Disney is in hot water as lies purported by former CEO Bob Chapek have resulted in a class-action lawsuit against the Walt Disney Company.
In a suit filed on May 12, 2023, Chapek is personally named among the defendants alongside the company as a whole as a result of misleading streaming revenue reports released while Chapek was still at the helm of the entertainment giant.
The complaint was filed in the U.S. District Court for the Central District of California by a pension fund. Court records state that Disney “repeatedly misled investors about the success of the Disney+ platform by concealing the true costs of the platform, concealing the expense and difficulty of maintaining robust Disney+ subscriber growth, and claiming that the platform was on track to achieve profitability by 2024.”
What Disney Allegedly Did Wrong
This deception came to light shortly before Chapek was fired in November 2022 and played a significant role in his demise. Antitrust and securities fraud accusations tend to have that effect. When he first became Disney’s CEO, one of Chapek’s initial decisions was to see the company undergo a restructuring that moved around various assets and intellectual properties. This allowed Disney to play a shell game with what program went where, making it easier for the company to hide losses and move production costs from Disney+, making the streaming platform seem more profitable than it actually was.
According to Bloomberg Law, “Chapek’s reorganization represented a dramatic departure from Disney’s historical reporting structure and caused controversy within the company because it redirected power and control from creative content executives to Chapek’s lieutenant Kareem Daniel. Daniel is among the defendants.”
Disney stock plummeted to an all-time low after it came to light that the company was using misinformation rather than actual facts and figures in its earnings reports.
The class-action lawsuit was filed by the Local 272 Labor-Management Pension Fund–a fund with hundreds or thousands of members, according to estimates within the complaint. The pension fund hopes to recoup losses and seeks “damages and injunctive relief” on its allegations of securities fraud.
A representative for Disney has publicly responded to the lawsuit stating, “We are aware of the complaint and intend to defend vigorously against it in court.”