This is an opinion editorial by Dr. Riste Simnjanovski, senior professor of public administration at California Baptist University, and Kenneth Minesinger, business and tax attorney.
If you’re in the Bitcoin space, you know Michael Saylor. Regardless of your personal opinion about the individual, the companies he founded, led, or sold, or his perspective on monetary policy, many topics revolving around Saylor have become commonplace in academic, personal, and academic discussions. and policies
In August 2022, through Attorney General Karl Racine, the District of Columbia and “Tributum, LLC” (please note the irony in “Tributum” (the co-plaintiff) translates to “a tax imposed on citizens to finance the cost of war.” during ancient Rome” it has not gone unnoticed; Nor the fact that DC is actually a municipal corporation) has jointly filed suit against Saylor and MicroStrategy (MSTR), alleging, among other things, that “defendant Michael J. Saylor has unlawfully deprived the District of Columbia of tens of millions of dollars in tax revenue”.
Much of this complaint/lawsuit revolves around the False Claims Act (FCA), which readers can learn about through the federal statute here , and the District of Columbia statute here , if they so choose .
What is the False Claims Act?
The District of Columbia False Claims Act is based on federal statute. Simply put, the federal statute originally enacted in 1863 was in response to defense contractor fraud during the American Civil War: the law was recently updated and now allows third parties (private companies, i.e. Tribulum, LLC ) file lawsuits in which they believe that individuals, organizations, etc. they have defrauded the US government…and then share any judgment (set in US dollars) while suing people with the support and legal backing of the US government.
Historically, lawsuits under state and federal false claims statutes have been used to recover overpayment from contractors or payment where work was not performed. Notable cases include a $1 billion settlement obtained against Bank of America and Countrywide Financial for filing false claims making Federal Housing Administration-insured loans to borrowers they knew did not qualify 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 tests.
More recently, several states and the District of Columbia have amended their False Claims Act to allow recovery of underpayment of taxes.
This change has essentially replaced civilians and almost any attorney practicing law in the US with an IRS tax auditor; Think red flag laws but with cash incentives to report your neighbors or colleagues. Note that violators are liable for damages and a penalty (which is related to inflation).
The crux of the complaint filed revolves around where Saylor resided for 183 days per year (that is, more than 50% of the time in a calendar year) over the past several years. If Saylor were to “reside” in DC for more than 183 days per year, in a calendar year, he is technically a “resident” of the jurisdiction and as such would have to file taxes in that jurisdiction.
The archived document can be viewed in its entirety here.
The complaint is based on a whistleblower suggesting that Saylor “fraudulently” claimed to be a resident of a lower-tax jurisdiction (a home in Florida). Additionally, MicroStrategy was added as defendants, alleging that “…the company conspired with Defendant Saylor to facilitate his tax avoidance scheme.”
Some may take offense at the politicization of how the lawsuit was announced, specifically, a tweet from Racine that said“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 any DC income taxes, for tax fraud.”
Even those with little or no legal experience can see the challenge of how the tweet was worded, specifically with the statement and implication of “fact” versus “claim.” For example, a more appropriate and less politically charged ad might have read something like, “NEW: Today we’re suing Michael Saylor, a tech executive who we say has lived in the District for more than a decade. And if our lawsuit is successful, we would have to pay back taxes.”
The differences are subtle, but again, many may perceive the claim against Saylor and MicroStrategy as political versus factual; the courts will try to determine whether fraud has occurred.
In a similar vein, in 2021, Racine filed an antitrust lawsuit against Amazon, which was dismissed by a US court.
Next, the paradox of the District of Columbia, specifically the Attorney General, using (collaborating with) Tributum, LLC, (listed as “The Reporter” in section nine of the disclosure of the “Parties”), where the complaint legal states that Tributum, LLC, is a “Wyoming limited liability company;” just a simple Google search will bring up the company’s address in Virginia, specifically, “32 N Augusta St Suite 6, Staunton, VA 24401.”
Alexandra Scaggs of the Financial Times identified this interesting side of events, noting that Tributum LLC’s physical address is the same as the “Wyoming Registered Agent” (a company that basically creates shell corporations) and that it promises “full anonymity” to their customers. .
Again, it is not the intention of the authors to suggest that any criminal or unethical conduct has occurred with respect to Tributum, LLC, nor to suggest that the whistleblower who filed the report with this company is in any way wrong, inaccurate or unfounded. Rather, the intent is to point out that the basis and origin of the lawsuit leave unanswered questions without much investigation, an investigation that may end up in court if these events result in a trial.
Jumping to conclusions
Personally, we really have no idea if Saylor or MicroStrategy conspired to avoid taxes in the DC area for the past decade, and really, no one else on the planet, including Racine; that’s what American courts are for, not Twitter courts.
The fact that the attorney general took a screenshot of a 2012 tweet from Saylor (see page six of the court filing), appears to be more inclined to shine a light on the tech executive and MicroStrategy than to make a true legal argument. However, this is simply perception (optics) and not necessarily reality.
Again, that’s what courts are for lawyer declaring, publicly, that someone has “lived in the District for over a decade but has never paid any DC income tax for tax fraud” comes to conclusions that Twitter trolls are called to jump on a daily basis, much less an official elected with a degree in law.
Let’s jump to some conclusions at this point, since everyone else has, and we don’t want to miss out on the fun of baseless claims posted on Twitter.
An attorney general who has recently filed antitrust lawsuits against Amazon (again, dismissed by a US court) and against Michael Saylor (one of the most vocal Bitcoin advocates on earth) personally, and MicroStrategy (one of the public more pro-Bitcoin). on earth) professionally, may have more to do with an attempt to silence or smear Bitcoin advocates than an attempt to collect potentially late taxes, plus penalties and interest. Again, time will tell – maybe the Attorney General has a real legal case and this case will settle out of court or go to trial.
Who knows for sure? But what we can say is that the rulings should come out in the courts and not on Twitter. As researchers, we have intuitions and opinions, but defamation is a slippery slope in public forums, as are claims of wrongdoing.
We encourage the Bitcoin community to pay close attention to how this case develops 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 my own and do not necessarily reflect those of BTC Inc or Bitcoin Magazine.