Disney Settles Case With SEC Over Board's Family Hires

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Disney Settles Case With SEC Over Board's Family Hires

By JUDITH BURNS
DOW JONES NEWSWIRES
December 20, 2004 12:00 p.m.

WASHINGTON -- Walt Disney Co. settled a long-running case with securities regulators over the company's failure to disclose details of related-party transactions, including the hiring of relatives of several board members.

Disney agreed to settle without admitting or denying the SEC's claims. The company wasn't fined but agreed to a cease-and-desist order.

The Securities and Exchange Commission, in charging Disney on Monday, also faulted the entertainment company for failing to reveal certain compensation to a director.

Disney, Burbank, Calif., didn't disclose hiring three children of its directors, paying them between $60,000 to more than $150,000 a year, the SEC said. In another omission, the SEC said Disney didn't divulge that a subsidiary half-owned by the company hired the wife of Disney director John Bryson at a salary of more than $1 million, about a year before her husband joined the Disney board.

In addition, the SEC said Disney failed to disclose regular payments to Air Shamrock, owned by Roy Disney, then a Disney director, and managed by Stanley Gold, another Disney director.

Roy Disney routinely flew on Air Shamrock and charged the cost to Disney, something shareholders weren't told about until 2002, according to the SEC's complaint. It said the arrangement with Air Shamrock was first approved in 1984 and continued in the mid-1990s after Michael Eisner became Disney's chairman and chief executive.

Disney received about $725,000 in rebates from Air Shamrock after an independent analysis in 2002 concluded Disney overpaid for its services, the SEC noted.

Finally, regulators said Disney didn't disclose providing more than $200,000 of services a year, including a leased car and driver, to Disney director Thomas Murphy, formerly chairman of Capital Cities/ABC Inc.

"Shareholders have a significant interest in information regarding relationships between the company and its directors," said Linda Thomsen, SEC deputy enforcement division director, in a prepared statement. "Failure to comply with the SEC's disclosure rules in this area impedes shareholders' ability to evaluate the objectivity and independence of directors."

Write to Judith Burns at judith.burns@dowjones.com

 

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SEC Press Release

SEC Press Release
December 20, 2004 10:34 a.m.

SEC Charges the Walt Disney Company for Failing to Disclose Relationships Between Disney and Its Directors

Disney Consents to a Cease-and-Desist Order

FOR IMMEDIATE RELEASE

2004-176

Washington, D.C., December 20, 2004 — The Securities and Exchange Commission today instituted settled enforcement proceedings against The Walt Disney Company (Disney). The Commission charged Disney for failing to disclose certain related party transactions between Disney and its directors, and for failing to disclose certain compensation paid to a Disney director. Under the settlement, Disney consented to the entry of an Order that it cease and desist from violating the proxy solicitation and periodic reporting provisions of the federal securities laws.

"Shareholders have a significant interest in information regarding relationships between the company and its directors," said Linda Chatman Thomsen, Deputy Director of the SEC's Division of Enforcement. "Failure to comply with the SEC's disclosure rules in this area impedes shareholders' ability to evaluate the objectivity and independence of directors."

The Commission found that between 1999 and 2001, Disney failed to disclose relationships between the company and its directors which were required to be disclosed in its proxy statements and annual reports filed with the Commission.

In particular, Disney failed to disclose that the company employed three children of its directors, who received annual compensation ranging from $60,000 to more than $150,000. In addition, Disney did not disclose that the spouse of another director was employed by a subsidiary 50% owned by Disney and received compensation in excess of one million dollars annually. Further, Disney failed to disclose that it made regular payments to a corporation owned by a Disney director that provided air transportation to that director for Disney-related business purposes. Finally, Disney failed to disclose that it provided office space, secretarial services, a leased car, and a driver to another Disney director, services valued by the company at over $200,000 annually.

The Commission concluded that Disney's failed disclosures violated Sections 13(a) and 14(a) of the Securities Exchange Act of 1934 and Rules 13a-1, 12b-20, and 14a-3(a) thereunder. Without admitting or denying the Commission's findings, Disney consented to the issuance of the Commission's Order, which requires Disney to cease and desist from committing or causing any violations and any future violations of the foregoing statutory provisions and rules.

 

[wannab@dis]

Maybe this is the reason Roy Disney decided to drop his attacks and calls for a new slate of directors. It appears that he didn't handle HIS board position very ethically and probably was aware this settlement could be used to tarnish his call for a new slate of INDEPENDENT directors.

 

[speck76]

Maybe this is the reason Roy Disney decided to drop his attacks and calls for a new slate of directors. It appears that he didn't handle HIS board position very ethically and probably was aware this settlement could be used to tarnish his call for a new slate of INDEPENDENT directors.

I agree.

I am not sure why Roy seems to have such an untarnished image in the eyes of so many....between the Ovitz trial and this, plus his lack of ability to really do anything while he was a board member (both pre- and during the Eisner years), he just does not come accross as effective to me.


Just because his last name is Disney, does not mean he is the "golden" person so many make him out to be.