Michael Saylor, Tax Fraud and Bitcoin – Bitcoin Magazine

This is an op-ed by Dr. Riste Simnjanovski, full professor of public administration at California Baptist University, and Kenneth Minesinger, corporate and tax attorney.

If you’re in the bitcoin space, you know Michael Saylor. Regardless of your personal opinion of the individual, the companies he founded, led or sold, or his views on monetary policy, many topics revolving around Saylor have become commonplace in academic, personal and policies.

In August 2022, via Attorney General Karl Racine, the District of Columbia and “Tributum, LLC” (please note that the irony of “Tributum” (the co-plaintiff) resulting in “a tax imposed on citizens to fund the Cost of War in Ancient Rome » did not go unnoticed; nor the fact that DC is in fact a municipal corporation) jointly filed a lawsuit against Saylor and MicroStrategy (MSTR), claiming, among other things, that “Defendant Michael J. Saylor unlawfully deprived the District of Columbia of dozens millions of dollars in tax revenue.

Much of this complaint/lawsuit revolves around the False Claims Act (FCA), which readers can learn about via federal law here, and District of Columbia law here, if they wish.

What is the Misrepresentation Act?

The District of Columbia’s False Claim Act is modeled after federal law. In a nutshell, the federal law originally enacted in 1863 was a response to defense contractor fraud during the American Civil War – the law was recently updated and now allows third parties (private companies, c i.e. Tribulum, LLC) to sue. which they think individuals, organizations, etc. defrauded the US government…and then share any judgment (settled in US dollars) as they prosecute individuals with the backing and legal backing of the US government.

Historically, lawsuits under state and federal false claims laws have been used to recover overpayments to contractors or payments when work has not been performed. Notable cases include a $1 billion settlement secured against Bank of America and Countrywide Financial for submitting false claims by providing Federal Housing Administration-insured loans to borrowers they knew to be unqualified in 2009, Bank of America (again) in 2014 for a record-breaking $16.65 billion and a $22 million settlement in 2021 against the University of Miami for allegedly billing Medicare for unnecessary testing.

More recently, several states and the District of Columbia amended their False Claim Acts to allow for the recovery of underpaid taxes.

This change essentially replaced civilians and nearly all attorneys practicing law in the United States with an IRS tax auditor; think red flag laws, but with cash incentives for flagging your neighbors or co-workers. Please note that violators are liable for damages plus a penalty (which is linked to inflation).

The crux of the complaint filed revolves around where Saylor resided 183 days a year (meaning more than 50% of the time in a calendar year) for the past several years. If Saylor “resided” in DC more than 183 days per year, in a calendar year, then he is technically a “resident” of the jurisdiction and, as such, would be required to file taxes in that jurisdiction.

The document submitted can be consulted, in its entirety, here.

The complaint hinges on a whistleblower suggesting that Saylor “fraudulently” claimed to be a resident of a low-tax jurisdiction (a home in Florida). Additionally, MicroStrategy was added to those sued, with an allegation that “…the company conspired with defendant Saylor to facilitate his tax evasion scheme.”

Politicization

Some may take offense to the politicization of the way the lawsuit was announced, in particular, a tweet from Racine stating“NEW: Today we are suing Michael Saylor – a billionaire tech executive who has lived in the District for over a decade but has never paid DC income tax – for tax evasion.”

Even those with little or no legal expertise can see the challenge with the way the tweet was composed, especially with the statement and implication of “fact” versus “allegation.” For example, a more appropriate and less politically charged ad might have read something like: “NEW: Today we are suing Michael Saylor – a tech executive who we believe has lived in the district for over a decade, and if our legal action is successful, we would be required to repay the taxes.”

The differences are subtle, but again, many may perceive the allegation against Saylor and MicroStrategy as politically counterfactual; the courts will try to determine if there has been fraud.

In a similar vein, in 2021 Racine filed an antitrust lawsuit against Amazon, which a US court dismissed.

Next, the paradox of the District of Columbia, specifically the Attorney General, using (collaborating) with Tributum, LLC, (listed as “The Relator” in section nine of the “Parties” disclosure), where the legal complaint alleges that Tributum, LLC, is a “Wyoming Limited Liability Company”; just do a simple Google search and the company’s address comes up in Virginia, specifically “32 N Augusta St Suite 6, Staunton, VA 24401”.

Alexandra Scaggs of the Financial Times identified this interesting aspect of events, noting that Tributum LLC’s physical address is the same as the “Wyoming Registered Agent” (a company that essentially sets up shell companies) and which promises “complete anonymity “to its customers.

Again, the authors do not intend to suggest that criminal or unethical behavior has occurred with reference to Tributum, LLC, or to suggest that the whistleblower who filed the report with that company is in any way incorrect, inaccurate or without merit. On the contrary, it is the intention to underline that the foundations and origin of the lawsuit leave unanswered questions without much investigation – an investigation that could come out in court if these events lead to a trial.

Jump to conclusions

Personally, we really have no idea if Saylor or MicroStrategy has conspired to avoid taxes in the DC area for the past decade, and in truth, no one else on the planet, including Racine; that’s what US courts are for – not Twitter’s court.

The fact that the Attorney General captured a Saylor tweet from 2012 (see page six of the court filing) seems to be more inclined to shine a light on the chief technology officer and MicroStrategy than to make a real legal argument. However, this is simply (optical) perception and not necessarily reality.

Again, that’s what the courts are for, a lawyer stating, publicly, that someone has “lived in the district for over a decade but never paid DC income tax – for tax evasion” jumps to conclusions that twitter trolls are called to jump on a daily basis, without talk about an elected official with a law degree.

Let’s jump to some conclusions at this point, since everyone has, and we don’t want to miss the fun of the baseless claims being posted on Twitter.

An attorney general who recently filed antitrust lawsuits against Amazon (again, dismissed by a US court) and against Michael Saylor (one of the most outspoken bitcoin defenders on earth) personally, and MicroStrategy (one of most pro-Bitcoin public companies on earth) professionally, may have more to do with an attempt to silence or tarnish Bitcoin supporters than an attempt to collect potentially late taxes, plus penalties and interest. Again, time will tell – maybe the Attorney General has a real legal argument and this case will either be settled out of court or go to trial.

Who knows for sure? But what we can say is that the judgments should come out in court and not on Twitter. As researchers we have hunches and opinions, however, slander is a slippery slope in public forums, as are allegations of wrongdoing.

We encourage the Bitcoin community to pay close attention to how this case is unfolding before passing judgment on any individual or organization, including but not limited to: Michael Saylor, MicroStrategy, Racine, the District of Columbia and/or Tribulum, LLC.

This is a guest post by Riste Simnjanovski and Kenneth Minesinger. The opinions expressed are entirely their own and do not necessarily reflect those of BTC Inc or Bitcoin Magazine.

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