Disney Accused Of Inflating Revenue

A former senior financial analyst for Walt Disney Co. (NYSE: DIS) has accused the company of repeatedly and systematically overstating its revenue for years. Sandra Kuba, who worked for Disney’s revenue operations unit for 18 years, filed a series of whistleblower tips with the U.S. Securities and Exchange Commission detailing the allegations. She claims that the entertainment conglomerate overstated revenue by as much as $6 billion in a single year by exploiting weaknesses in the company’s accounting software.

All of the allegations involve the company’s parks and resort segment. The complaints allege that Disney inflated sales numbers by assigning revenue to free rounds of golf and free guest promotions. It is also claimed that Disney reclassified some high-sales-tax items, like hotel rooms, to lower-taxed items, such as food and beverages, to reduce its sales tax liabilities in Florida, California and Hawaii.

Several allegations were made regarding the company’s gift card practices. Kuba accused theme park employees of accounting for $500 gift cards at face value while charging $395 for them in order to artificially boost revenue. In some cases, revenue was recorded even though a gift card was given to a guest for free following a customer complaint. Sometimes, gift card revenue was recorded twice, both when guests bought the gift card and when it was used at a resort.

Kuba claims that she first reported the issues to management in 2013, but she received no response from the company. The issues were escalated to a more senior executive in 2016, after which Disney’s corporate audit group contacted her once. Kuba sent the complaints to the SEC in August 2017 and was reportedly fired from her position a month later. She then filed a whistleblower-retaliation complaint with the Department of Labor’s Occupational Safety and Health Administration.

Disney has denied the claims. A Disney spokesperson said that “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.” Disney’s response to an investigator’s inquiry said that Kuba’s employment was terminated 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.”