Feb 9, 2005 10:56 am US/Central
Bally: Former Execs To Blame For Accounting Errors
CHICAGO (AP) ―
After a five-month internal investigation, Bally Total Fitness Holding Corp. has fired two midlevel executives and accused its former chief executive and chief financial officers of faulty accounting practices.
The gym operator said former CEO Lee Hillman and former CFO John Dwyer were responsible for "multiple accounting errors and for creating a culture of aggressive accounting." The company said it has ceased severance payments to both men.
Bally's also fired controller Ted Noncek and treasurer Geoff Scheitlin for improper conduct.
Hillman said Bally has "no basis" for the allegations.
"These are truly scurrilous allegations," Hillman said Wednesday. "The company in my view should look internally to its longtime directors who were there at the time. This is a diversion from looking at what is going on internally."
Public phone listings for the other three men could not be found.
The Securities and Exchange Commission opened an investigation into the Chicago-based company in April over the recording of prepaid dues. Bally in November said it would restate financial results from 2000 through first quarter 2004 as a result of errors it made in booking revenue.
It plans to file new financial statements by July 31, Bally said Tuesday.
Hillman, who served as chairman and CEO from 1996 to 2002, is president of Liberation Investment Advisory Group LLC in Chicago. He also is chairman of the audit committee at HealthSouth Corp., where 15 executives have pleaded guilty to what prosecutors describe as a scheme to overstate earnings by more than $2.6 billion.
Bally also said it believes its former outside auditor, Ernst & Young, made several errors and it is considering taking legal action against the firm.
Ernst & Young spokesman Charles Perkins declined to comment Wednesday.
"The completion of the audit committee investigation is another important step toward putting our past accounting and financial issues behind us," Bally Chairman and CEO Paul Toback said in a statement Tuesday.
Bally shares fell 10 cents, or more than 2 percent, to $4.20 in morning trading on the New York Stock Exchange.
(© 2005 The Associated Press. All Rights Reserved. This material may not be published, broadcast, rewritten, or redistributed.)
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