Justice Department Recently Looked Into Twitter, Lawsuit Says

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 F.T.C. with past investigations into Twitter. In 2022, the agency joined the F.T.C. in a $150 million fine against Twitter over misleading users about how it treated their personal data. The Justice Department also often assists the S.E.C. in criminal investigations.

Mr. Musk did not respond to a request for comment. A spokesperson for the Justice Department did not respond to a request for comment.

Inside Elon Musk’s Twitter

• Changing the Twitter Experience: Nearly six months after buying Twitter, Elon Musk has made tweaks that have altered what people see on the platform and how they interact with it.
• Taking Aim at Substack: After the newsletter service announced that it had built a Twitter competitor, Twitter took steps to block Substack newsletters from circulating on its platform.
• Senior Lawyer 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 it over.
• A New Label for NPR: Twitter has added a label to the public radio network’s account on the platform, designating it “U.S. state-affiliated media.” NPR denounced the move as “unacceptable.”

Twitter is facing shareholder lawsuits related to Mr. 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.

Mr. 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, Mr. 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 percent, the billionaire told a banker 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 what he paid for it.

Twitter has eliminated more than 75 percent 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.

Mr. Musk fired Mr. Agrawal, Ms. Gadde and Mr. 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. Mr. Edgett is not part of Monday’s lawsuit.

Mr. Agrawal and Mr. Segal have racked up legal expenses responding to inquiries from the Justice Department and the S.E.C. during and after Mr. 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 S.E.C. asking Mr. Agrawal in September 2022 to preserve documents. The Justice Department contacted Mr. Agrawal and Mr. Segal’s lawyers “later in 2022.”

They are also named, along with Ms. Gadde, in a shareholder lawsuit. Ms. 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 Mr. Segal and Ms. Gadde, said in a statement.

This is a developing story. Check back for updates.