Accounting & Tax

SEC Probes Bally; CFO Resigns, Returns

Investigation concerns the fitness company's restatement, which stemmed from the timing of recognition of pre-paid dues.
Stephen TaubApril 30, 2004

Chief financial officer and director John Dwyer resigned on Wednesday from gym chain Bally Total Fitness Holding Corp., as the Securities and Exchange Commission launched an investigation into the company’s recent restatement.

On Thursday, Dwyer returned to Bally’s as a $475,000-a-year consultant, according to the Associated Press. The wire service reported that Dwyer will receive that salary through the end of 2005 and that the company is removing all restrictions from 100,000 shares awarded to Dwyer last year.

Bally revised its 2003 results in March to correct revenue errors amounting to about $43 million over seven years. According to the company, the revenue errors accelerated dues recognition for certain prepaying members. The $43 million was part of a $675 million non-cash charge related to a 2003 change in the company’s accounting system in 2003, added the fitness-club operator. The company’s auditor, Ernst & Young LLP, resigned later that month, said the AP.

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Although Dwyer is returning as a consultant, Bally’s named William Fanelli, the senior vice president of finance, to serve as acting CFO, and hired Korn/Ferry International to conduct a search for a permanent replacement. The search will include Fanelli as well as external candidates, according to the company.