A lawsuit filed on Monday by several former Twitter executives said they had personally spent more than $1 million on legal expenses related to shareholder lawsuits and several government investigations, including an inquiry by the Justice Department.
The nature of the Justice Department inquiry and whether it was ongoing, was unclear. The lawsuit, filed in Delaware Chancery Court, did not offer other details.
Last year, the Securities and Exchange Commission began investigating Elon Musk’s purchases of Twitter shares and whether they were properly disclosed. Twitter is also under investigation by the Federal Trade Commission, which is scrutinizing the company’s privacy practices.
The Justice Department has aided the FTC with past investigations into Twitter. In 2022, the agency joined the FTC in a $150 million fine against Twitter over misleading users about how it treated their personal data. The Justice Department also often assists the SEC in criminal investigations.
Musk did not respond to a request for comment. A spokesperson for the Justice Department did not respond to a request for comment.
Twitter is facing shareholder lawsuits related to Musk’s acquisition, including one that named its former executive officers. And one of those executives has been subpoenaed to appear before Congress, in a hearing that addressed Twitter’s content moderation policies.
The executives who filed the suit include Parag Agrawal, Twitter’s former chief executive; Ned Segal, its onetime chief financial officer; and Vijaya Gadde, who was its head of legal and policy.
Musk, who bought Twitter in late October, fired the executives on the day he took control of the company. They said they notified Twitter of the expenses more than two months ago, but the company had not paid, according to the lawsuit.
Since buying Twitter for $44 billion, Musk has aggressively cut costs, partly to pay the debt he took on to fund the acquisition. The loans have left Twitter with about $1.5 billion in debt payments a year, while advertising revenue at the company has fallen about 50%, the billionaire told a banker conference last month.
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Later in March, he told employees in an email seen by The New York Times that he valued Twitter at $20 billion, less than half what he paid for it.
Twitter has eliminated 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 is also accused of missing payments to software services, janitorial contractors and real estate management firms, leading to a host of lawsuits.
Musk fired Agrawal, Gadde and Segal, as well as Twitter’s then-general counsel, Sean Edgett, “for cause,” and refused to pay the executives tens of millions of dollars in compensation and severance. Edgett is not part of Monday’s lawsuit.
Agrawal and Segal have racked up legal expenses responding to inquiries from the Justice Department and the SEC during and after Musk’s acquisition, according to their lawsuit. Federal authorities contacted them around July 2022, while they were still employed by the company, the complaint said, with the SEC asking Agrawal in September 2022 to preserve documents. The Justice Department contacted Agrawal and Segal’s lawyers “later in 2022.”
They are also named, along with Gadde, in a shareholder lawsuit. Gadde incurred legal fees related to her February testimony before the House Committee on Oversight and Accountability, which focused on the company’s decision to briefly restrict a 2020 New York Post story about contents from Hunter Biden’s laptop.
Twitter’s corporate bylaws and its contracts with the former executives require the company to pay their legal fees for matters related to the company, the lawsuit said.
“Once again, Twitter has failed to honor its contractual obligations to pay its bills,” Aaron Zamost, a spokesman for Segal and Gadde, said in a statement.