Former CEO Bob Chapek, current CFO Christine McCarthy, and former Entertainment Chief Kareem Daniel are listed as defendants in a new lawsuit filed against the Walt Disney Company. The lawsuit claims the corporation restructured last year during Chapek’s leadership only to create a fraudulent scheme, hiding Disney+ streaming costs in order to deceive investors of actual losses and inflate growth trajectory of the service.
Disney+ Smoke and Mirrors
According to Bloomberg Law, a lawsuit has been filed in the U.S. District Court for the Central District of California. Within, former Disney CEO Bob Chapek is on a list of defendants that also includes current CFO Christine McCarthy, and former Entertainment Chief Kareem Daniel.
The filing states these executives “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.”
The lawsuit is a securities class action on behalf of all purchasers of the Disney common stock between December 10, 2020 and November 8, 2022. The proposed class is estimated to include possibly thousands of members, and the pension fund seeks damages and injunctive relief on its securities fraud claims.
The lawsuit goes on to claim the October 2020 restructuring of the Walt Disney Company was “a dramatic departure from Disney’s historical reporting structure” and was put into place to conceal the costs associated with its Disney+ streaming service. This restructuring plan was designed to “hide the extent of Disney+ losses and to make the growth trajectory of Disney+ subscribers appear sustainable and 2024 Disney+ targets appear achievable when they were not.”
The lawsuit also states the restructuring was “hugely controversial within the Company because it took power away from the creative content-focused executives and centralized it in a new reporting group led by defendant Daniel who reported directly to defendant Chapek.”
Disney’s Shift in Leadership
Chapek was fired unceremoniously on November 20, 2022. When Iger returned to replace Chapek, one of his first moves was to undo the restructuring that had occurred and dismiss Daniel from the company.
Since Iger’s return, the company has found itself plagued with high-profile issues. Between a government takeover of the Reedy Creek Improvement District, multiple lawsuits with Florida Governor Ron DeSantis, thousands of executive-level layoffs, and revenue problems with streaming platforms, Iger has been putting out fires since his return last fall.
Take a look at some of our coverage on these events using the links below:
- Florida Senate Files Legislation to Void Disney & Reedy Creek Agreements
- BREAKING: Disney Updates Lawsuit Against Ron DeSantis Using Latest Comments as Proof of Unconstitutional Retaliation
- Disney Executives Ordered to Identify Thousands of Layoff Candidates as Iger Aims to Cut $5.5 Billion in Spending
- Iger Predicts Disney Will ‘Meet or Exceed’ $5.5 Billion Cost-Cutting Goal
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