Bally Total Fitness

Bally Total Fitness is an American fitness club chain with four hundred gyms in seventy cities, and claims four million customers . At its peak, prior to filing Chapter 11 bankruptcy in 2007, Bally operated nearly 440 facilities located in 29 states, Mexico, Canada, Korea, China and the Caribbean under the Bally Total Fitness, Crunch Fitness, Gorilla Sports, Pinnacle Fitness, Bally Sports Clubs, and Sports Clubs of Canada brands. In response to an increasingly competitive market invaded by niche clubs catering to specific market demographics, Bally has diversified into franchising, with over thirty Bally facilities now operating as franchises. The company's headquarters are located in Chicago, Illinois.

Controversy

Bally Total Fitness has been the subject of controversy over their sales and membership cancellation practices, with some customers claiming they were misled into signing long membership contracts, and subsequently found themselves dealing with collection agencies . The fitness chain has had problems for years. In April 1994, Bally paid $120,000 to settle Federal Trade Commission charges of illegal billing, cancellation, refund, and debt-collection practices. But consumers complain that little has changed over the years. From 1999 to 2004, over six hundred customers complained to the New York Attorney General's office, leading to an investigation and subsequent agreement by Bally Total Fitness to reform their sales tactics in February, 2004.

According to ConsumerAffairs.com, "We get so many complaints about Bally Total Fitness, it's a workout just to sort through them.

Paul Toback, a former White House aide in the Clinton administration who joined Bally as a corporate development officer in 1997, was named Chief Executive Officer (CEO) in late 2002, after predecessor Lee Hillman resigned.

Investigations

Bally has been the subject of at least one federal investigation, in addition to the aforementioned probe into consumer complaints against Bally, conducted by the New York State Attorney General, regarding the firm's sales practices. In April 2004, Bally disclosed the U.S. Securities and Exchange Commission (SEC) was investigating its accounting practices. The company eventually restated its financial statements for 1997 through 2003.

The SEC has yet to complete its investigation, but an internal Bally probe blamed the company's "culture of aggressive accounting" on Mr. Hillman and former Chief Financial Officer John Dwyer; both men have repeatedly denied any wrongdoing.

On February 28, 2008, the SEC formally filed financial fraud charges against Bally Total Fitness. Among the charges, the SEC alleges that in 2001, Bally overstated its originally reported stockholder's equity by roughly $1.8 billion (over 340%), and understated its 2003 net loss by $90.8 million, (or 845%) .

Bankruptcy

Bally filed for bankruptcy in August 2007, with outstanding debts of $761 million. Over the preceding ten years, its stock price had fallen from a high of approximately $37.00 to less than $0.37 on the Pink Sheets .

On October 1st 2007, Bally announced its emergence from bankruptcy court protection, 100% owned by a hedge fund, Harbinger Capital.