According to the SEC’s order, one settlement agreement obligated McMahon to pay a former employee $3 million in exchange for the former employee’s agreement to not disclose her relationship with McMahon and her release of potential claims against WWE and McMahon, and the second agreement obligated McMahon to pay a former WWE independent contractor $7.5 million in exchange for the independent contractor’s agreement to not disclose her allegations against McMahon and her release of potential claims against WWE and McMahon. The order finds that, because McMahon failed to disclose the agreements to WWE, WWE did not evaluate the disclosure implications or the appropriate accounting for these transactions in its financial statements. The SEC’s order finds that, because the payments required by the 2019 and 2022 agreements were not recorded, WWE overstated its 2018 net income by approximately 8 percent and its 2021 net income by approximately 1.7 percent. In addition, according to the order, these payments should have been disclosed as related party transactions.

The order further finds that McMahon signed management representation letters that were provided to WWE’s auditor that did not disclose the existence of either settlement agreement. After learning of the settlement agreements, WWE issued a restatement of its financial statements in August 2022.

“Company executives cannot enter into material agreements on behalf of the company they serve and withhold that information from the company’s control functions and auditor,” said Thomas P. Smith Jr., Associate Regional Director in the New York Regional Office.

Source:  https://www.sec.gov/newsroom/press-releases/2025-1

Categories:  Disclosure Failures – Accounting Failures