Potential fraud at Disney?

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Disney has certainly done some questionable things. (Example: Replaced IT workers with cheaper H-1B visa holders.) But, this whistleblower seems to have credibility issues. She was terminated and filed a complaint with the Department of Labor over that termination. From the article:

"Kuba said she has withdrawn her claim challenging her termination but reserves the right to resubmit it and continues to dispute Disney’s decision to fire her."

The fact that she withdrew the claim seems to be imply that even she knew it wasn't valid. There's no reason to withdraw it if it were true. I'd take her assertions with a whole shaker of salt.

But as a way to get back at a company you feel wronged you, this is a good one. (Potentially evil and wildly unethical, but good.) Disney will have to spend $$$ to defend itself to the government.
 
There are definitely some holes in her story. Do I believe you can overstate some revenue and and possibly skirt some accounting system controls? Absolutely. But as someone who sets up system controls for a living, you'd need a LOT of people to be in on this scam and also would have to dupe your Corporate Audit team and your Big 4 external auditor (in this case PwC). You are talking massive collusion here by hundreds of people. And only 1 person is speaking up?
She also claimed that park revenues overstated by $6 billion in a $10 billion year. No way you are overstating by more than 50% if you are just doing this from room allocations on taxes and gift cards. She also only brought these concerns to management a handful of times over almost 10 years? Conveniently only reporting it to the SEC after she was fired. Definitely some suspicious activity on both ends.
 


I will let others speculate as to the Validity of the claims. What I find interesting is that a Whistleblower can be compensated for up to 30% of the claim. Just what if she is correct? The least of her worries is going to be having to ever work again. This could be a massive payout. I googled and it said the largest payout for an SEC whistleblower was 30 million. That is a lot of whistles.
 
As an accountant (albeit in a different industry), I am a bit skeptical of her claims. First, a financial analyst is not an accountant, as the analysts in my company are very quick to point out. I would question on how much she actually understands GAAP standards. If I remember correctly, there are perfectly legitimate reasons to record a discounted gift card at face value. The $105 offset could be showing up in a different place. I don't work with gift cards, but I recall them being a pain to deal with the accounting. Also, the allegation is that almost 60% of the revenue is made up ($6 billion of 10.6 billion). That would be one heck of a blind eye by the auditors. Plus, that is saying parks and resorts only made 4 billion in revenue. Revenue, not income. Considering what I have paid for my onsite stays, that seems unlikely.

Not saying there might not be some shady stuff going on, but I have a hard time believing it is as large as claimed.
 
JimmyBean42 said:
There are definitely some holes in her story. Do I believe you can overstate some revenue and and possibly skirt some accounting system controls? Absolutely. But as someone who sets up system controls for a living, you'd need a LOT of people to be in on this scam and also would have to dupe your Corporate Audit team and your Big 4 external auditor (in this case PwC). You are talking massive collusion here by hundreds of people. And only 1 person is speaking up?
She also claimed that park revenues overstated by $6 billion in a $10 billion year. No way you are overstating by more than 50% if you are just doing this from room allocations on taxes and gift cards. She also only brought these concerns to management a handful of times over almost 10 years? Conveniently only reporting it to the SEC after she was fired. Definitely some suspicious activity on both ends.
Click to expand...
I agree that she has some credibility issues but we've also seen too many Corporate Audit teams be "duped" or in on the fix. And Big 4 external auditors are paid for by who? Plenty of companies have overstated the revenue or got caught manipulating their books...Enron. ComCast. Meryl Lynch. Bear Stearns. QWest. Tyco. and WorldCom are just a few that were BIG companies that got caught. We also have the new whistle-blower complaint to the SEC regarding GE's accounting practices. Another legacy company being questioned for their accounting. I think, especially in terms of legacy companies, the public's first instinct is to rely on their reputation and have more faith in the company and their accounting than they might warrant. It's the other reason, whether or not this whistle-blower is correct, why so many people would be hesitant to file such a claim against such a public and well loved company. Despite the possible payout she would be entitled too, the public would most likely not be on her side, and either way will be an uphill battle. It's also interesting that the SEC didn't entirely dismiss this claim to begin with.
 
Eh. Market doesn’t seem too concerned, DIS dropped a whole 2 points on the news. I think it would have been taken more seriously if they hadn’t been so outlandish- $6 billion in one year due to gift cards and freebies? C’mon. Sure, there could be some fraud going on here- is THAT what Disney IT has been working on all these years?- but I’m guessing it’s not earth-shattering for DIS (full disclosure: my money is not where my mouth is. I own no DIS lol!)
 
Jennifer Brooklyn said:
Another legacy company being questioned for their accounting. I think, especially in terms of legacy companies, the public's first instinct is to rely on their reputation and have more faith in the company and their accounting than they might warrant. It's the other reason, whether or not this whistle-blower is correct, why so many people would be hesitant to file such a claim against such a public and well loved company. Despite the possible payout she would be entitled too, the public would most likely not be on her side, and either way will be an uphill battle. It's also interesting that the SEC didn't entirely dismiss this claim to begin with.
Click to expand...

Speaking of Disney specifically? Sure, but I don't know about the public's perception of other big companies lately, especially since we're starting to see how much influence they can have over things and also how some don't pay certain taxes due to tax laws/accounting being in their favor.
 
i think the dis should edit their article ; the title says "
Former Disney Accountant Claims Company Has Inflated Revenue For Year"
when she was actually a financial analyst; this is a significant difference
 
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