Former Louisiana Attorney General Charles Foti Launches Investigation into Accounting Fraud Allegations Against Disney
Former Louisiana Attorney General Charles Foti has begun an investigation into the allegations brought against Disney by whistleblower Sandra Kuba, a former employee who claims that Disney falsely inflated revenue reports for 18 years.
In August of 2019, Sandra Kuba, a former senior financial analyst for Disney, filed multiple reports with the U.S. Securities and Exchange Commission (SEC) which described multiple methods used by Disney employees to exaggerate the company’s revenue, such as claiming full revenue from complimentary golf games and discounted guest promotions and recording revenue from gift cards twice, once when a customer would purchase a gift card and again when it was used. (Related: Former Disney Accountant Sandra Kuba Claims Company Inflated Revenue By Billions)
Kuba claims that she first reported these issues to management in 2013 but received no response, leading her to escalate the report to a senior executive in 2016 where her complaints were again ignored (granted, the escalated reported warranted a single communication from Disney’s corporate audit group before communication abruptly ended). After being ignored again, Kuba brought her concerns directly to the SEC in August 2017 and was fired from Disney a month later.
On September 9th, less than month after Kuba’s reports were received by the SEC, Former Attorney General of Louisiana, Charles C. Foti, Jr., of the law firm Kahn Swick & Foti, LLC (KSF), announced that he would be initiating an investigation into “whether Disney’s officers and/or directors breached their fiduciary duties to Disney’s shareholders or otherwise violated state or federal laws”:
In August 2019, news media sources reported that a former Walt Disney Co. senior financial analyst had filed a series of whistleblower tips with the Securities and Exchange Commission against the Company alleging that its employees had utilized a variety of schemes to systematically overstate revenue by billions of dollars, including 2008-09 revenue possibly being overstated by up to $6 billion. The former employee also charged that Company executives were unresponsive to her attempts to report the issues and that she was ultimately fired soon after she contacted the SEC regarding the matter in August 2017.
KSF’s investigation is focusing on whether Disney’s officers and/or directors breached their fiduciary duties to Disney’s shareholders or otherwise violated state or federal laws.
Following the announcement of the investigation, two former Disney employees publicly discussed their alleged experiences with Disney’s fraudulent accounting practices. One employee described how one “project was a complete disaster. And…they marked it as profitable,” though the employee notes that his knowledge regarding the topic is “hearsay” and that they have “zero proof of anything.” Another employee, who has since deleted the relevant tweet from their account, stated that “when I asked about certain monies being created that really didn’t exist…well let’s just say I never got answers.” (Related: New Reports of Empty Theaters at Captain Marvel Add to Movie’s Controversy)
A former state Attorney General has initiated a shareholder investigation into the $6B accounting fraud claim made by a former Disney employee.
After the SEC’s fraud investigation was announced, former Disney employees tweet’d similar stories about Disney “cooking the books.” pic.twitter.com/OydZ6OYdr5
— Dataracer (@Dataracer117) September 17, 2019
KSF is currently asking for assistance from the public and long-term Disney shareholders in their investigation, encouraging anyone with relevant information to contact them:
If you have information that would assist KSF in its investigation, or have been a long-term holder of Disney shares and would like to discuss your legal rights, you may, without obligation or cost to you, call toll-free at 1-877-515-1850 or email KSF Managing Partner Lewis Kahn (lewis.kahn@ksfcounsel.com), or visit https://www.ksfcounsel.com/cases/nyse-dis/ to learn more.
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