Feb 17, 2005 9:15 am US/Central
Bally Ordered To Save Records
CHICAGO (AP) ―
Bally Total Fitness Holding Corp. has been ordered to save accounting records by federal prosecutors conducting a criminal investigation, the company said.
Bally said Wednesday it received a letter from the U.S. attorney's office in Washington telling the company to preserve its records.
"We are fully cooperating with the U.S. attorney's office," said Bally spokesman Jon Harris.
The Chicago-based company fired two midlevel executives last week and accused its former chief executive and chief financial officers of faulty accounting practices.
The letter from the U.S. attorney's office did not indicate whether Bally or its former officers were the target of the criminal investigation.
Randall Samborn, spokesman for the U.S. attorney's office in Chicago, declined to comment on why the Washington office was handling the investigation.
Bally also said Wednesday it is evaluating a shareholder request that the company bring legal action against the officers responsible for the faulty accounting errors.
After a five-month investigation, Bally said last week that former CEO Lee Hillman and former CFO John Dwyer were responsible for "multiple accounting errors and for creating a culture of aggressive accounting." Bally's also fired two other senior managers for improper conduct.
Jerold Solovy, the attorney for Dwyer and Hillman, said Thursday that his clients are innocent.
"We have no concerns whatsoever," Solovy said. "Everything we did was by the book."
Solovy has said current officials and board members who were at Bally at the time of the alleged misconduct are to blame.
Bally last week also said it believes its former outside auditor, Ernst & Young LLP, made several errors and was considering taking legal action against the firm. An Ernst & Young spokesman on Thursday refused to comment on the allegations.
The Securities and Exchange Commission opened an investigation into Bally in April over the recording of prepaid dues. Bally in November said it would restate financial results from 2000 through the first quarter of 2004 because of errors it made in booking revenue.
The company said it plans to file new financial statements by July 31.
(© 2005 The Associated Press. All Rights Reserved. This material may not be published, broadcast, rewritten, or redistributed.)
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