The Walt Disney Company is being accused of “cooking the books” by a former senior Disney financial analyst, according to MarketWatch.
The former employee, Sandra Kuba, filed a complaint with the SEC in August of 2017 after unsuccessfully attempting to address the issue internally at Disney. She was terminated in October 2017 after Disney said 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.”
According to Kuba, Disney employees in the Parks and Resorts division would often over-inflate the value of gift cards and other guest perks, in addition to exploiting Disney’s accounting software in other way. This allegedly resulted in billions of dollars in overstated revenue, including $6 billion in 2008-2009 alone.
Kuba’s whistleblower filings, which have been reviewed by MarketWatch, outline several ways employees allegedly boosted revenue, including recording fictitious revenue for complimentary golf rounds or for free guest promotions. Another alleged action Kuba described in her SEC filing involved recording revenue for $500 gift cards at their face value even when guests paid a discounted rate of $395.
Kuba has also alleged that employees sometimes recorded revenue twice for gift cards, both when guests bought the gift card and when it was used at a resort. Sometimes, revenue was recorded even though a gift card was given to a guest for free following a customer complaint, for instance, according to the whistleblower’s allegations.
Kuba’s filing alleges that flaws in the accounting software made the manipulation difficult to trace, though the consequences could be significant. In just one financial year, 2008-09, Disney’s annual revenue could have been overstated by as much as $6 billion, Kuba’s whistleblower filing alleges. The parks-and-resorts business segment reported total revenue of $10.6 billion in 2009, according to its annual report filed with the SEC.
Disney stock dropped almost immediately after MarketWatch published the article.
Disney, of course, has denied the allegations and it is currently unclear how the SEC will proceed.