DIS Walt Disney Co

By Wayne Ma 

BEIJING--A Chinese executive who left Walt Disney Co. after the launch of an internal inquiry has links to a Hong Kong company that used Disney's brand for a project in China without approval, documents show.

A Disney spokeswoman said Thursday that Meng Dekai, who was director of international special projects at Disney in China, was no longer an employee. The spokeswoman declined to comment on the circumstances of Mr. Meng's departure or say when he had left. Mr. Meng couldn't be reached for comment.

Mr. Meng's departure came after Disney launched an internal investigation in response to a report last month by the Chinese news website The Paper. The Paper reported that Hong Kong-registered DeeMagic International Culture Ltd., which is linked to Mr. Meng, was attached to a park project that was branded as a Disney facility despite not having the company's permission. The Wall Street Journal couldn't find contact information for DeeMagic.

"We are continuing to investigate the situation thoroughly and are taking appropriate action as we continue this process," the Disney spokeswoman said.

Like many Western brands, Disney has over the years battled its fair share of counterfeit goods and even fake Disney stores in China. In 2015, Chinese authorities launched a year-long special campaign to protect Disney's trademarks ahead of the opening of its Shanghai theme park, which is majority owned by a government-backed company.

The Disney spokeswoman said the Burbank, Calif.-based company had signed a preliminary agreement in November 2015 with Henan province to "enhance the growth of the retail sector." The spokeswoman said as part of the agreement, DeeMagic was given a "limited consumer-product license agreement."

Disney policy "prohibits employees from entering into business arrangements without prior approval. We were not advised of any relationship between an employee and DeeMagic," the spokeswoman said.

Mr. Meng is linked to more than 20 companies in China and Hong Kong that share the first part of the name "Disney" in Chinese, according to corporate-records searches. One of these companies is DeeMagic, which also signed a separate agreement with the central Chinese city of Zhengzhou, the capital of Henan province, for a Disney-branded project.

Mr. Meng is linked to DeeMagic through Lin Yu, a director at DeeMagic who is also an employee at two companies in China where Mr. Meng is listed as executive director, including the similar sounding DeeMagic International Culture Development Ltd., Chinese corporate records show. Mr. Lin couldn't be reached for comment.

The Paper, citing a local media report that has since been taken offline, said in February that the Zhengzhou project would include a Disney-branded administration and operations center, a shopping street, postproduction film and animation facilities and an animation-themed family resort. The Disney spokeswoman said Thursday it wasn't involved in this project.

The website of a county in Henan province posted a statement in November 2015 saying that at the same ceremony where Disney signed its Henan agreement, an industrial-cooperation agreement also had been signed between Zhengzhou and Mr. Meng, who was a "representative of DeeMagic." That statement, which didn't elaborate on either agreement, was removed from the website after the appearance of The Paper's article.

The Disney spokeswoman said that beyond the limited-licensing agreement, neither DeeMagic nor any of its affiliates were ever authorized by Disney to promote any project or sign any agreement in its name.

"DeeMagic has been told to immediately cease any such unauthorized activities," the spokeswoman said.

Disney's push into China has largely been through merchandising and theme parks rather than through media distribution, which is tightly controlled by the central government.

In recent years, though, the Magic Kingdom has enjoyed greater success at the Chinese box office, grossing almost $1 billion in the country last year, more than the other big five Hollywood studios in China combined. Last year, Disney, which already has a theme park in Hong Kong serving mostly Chinese tourists, opened its first mainland park in Shanghai at the cost of $5.5 billion. The company is behind dozens of Disney English schools that teach language skills to children but also serve as a marketing tool.

Mr. Meng's departure from Disney was reported Wednesday by the New York Times.

Write to Wayne Ma at wayne.ma@wsj.com

(END) Dow Jones Newswires

March 30, 2017 08:34 ET (12:34 GMT)

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