Disney’s Devious ‘Mousetrap’: Audit Reveals Company’s Bait-And-Switch

Clear Facts

• An independent audit of Disney’s role in Florida accuses the company of performing a “bait and switch” and using its “unaccountable governmental power” to maximize profits at the expense of the public good.
• The audit found that Disney seized control of the Reedy Creek Improvement District (RCID), using shady tactics to maintain power, hand-picking government officials, and making payments to district employees that were “akin to bribes.”
• The report comes nine months after Florida Gov. Ron DeSantis eliminated the Disney-controlled district, and its findings are likely to be seen as a vindication of his actions.

An independent audit of the Reedy Creek Improvement District (RCID), established by Florida in 1966 to bring Disney’s business to the state, found that Disney performed a “bait and switch” on the state and used its “complete and unaccountable governmental power” to “maximize its profits” at “the expense of the public good.”

The report, obtained by The Daily Wire, claims that Disney’s establishment of RCID “facilitated the most egregious exhibition of corporate cronyism in modern American history.”

The audit comes nine months after Florida Gov. Ron DeSantis eliminated the Disney-controlled district, a move criticized by his opponents as politically motivated.

DeSantis argued that Disney should “live under the same laws as everybody else,” and that “allowing a corporation to control its own government is bad policy.”

The audit’s findings are likely to be seen as a vindication of DeSantis, with the report stating that RCID’s 55-year stint “represented a stunning deviation from the good governance standards of the State of Florida.”

The audit consisted of a forensic examination of the district’s finances, as well as an analysis of governing structures and urban planning. It found that Disney used shady tactics to maintain its control of power, hand-picking government officials, and making payments to district employees that were “akin to bribes.” Disney also used the district to avoid taxation and thrust costs on taxpayers in surrounding communities.

George Mason Law School Professor Donald Kochan, one of the independent auditors, found that Disney knew it wanted to govern itself and deceived Florida to attain the Reedy Creek structure. Disney told Florida it would build a city around a single theme park, complete with “affordable housing, transportation, and other community services,” the report noted.

However, Kochan explains that Disney “quickly abandoned its city-building pretense” and instead built the modern Disney World, consisting of several theme parks, four golf courses, and dozens of hotels — with no housing and services only offered to tourists.

“The RCID was a mousetrap,” the report states. “Disney dangled savory cheese in front of the Florida Legislature and the people of Orlando, but quickly abandoned its city-building pretense.”

Kochan says this was always Disney’s plan, as having a real population in the district would threaten its control.

“The historical record demonstrates that Disney disdained voters from the outset and did not want its special district or its corporate choices to be subject to public accountability through popular elections,” Kochan states. “Documentary evidence from Walt Disney himself makes clear that he did not want permanent residents in his model community.”

In an interview with The Daily Wire, Kochan called the situation “a bait and switch” but noted that even if Disney had fulfilled its promises, it would have still been a mistake for Florida.

“I do not conclude in this report that had they fulfilled these promises, this would have been a good idea,” Kochan said. “The governance structure was a bad idea. We would have hoped that the legislature never would have been seduced by the narrative in the first place.”

The report details how even the democratic aspects of the RCID were meticulously controlled by Disney. Board members, for example, were only eligible if they owned land in the district, so Disney would temporarily deed plots of inaccessible land that board members could hold during their service and forfeit back to Disney at the end. The company would even continue to pay the property tax for the board members. The system ensured that the board “would be responsive to Disney’s preferences and would serve Disney’s interests,” the report states.

“Because The Walt Disney Company controlled the election of the Board of Supervisors, the Board of Supervisors effectively reported to Disney and represented Disney’s interests,” the report says. “This created the potential for corruption.” The financial audit appears to uncover areas where corruption may have existed, as well as potential tax fraud, according to the report.

William Jennings, a forensic accountant who is regularly hired by the federal government to conduct investigations, found that Disney treated the district employees that were supposed to be regulating it like employees.

Reedy Creek Improvement District employees were treated to benefits such as complimentary annual passes for themselves and family members, as well as steep discounts on products and related services, such as Disney cruises.

The report states that “showering gifts and lavish spending on RCID employees” created the “impression that these employees worked to achieve the interests of Disney, not of the District or other property owners.”

The audit states that these “improper” payments were “akin to bribes of public officials” when they were coming from Disney. In recent years, the district has reimbursed Disney for the benefits, categorizing the perks as “financial and administrative services.”

The district also failed to include the benefits as taxable income to the IRS, even after employees brought the tax issue up to leadership. The district administrator, John Classe, said that the benefits — which included annual passes for each employee and three or more family members —  were part of “employee training.”

The report criticizes Classe’s statement as “not plausible,” noting “RCID employees received the tickets regardless of their job duties and for the use of their friends and family.”

Jennings found that the same administrator, Classe, in a 15-month span put $166,000 on the RCID’s American Express card for “celebrations, sports tickets, memberships, meetings, and other events,” including roughly $23,000 for “entertainment and golf.”

The “stunning deviation from … good governance standards” was allowed to happen due to a lack of oversight.

“Hardly anyone outside of the special district knew about the scope and scale of the problems plaguing it,” the auditors found. “Complete and unaccountable governmental power was handed over to a private corporation, transforming a democratic institution into a private corporate monopoly.”

The report concludes that the failure to competently govern Disney was “disastrous for the surrounding communities of Central Florida,” who were on the hook for housing, schooling, hospitals, and other public services for the company’s massive workforce.

“Over 100,000 people work in the District, but they must commute from elsewhere because the District has no workforce housing,” the report explains, noting that it was also “not home to any schools, hospitals, or libraries and instead foists those costs upon the surrounding communities which must supply those services for Disney employees and their families.”

Disney’s urban planning was “focused almost entirely on optimizing corporate goals,” rather than the needs of its workforce, which consists predominantly of people with “relatively low-wage service industry jobs,” all living outside the district.

The audit acknowledges that Disney has had positive impacts on the region, but posits that it could have helped Central Florida just as much without taking the measures it did to govern itself.

The legislation eliminating Reedy Creek Improvement District mandated that the audit be completed within a year of its passing in February 2023. Democratic lawmakers last week introduced legislation to restore the district, stating that the new governing structure put in place by DeSantis, the Central Florida Tourism Oversight District, has “no transparency.”

The auditors also found that Disney took many steps to memorialize its control over the district in the final days of Reedy Creek, even entering into a hundred-year contract with the district. The new Central Florida Tourism Oversight District is fighting to nullify these so-called “11th-hour agreements” in court.

The report’s authors say Disney’s fight is not a surprise. “No one would expect a company that’s grown obese on a steady diet of gigantic portions of exemptions and privileges to peacefully pass back the plate,” it states.

The report was sent to DeSantis and the legislature later on Monday.

Clear Thoughts (op-ed)

The independent audit exposing Disney’s manipulation of Florida’s Reedy Creek Improvement District is a disturbing revelation of corporate cronyism.

Disney’s bait and switch tactics deceived Florida, promising a city with affordable housing and community services but delivering a profit-driven tourist destination instead.

Governor DeSantis’ elimination of the Disney-controlled district is vindicated by this audit, highlighting the dangers of allowing a corporation to control its own government.

The report’s findings, from hand-picking government officials to making payments akin to bribes, underscore the consequences of unchecked corporate power.

Florida must learn from this experience and ensure that no corporation can wield such influence again.

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