In a new lawsuit, the Walt Disney Company has named former CEO Bob Chapek as a defendant, along with current CFO Christine McCarthy and former Entertainment Chief Kareem Dania.
The lawsuit claims that the corporation restructured under Chapek’s leadership last year only to create a fraud scheme, hiding Disney+ stream costs to deceive investors and inflate the growth trajectory of the service.
Bloomberg Law reports that a lawsuit was filed in the U. S. District Court of the Central District of California. In the lawsuit, former Disney CEO Bob Chapek appears alongside current CFO Christine McCarthy and former Entertainment chief Kareem Dania.
The filing states that these executives "repeatedly lied to investors about the success and profitability of the Disney+ platform, by concealing its true costs, the expense and difficulty in maintaining robust Disney+ subscribers growth, and claiming the platform was on course to achieve profitability."
The lawsuit is a securities action on behalf of all Disney common stock purchasers between December 10, 2020, and Nov 8, 2022. The pension fund is seeking damages and injunctive remedies for its securities fraud claims.
The lawsuit claims that the restructuring of the Walt Disney Company in October 2020 was "a dramatic departure" from Disney's previous reporting structure and was implemented to hide the costs associated with the Disney+ streaming service.
This restructuring plan was intended to "hide Disney+ losses, make the growth trajectory for Disney+ subscribers seem sustainable and 2024 Disney+ targets appear achievable even though they weren't."
The lawsuit also states that the restructuring was "hugely contentious within the Company" because it "took power away from creative content-focused executives, and centralized it into a new reporting team led by defendant Daniel, who reported directly to defendant Chapek."
Chapek was dismissed without ceremony on November 20, 2022. Iger, who replaced Chapek in 2022, made his first move to undo all the restructuring and fire Daniel from the company.
Since Iger returned, the company has been plagued by high-profile issues. Iger has been putting fires out since his return in the fall. He has dealt with a government takeover at Reedy Creek Improvement District and multiple lawsuits filed with Florida Governor Ron DeSantis.
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