Disney Settles Whistle-Blower Case

January 21, 2003 (PLANSPONSOR.com) -The Walt Disney Company has reached a settlement in a $20 million "whistle-blower" lawsuit brought by a former executive who alleged wrongful termination for refusing to help the company report lowered back taxes to the Internal Revenue Service (IRS).

The case, originally scheduled to go to trial January 27, was settled late last week. The terms of the settlement were not disclosed, the Associated Press reported.

“Mousey” Business

Judy Denenholz, a senior vice president in Disney’s anti-piracy division, filed her suit in March 2001.   The suit claimed the company’s general counsel was frustrated by Denenholz after she refused to sign off on Disney’s response to an IRS audit.

The IRS audit in question focused on Disney’s accounting for taxes related to legal and professional expenses incurred in copyright and trademark lawsuits for 1993, 1994 and 1995.   Denenholz’s suit said the company wanted to state back taxes of $676,000, a figure she believed omitted millions of dollars in legal expenses.  

When Denenholz refused to sign off on the figure, she claims company executives retaliated by saying her services were no longer needed, ending a nearly 20-year career at Disney.   Denenholz responded by filing a wrongful termination suit under a California labor code provision that protects whistle-blowers from retaliation by their employer.

Disney responded by saying Denenholz was not fired, only that her contract was not renewed after it expired and that her allegations were baseless. In response to the suit, Disney said it had investigated the allegations brought by the former executive and found them “shameful and untrue.”