The record revenues reported by Disney this quarter may be as much of a fiction as than the entertainment product coming out of the megacorp’s studios.
According to a former Disney accountant, the company has been illegally inflating its revenues for years.
A former Walt Disney Co. accountant says she has filed a series of whistleblower tips with the Securities and Exchange Commission alleging the company has materially overstated revenue for years.
Sandra Kuba, formerly a senior financial analyst in Disney’s revenue-operations department who worked for the company for 18 years, alleges that employees working in the parks-and-resorts business segment systematically overstated revenue by billions of dollars by exploiting weaknesses in the company’s accounting software.
Kuba said she has met with officials from the SEC on several occasions to discuss the allegations.
Emphasis mine. If the SEC met with Kuba multiple times, it’s a good bet she’s not just a crank filing nuisance complaints. Factor in the Trump administration’s stated interest in investigating Big Tech firms for violations of antitrust law, and the odds look better that the feds suspect there’s fire behind all the smoke Disney’s blowing.
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.
For those keeping score at home, that’s a 56% overstatement of Disney’s revenue. Let’s cut Disney some slack and assume for the sake of argument that Kuba’s numbers are exaggerated. She still exposes a pattern of deceptive behavior surrounding Disney’s finances.
It’s a good bet these underhanded practices are still going on. If that’s the case, who knows what Disney’s revenues really are?
Sure, the Mouse looks invincible now, but people forget that a company’s fortunes can turn on a dime. It’s easy to forget that Disney suffered a run of bad luck at the box office back in the early 80s that had the studio on the ropes.
And remember, Disney’s troubled ESPN network has been hemorrhaging money. Their new theme park attraction, whose name was lifted from a superior IP, is a dud. Compounding these woes, some of Disney’s most iconic and profitable characters are about to enter the public domain barring a change in copyright law.
Could the Mouse that Roared turn out to be a paper tiger? Best not to leave it to chance. As always, don’t give money to people who hate you. Voting with your wallet may be more effective than we thought.
For a more in-depth take, check out this video from Clownfish TV that’s been making the rounds:
Originally published here.