Whistleblower Accuses Disney of Overstating Revenue (Report)

The complaints allege that Disney skirted tax payments by reclassifying such items as food and hotel rooms, and that it inflated sales numbers.

Disney was a notable exception to a Wall Street rally on Monday after MarketWatch reported that a former employee in the revenue-operations department told the SEC the entertainment giant had overstated sales at the parks-and-resorts segment to the tune of billions of dollars over several years.

According to MarketWatch, Sandra Kuba, an 18-year veteran at Disney, filed a complaint with the SEC in 2017 and was fired about a month later, and she filed two more whistleblower complaints since then, the latest in June.

The complaints allege that Disney skirted tax payments by reclassifying such items as food and hotel rooms, and that it inflated sales numbers by assigning revenue to free rounds of golf and other complimentary items. Kuda, according to documentation given to MarketWatch, also claims that Disney accounted for $500 gift cards at face value while charging just $395 for them in order to artificially boost revenue.

In 2008-2009, the former employee alleges Disney may have overstated revenue by $6 billion, a remarkably large number given the parks-and-resorts unit reported $10.6 billion in revenue in 2009.

Disney shares had traded as high as $137.53 on Monday, but after the MarketWatch story broke they sunk to $135.26, up six cents for the day, while the S&P 500 enjoyed a 1.2 percent rally.

According to documentation obtained by MarketWatch, Disney fired Kuba because "she displayed a pattern of workplace complaints against co-workers without reasonable basis for doing so, in a manner that was inappropriate, disruptive and in bad faith."

Kuba told MarketWatch that she first reported the alleged accounting issues to Disney management in 2013 and again in 2016.

After she was fired, Kuba filed a whistleblower-retaliation complaint with the Department of Labor's Occupational Safety and Health Administration. She withdrew the complaint but reserved the right to resubmit it, and she has spoken by phone to SEC officials as recently as last week to reiterate her accusations.

"This former employee, who was fired for cause, has persistently made patently false claims for over two years," a Disney spokesperson said late Monday. "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."