A lawsuit filed Monday by several former Twitter executives said they had personally spent more than $1 million in legal expenses related to shareholder lawsuits and various government investigations, including a Justice Department investigation.
The nature of the Justice Department investigation and whether it was ongoing was unclear. The lawsuit, filed in the Delaware Chancery Court, offered no further 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 examining the company’s privacy practices.
The Justice Department has assisted the FTC with previous investigations into Twitter. In 2022, the agency joined the FTC in a $150 million fine against Twitter for misleading users about how it handled their personal data. The Department of Justice also often assists the SEC in criminal investigations.
Twitter is facing shareholder lawsuits related to the Musk acquisition, including one that named its former executives. And one of those executives has been subpoenaed to appear before Congress, in a hearing that addressed Twitter’s content moderation policies.
Inside Elon Musk’s Twitter
- Change the Twitter experience: Nearly six months after buying Twitter, Elon Musk has made adjustments that have altered what people see on the platform and how they interact with it.
- Pointing to Substack: After the newsletter service announced that it had created a competitor to Twitter, Twitter took steps to block Substack newsletters from circulating on its platform.
- Senior attorney resigns: Christian Dowell, who had risen to the top of Twitter’s legal department, became the latest in a string of executives to leave the company since Musk took over.
- A new label for NPR: Twitter added a label to the public radio network’s account on the platform, designating it as “US state-affiliated media.” NPR denounced the move as “unacceptable.”
The executives who filed the lawsuit include Parag Agrawal, former CEO of Twitter; Ned Segal, his former CFO; and Vijaya Gadde, who was his head of policy and legal.
Musk, who bought Twitter in late October, fired the executives 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, in part to pay off the debt he took on to finance the acquisition. The loans have left Twitter with about $1.5 billion in debt payments a year, while the company’s advertising revenue has fallen about 50 percent, the billionaire told a bankers conference last month.
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 of what he paid for it.
Twitter has fired more than 75 percent of its 7,500 employees and has been accused of refusing to pay invoices owed to vendors, suppliers and owners. The company is also accused of missing payments to software services, cleaning contractors and real estate management companies, which has led to a series of lawsuits.
Musk fired Agrawal, Gadde and Segal, as well as Twitter’s then-general counsel Sean Edgett, “for cause,” refusing to pay the executives tens of millions of dollars in compensation and severance payments. Mr. Edgett is not a party to Monday’s lawsuit.
Mr. Agrawal and Mr. Segal have accrued legal expenses in response to inquiries from the Department of Justice and the SEC during and after the acquisition of Mr. Musk, according to their lawsuit. Federal authorities contacted them around July 2022, while they were still employed by the company, according to the complaint, and Mr. Agrawal was asked by the SEC in September 2022 to retain the documents. The Justice Department contacted the attorneys for Agrawal and Segal “later in 2022.”
