Disney was noticably absent from a Wall Street rally on Monday, after MarketWatch reported that a former accountant told the U.S. Securities and Exchange Commission that the entertainment giant had inflated sales at the company to the tune of billions of dollars over several years.
According to MarketWatch, Sandra Kuba, an eighteen-year veteran at Disney, filed a complaint with the SEC in 2017 and was fired a month later. She has filed two more whistleblower complaints since then, the latest in June. The filings indicate the mega-resort overstated revenue, sometimes by as much as $6 billion, by exploiting deficiencies in Disney’s accounting system that enabled the exaggerations to remain undetected.
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The former employee alleges that in 2008-2009 Disney may have exaggerated revenue by $6 billion, a notably large number given the parks-and-resorts unit reported $10.6 billion in revenue in 2009.
According to the complaints, Disney avoided tax payments by reclassifying items such as hotel rooms and food. The company also allegedly inflated sales numbers by assigning revenue to free rounds of golf and other complimentary items, and accounted for $500 gift cards at face value while charging just $395.
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Kuba said she informed senior management of the alleged revenue-boosting on several occasions. The first time was in 2013, but she said Disney’s corporate audit group never followed up. In 2017, she took her concerns to the SEC and was then fired from Disney. (Disney said they fired her because “she displayed a pattern of workplace complaints against co-workers without a reasonable basis for doing so, in a manner that was inappropriate, disruptive and in bad faith.”)1
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In a statement to Fox Business, a spokesperson for Disney said the claims were false, and criticized MarketWatch for publishing the accusations, adding:
“This former employee, who was fired for cause, has persistently made patently false claims for over two years. The claims she made to the company were thoroughly investigated and found to be utterly baseless. It is unfortunate that MarketWatch, which has been aware of the facts for months, knowingly and deliberately chose to give Ms. Kuba’s unfounded claims a platform.”1
The SEC declined to comment. Shares of Disney dropped after the report was published, shedding about $2 per share.
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