WASHINGTON, Dec 17 (Reuters) - Ernst & Young has agreed to pay $8.5 million to settle civil charges that it violated accounting rules in connection with a fraud at Bally Total Fitness Holding Corp, the U.S. Securities and Exchange Commission said on Thursday.
The SEC accused the accounting firm of issuing unqualified audit opinions that said that Bally's 2001 and 2003 financial statements conformed with U.S. accounting rules.
'These opinions were false and misleading,' the SEC said in a statement.
Six of the accounting firm's current and former partners also agreed to settle SEC accounting violation charges as part of this investigation, the SEC said.
In settling the allegations, Ernst & Young and the former and current partners did not admit to any wrongdoing, the SEC said.
'These settlements allow us and several of our partners to put this matter behind us and resolve issues that arose more than five years ago,' Ernst & Young said.
According to the SEC, Bally engaged in fraudulent financial accounting from 2001 through 2003, including prematurely recognizing revenue and improperly deferring costs. Those accounting schemes overstated income and inflated the company's stock price, the SEC said.
Bally, which emerged from bankruptcy in September, was charged with fraud in 2008.
Bally's former chief financial officer John Dwyer and former controller Theodore Noncek also agreed to settle regulatory charges, the SEC said on Thursday.
Calls to Dwyer's lawyer were not immediately returned. Noncek's lawyer had no comment.
(Reporting by Rachelle Younglai with additional reporting by Emily Chasan and Dan Margolies; editing by Andre Grenon) Keywords: SEC ENFORCEMENT/ (rachelle.younglai@thomsonreuters.com; +1 202 898 8411) COPYRIGHT Copyright Thomson Reuters 2009. All rights reserved. The copying, republication or redistribution of Reuters News Content, including by framing or similar means, is expressly prohibited without the prior written consent of Thomson Reuters.
The SEC accused the accounting firm of issuing unqualified audit opinions that said that Bally's 2001 and 2003 financial statements conformed with U.S. accounting rules.
'These opinions were false and misleading,' the SEC said in a statement.
Six of the accounting firm's current and former partners also agreed to settle SEC accounting violation charges as part of this investigation, the SEC said.
In settling the allegations, Ernst & Young and the former and current partners did not admit to any wrongdoing, the SEC said.
'These settlements allow us and several of our partners to put this matter behind us and resolve issues that arose more than five years ago,' Ernst & Young said.
According to the SEC, Bally engaged in fraudulent financial accounting from 2001 through 2003, including prematurely recognizing revenue and improperly deferring costs. Those accounting schemes overstated income and inflated the company's stock price, the SEC said.
Bally, which emerged from bankruptcy in September, was charged with fraud in 2008.
Bally's former chief financial officer John Dwyer and former controller Theodore Noncek also agreed to settle regulatory charges, the SEC said on Thursday.
Calls to Dwyer's lawyer were not immediately returned. Noncek's lawyer had no comment.
(Reporting by Rachelle Younglai with additional reporting by Emily Chasan and Dan Margolies; editing by Andre Grenon) Keywords: SEC ENFORCEMENT/ (rachelle.younglai@thomsonreuters.com; +1 202 898 8411) COPYRIGHT Copyright Thomson Reuters 2009. All rights reserved. The copying, republication or redistribution of Reuters News Content, including by framing or similar means, is expressly prohibited without the prior written consent of Thomson Reuters.