Disney Settlement Doubles as Flashback

Disney also didn't disclose its relationship with Air Shamrock, a business owned by onetime director (and vice chairman) Roy Disney, and managed by Gold. Roy Disney regularly traveled on Air Shamrock planes for Disney corporate business, with Air Shamrock billing Disney for those flights. Disney didn't disclose the payments to Air Shamrock until December 2002.

Finally, Disney didn't disclose until December 2002 that for years it had provided director Thomas Murphy office space, secretarial services, a leased care and a driver, based on an oral agreement between Murphy and Eisner when Disney in the 1990s acquired Capital Cities/ABC, of which Murphy was chairman. Disney valued these services at $200,000 a year, according to the SEC.

In a sign of how tangled Disney's board has been over the years, former directors Disney and Gold -- whose related party transactions weren't disclosed by the company -- subsequently attacked Eisner for the chumminess he cultivated with other board members, and attacked Disney for its weak oversight of Eisner.

The failure to disclose the employment of the children took on added significance, says the SEC, because Disney represented that these were independent directors on Disney's board. In April 2002, Disney publicly revised the guidelines for independent directors, announcing that directors with immediate family members employed by Disney would not be considered independent.

But it took more than three months for Disney to disclose the employment of these directors' children -- a disclosure that under Disney's guidelines at the time rendered them nonindependent. (Under subsequent guidelines Disney adopted in December of that year, employment of children, except as executive officers, was eliminated as a criterion for determining directors' independence.)