September 30, 2023

A lawsuit filed Monday by several former Twitter executives said they had personally spent more than $1 million in legal fees related to shareholder lawsuits and several government investigations, including one by the Justice Department.

It was not immediately clear the nature of the Justice Department investigation and whether it is ongoing. The lawsuit, filed in the Delaware Chancery Court, provided no other details.

Last year, the SEC began investigating Elon Musk’s Twitter stock purchases and whether those transactions were properly disclosed. Twitter is also under investigation by the Federal Trade Commission, which is reviewing the company’s privacy practices.

The Justice Department has assisted the FTC in its investigations of Twitter in the past. In 2022, the agency joined the FTC in fineing Twitter $150 million for misleading users about how it handled their personal data. The DOJ also frequently assists the SEC in criminal investigations.

Musk did not respond to a request for comment. A Justice Department spokesman did not respond to a request for comment.

Twitter is facing shareholder lawsuits related to Mr. Musk’s acquisition, including the appointment of its former executive. One of the executives has been subpoenaed to testify before Congress to discuss Twitter’s content moderation policy.

The executives filing the lawsuit include Parag Agrawal, Twitter’s former chief executive; Ned Segal, its former chief financial officer; and Vijaya Gadde, its legal and policy chief.

Mr. Musk, who bought Twitter in late October, fired top executives the day he took over the company. They said they notified Twitter of the fee more than two months ago, but the company did not pay it, the lawsuit said.

Since buying Twitter for $44 billion, Mr. Musk has been cutting costs sharply, in part to pay down the debt he took on to finance the acquisition. The loans have left Twitter paying about $1.5 billion a year in debt, while the company’s ad revenue has fallen by about 50%, the billionaire told a conference of bankers last month.

In late March, he told employees in an email reviewed by The New York Times that he valued Twitter at $20 billion, less than half of what he paid for it.

Twitter has laid off more than 75% of its 7,500 employees and has been accused of refusing to pay bills owed to vendors, suppliers and landlords. The company has also been accused of defaulting on payments to software services, cleaning contractors and real estate management companies, leading to a flurry of lawsuits.

Mr. Musk fired Mr. Agrawal, Ms. Gard and Mr. Siegel “for good cause,” along with then-Twitter general counsel Sean Ejitter, and refused to pay the executives tens of millions of dollars. Compensation and severance pay. Mr. Edgett was not involved in Monday’s lawsuit.

Mr. Agrawal and Mr. Segal have accrued legal fees responding to inquiries from the Justice Department and the SEC during and after Mr. Musk’s acquisition, according to their lawsuit. They were contacted by federal authorities around July 2022, when they were still employed by the company, and Agrawal was ordered by the SEC to preserve documents in September 2022, the complaint said. Lawyers for Mr. Agrawal and Mr. Segal were contacted by the Justice Department “later in 2022”.

They and Ms Gard were also named in a shareholder lawsuit. Ms Gadde paid legal fees related to her ahead of testimony in February House Oversight and Accountability Committeefocusing on the company’s decision to temporarily limit a 2020 New York Post story about the contents of Hunter Biden’s laptop.

The lawsuit alleges that Twitter’s articles of incorporation and its contracts with former executives required the company to pay legal fees related to the company.

“Once again, Twitter has failed to meet its contractual obligations to pay its bill,” Aaron Zamost, a spokesman for Mr. Siegel and Ms. Gard, said in a statement.

This is a developing story. Check for updates.

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