Disney Under Criminal Investigation For Violation of Florida's Law by Former Board of Reedy Creek Improvement District

The Disney-owned and operated Reedy Creek Improvement District was previously violating Florida law by paying their municipal employees with "gift" passes to Disney's parks.

Gift passes bought from Disney -- with public money.

Apparently this violates Florida law about the compensation of public employees.

Already involved in two lawsuits with Disney, Gov. Ron DeSantis' appointees to a board that oversees Disney World's governing district on Monday launched a battle against the company on a new front -- free passes and discounts for district employees.

Board members of the Central Florida Tourism Oversight District submitted a complaint to the state Inspector General, claiming that the millions of dollars in season passes, as well as discounts on hotels, merchandise, food and beverages, that their Disney-supporting predecessors provided governing district employees amount to unethical benefits and perks.

Last year alone, before the DeSantis appointees took over the governing board and it was still controlled by Disney backers, around $2.5 million in discounts and passes were given to district employees and their families, the board said in a news release.

The arrangement was self-serving to the company because it funneled money back to Disney, with the district footing the bill, the release said.

So the Disney-dominated board was sending money to Disney to buy their passes, then giving them as compensation to employees like firefighters.

Below the fold, a legal observer says that only 40% of the employees given this "gift" used it. So Disney got 100% of the money for the passes, but only had to dish out 40% in services in return.

He also says that this is clearly a violation of Florida law. I don't know Florida law at all, but he seems very certain.

He also says that this is just the tip of the iceberg, and seems certain that a lot of self-dealing behavior will be made public in the coming months.

One point I heard people talking about a while back was the Reedy Creek Improvement District's issuance of municipal bonds. Municipal bonds offer buyers lower rates than, say, corporate debt -- and they still get bought, because they're free of federal and state taxes. A municipal bond offering a weak 2.5% interest rate, but without any taxes imposed on it, may look more attractive than a corporate bond at a 6% rate which is taxed.

This allows municipalities to finance their projects cheaply -- the lower the rates they have to pay out, the cheaper their financing.

The problem -- at least as I've heard; I am not acquainted with this matter at all -- is that the Reedy Creek Improvement District may have been issuing debt which was really for the benefit of the Disney corporation, and not the municipality called the Reedy Creek Improvement District itself. This would be a benefit to Disney, as they could finance their own projects at the lower interest rates people will accept for tax-free municipal bonds.

It would also be self-dealing. It would also be, maybe, illegal.

I don't know if that's the kind of thing the commentator "Legal Mindset" has in mind as the rest of the iceberg we're not seeing yet, but that would be my best guess. He mentions that Disney routinely acted as if they were the administrators of the RCID, making decisions for the RCID, and not bothering to even pretend that the Disney corporation and RCID were two different legal entities which are supposed to have their own independent objectives. I know other commentators have pointed out that Disney's loss of control of the RCID will result in their books being opened and 70 years of possible self-dealing by Disney coming to light.

Meanwhile, Disney flirted with a nine-year-low yesterday.

Shares of Walt Disney Co. closed at their lowest level in nearly nine years Thursday, and even there they may not be cheap.

The media conglomerate's stock remains under pressure amid a host of challenges, and KeyBanc Capital Markets analyst Brandon Nispel still views it as expensive relative to peers, despite a selloff that has taken the share price down 59% from Disney's DIS, -3.91% all-time closing high established in early 2021.

"From our point of view, Disney has problems across just about every one of its businesses," Nispel told MarketWatch. These include a declining linear-TV business, a complicated shift toward streaming, an underperforming studios unit and a comedown for the parks business as the initial period of postpandemic exuberance wanes.

Disney's troubles in linear television and streaming go hand in hand. Pay-TV subscribers are declining at a 6% to 7% rate, weighing on advertising and affiliate revenue. Meanwhile, media companies bled dry their linear offerings in pursuit of streaming success, but the streaming business has been unprofitable, something companies are trying to reverse.

posted by Ace at 03:26 PM

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