Former Viacom Executive Files Suit for Alleged “Teenage Mutant Ninja Turtles” Tax Evasion Scheme

On January 5, 2016, former Viacom Vice President for Financial Planning and Analysis Nataki Williams filed suit under the Sarbanes-Oxley Act of 2002 and the Dodd-Frank Wall Street Reform and Consumer Protection Act against the entertainment company.  In her complaint filed in federal court in the Southern District of New York, Williams claims that Viacom fired her in retaliation for questions she raised about a scheme in which Viacom allegedly sought to avoid paying taxes on licensing rights to the “Teenage Mutant Ninja Turtles” (TMNT) franchise.

Viacom acquired the international licensing rights to TMNT in 2009 from The Mirage Group and 4Kids Entertainment.  Williams alleges that shortly after Viacom acquired the licensing rights, Viacom concocted a scheme to attribute TMNT’s revenue to the Netherlands to avoid the U.S. tax burden.  TMNT is owned by a Netherlands-based entity, but Williams asserts that all of TMNT’s business took place in New York.  She further claims that a Netherlands-based employee was tasked with making immaterial changes to draft contracts in order to legitimize business contacts outside of New York.  Williams’ superiors were allegedly in on the scheme, joking that they do not “look good in orange.”

Williams claims that after the scheme was briefly abandoned, Viacom assigned the TMNT rights via transfer price agreement back to the United States in the summer of 2010. Viacom paid U.S. taxes on only a small portion of TMNT’s revenue prior to the release of the TMNT film in 2014.  Then, in January 2013, Williams allegedly learned that the Netherlands scheme was back on.  This time, Viacom sought to have the Netherlands-based entity purchase the rights to Dora the Explorer, SpongeBob SquarePants, and others.  Williams’ superiors claimed that this would save Viacom millions of dollars.

Williams alleges that she raised concerns about the scheme on several occasions with her superiors, and even with the Netherlands-based Viacom employee, who could not “credibly claim to be negotiating these contracts.”  Williams was not the only one to speak up—a second Vice President objected to the scheme, too, and was terminated.  Williams’ supervisors told her not to put her concerns in writing and ignored her questions.

Viacom terminated Williams on April 9, 2014—twelve weeks into her maternity leave.  Viacom said it fired Williams for falsely claiming in benefits paperwork that the father of her newborn child—also named Williams—was her spouse.  Williams says that this is pretext for retaliation for her protected disclosures.  The mistake, she alleges, was actually Viacom’s internal clerical error, which she asked them to address several times.

Viacom says that Williams’ claims are without merit, though it has yet to answer Williams’ complaint formally.  The parties’ initial conference is set before Judge Lorna G. Schofield in the Southern District of New York for March 3, 2016.

Tagged: Sarbanes-Oxley Act (SOX), Whistleblower Laws (Federal)