to pay $40M to District of Columbia to settle civil complaint

In a regulatory filing, MicroStrategy stated: “As previously reported, on August 31, 2022, the District of Columbia, through its Office of the Attorney General, filed a civil complaint in the Superior Court of the District of Columbia naming as defendants (i) Michael J. Saylor, the Chairman of the Board of Directors of MicroStrategy Incorporated and the company’s Executive Chairman, in his personal capacity, and (ii) the company. The District sought, among other relief, monetary damages under the District’s False Claims Act for the alleged failure of Mr. Saylor to pay personal income taxes to the District over a number of years together with penalties, interest, and treble damages. The complaint also alleged in the sole claim against the company that it violated the District’s False Claims Act by conspiring to assist Mr. Saylor’s alleged failure to pay personal income taxes. On February 28, 2023, following a motion to dismiss filed by Mr. Saylor and the company, the court dismissed the sole claim against the company and the claim against Mr. Saylor alleging violation of the District’s False Claims Act. On May 10, 2023, the court granted the District’s motion to amend its complaint to restore claims under the False Claims Act against both Mr. Saylor and the company. The amended complaint alleged that the company violated the District’s False Claims Act by making and using false records and statements in the form of false withholding filings with the District Office of Tax and Revenue. The amended complaint also alleged that Mr. Saylor violated the District’s False Claims Act by making and using false records and statements and by causing the company to make and use false records and statements. On May 31, 2024, the District, Mr. Saylor, and the company stipulated to the entry of a Consent Order and Judgment with the court pursuant to which the District, upon receipt of all amounts due under the Consent Order, released Mr. Saylor and the company from all claims and liabilities that the District asserted, could have asserted, or may assert in the future based on the conduct described in the complaints filed in the case. Under the Consent Order, which is subject to entry by the court, Mr. Saylor and the company do not admit to any of the allegations encompassed by the conduct described in the complaint, any violation of law or regulation, any other matter of fact or law, or any liability or wrongdoing, and agree to pay $40,000,000 to the District to settle the case and resolve the litigation with the District. Pursuant to a separate agreement between Mr. Saylor and the company, and following the court’s entry of the Consent Order, Mr. Saylor will pay this settlement amount to the District in full and the company will not be obligated to make any contribution to the settlement payment.”