Stockholders v Bally Total Fitness Holding Corporation
Bally Total Fitness Caught Violating GAAP
Several class actions have been filed against gym franchiser Bally Total Fitness Holding Corporation (NYSE:BFT) and certain of its officers and directors by stockholders who purchased the company's common stock between August 3, 1999, and April 28, 2004. The actions claim that the defendants violated federal securities laws by issuing a series of material misrepresentations to the market over this time period, thereby artificially inflating the price of the company's securities. The stockholders seek to recover compensatory damages for the loss of value of their stock.
The action alleges that the defendants violated the federal Securities Exchange Act of 1934 by issuing false statements to the public which described Bally's increasing financial performance. These statements were allegedly false because they failed to disclose the following adverse facts: (1) that the company had violated Generally Accepted Accounting Principles and its own internal policies by prematurely recognizing revenue on certain non-obligatory prepaid membership dues; (2) that it lacked adequate internal controls and was therefore unable to ascertain its true financial condition; and (3) that, as a result, Bally's reported revenues during the applicable period were materially overstated.
On April 28, 2004, Bally issued a press release announcing that its Chief Financial Officer and Director, John W. Dwyer, had resigned and that the Division of Enforcement of the Securities & Exchange Commission had commenced an investigation in connection with the company's announced restatement regarding the timing of recognition of certain prepaid dues. The company also stated that it had modified its existing internal controls structure, which it believes is now effective. In response to these disclosures, Bally shares fell approximately 17% to close at $4.50 per share, on extremely heavy trading volume.
If you purchased securities issued by Bally during the applicable period, you may request appointment by the court as a lead plaintiff if you do so by July 26, 2004. A lead plaintiff is a representative party that acts on behalf of other class members in directing the litigation. In order to be appointed lead plaintiff, the court must determine that your claim is typical of the claims of other class members, and that you will adequately represent the class. Under certain circumstances, one or more class members may together serve as lead plaintiffs. Your ability to share in any recovery is not affected by the decision whether or not to serve as a lead plaintiff. You may retain any counsel of your choice to serve as you in this action, or you may choose to do nothing, and remain in the class as a silent member.
