Vince McMahon, the former Executive Chairman and CEO of World Wrestling Entertainment Inc. (WWE), is facing charges from the U.S. Securities and Exchange Commission (SEC) for not disclosing two settlement agreements he made on behalf of WWE. These agreements, executed in 2019 and 2022, led to significant inaccuracies in WWE’s financial reports and bypassed the company’s internal accounting protocols.
According to the SEC’s findings, McMahon signed off on two major settlement deals without notifying WWE’s Board of Directors, legal advisors, auditors, or financial staff, which resulted in misleading financial disclosures. The first settlement required McMahon to pay $3 million to a former WWE employee in exchange for her silence regarding their relationship and a release of any potential claims against both WWE and McMahon. The second settlement involved a payment of $7.5 million to a former independent contractor under similar conditions.
Due to McMahon’s failure to disclose these settlements, WWE was unable to accurately reflect these payments in its financial statements, causing an inflation of the company’s net income. The SEC determined that WWE’s net income for 2018 was overstated by about 8 percent, while the 2021 figure was inflated by approximately 1.7 percent. Furthermore, these settlement payments should have been recorded as related party transactions, a requirement that was overlooked.
The SEC also found that McMahon signed management representation letters provided to WWE’s auditor, which failed to mention the existence of these settlement agreements. WWE later restated its financial statements in August 2022 after learning about the undisclosed settlements.
“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 SEC’s New York Regional Office.
McMahon has consented to resolve the allegations without acknowledging or disputing the SEC’s conclusions. As a condition of the settlement, he will pay a civil penalty of $400,000 and reimburse WWE a total of $1,330,915.90 in accordance with the Sarbanes-Oxley Act. Additionally, the SEC’s order mandates that McMahon refrain from any future breaches of the Securities Exchange Act.
This situation underscores the critical need for transparency and robust internal controls among corporate leaders, as McMahon’s conduct led to considerable financial discrepancies and compromised the integrity of WWE’s financial disclosures.
