Whistleblower Accuses Disney of Faking Revenues

Disney is supposed to be in the business of making magic—but not with its numbers.

A former senior financial analyst for the Walt Disney Company has filed multiple claims with the Securities and Exchange Commission about the company’s accounting practices, according to a report by MarketWatch.

Sandra Kuba claims that employees at Disney falsely inflated revenue for years. Some of the alleged methods included pretending that complimentary golf games or other free or discounted promotional services and products were paid in full. Software flaws supposedly allowed these and other misstatements to be entered.

Disney, in a statement to Fortune, denied the claims had any merit. Kuba was “fired for cause” in 2017 and has “persistently made patently false claims for over two years,” a company spokesman said. Her claims have been “thoroughly investigated and found to be utterly baseless,” the spokesman added, and MarketWatch “has been aware of the facts for months.”

Here’s what we know so far.

The whistleblower says she told management

Public companies live and die by their revenues and profits. Regulators require full and accurate financial statements so investors can see a company’s performance.

Kuba claims that Disney manipulated many small transactions, allegedly at its theme parks, misrepresenting their actual value and, when totaled, significantly increasing the company’s revenues.

In Disney’s 2009 fiscal year, the parks and resorts business unit showed $10.7 billion in revenue. Kuba says the number could have been inflated by upwards of $6 billion.

She claims to have repeatedly reported the problems to Disney management. Kuba says she contacted the SEC in 2017 and was fired a month after.

Investors aren’t worried

Shares were down only 0.12%, suggesting that investors were not terribly alarmed. Some experts who spoke with Fortune expressed doubts about the larger claims.

“This is the first report that I’ve heard of,” said Joseph Bonner, a senior analyst for technology, media, and communications at equities analysis firm Argus Research Company. “I have to say that $6 billion sounds a little unbelievable.”

James Angel, a professor of finance at Georgetown University’s McDonough School of Business, was similarly unconvinced. “Disney is a master of financial engineering,” he said. “If there’s a loophole available, would they have exploited it? I don’t doubt it. Would they have committed financial fraud? I’d be shocked.”

Angel thought that it was more likely that a mid-level manager trying to push their numbers up, if anything at all—but that internal auditors would probably have uncovered the practice.

Kuba says she’s met with the SEC multiple times

Kuba told MarketWatch she had multiple phone and in-person meetings with SEC personnel. There is no evidence that the agency is even undertaking an investigation.

“If they get a complaint from a financial analyst at a publicly-traded company alleging accounting irregularities, my bet is that they would give that a second look” rather than quickly dismissing it, said Andy Dunbar, general counsel and chief compliance officer at Bel Air Investment Advisors and a former SEC enforcement attorney. “And who knows what she told to the SEC? She could have a lot more detail.”

Correction, Aug. 20, 2019: An earlier version of this article contained several errors that have been corrected: It misspelled Kuba’s surname; its headline overstated her allegations; and its text misstated that she had reported her allegations to Disney’s board of directors when it was in fact management. We regret the errors.