SEC charges Ernst & Young with accounting fraud at Bally fitness

Moments ago, the SEC announced that it has charged Ernst & Young and six of its current and former partners for taking part in accounting fraud with former client Bally Total Fitness, saying E&Y knew or should have known that the gym chain was fudging its accounting.

E&Y will pay $8.5 million to settle the charges, the SEC said. The partners have settled their individual charges, the SEC said.

E&Y said Bally's books were in order from 2001 to 2003; the SEC found otherwise.

"It is deeply disconcerting that partners, even at the highest levels of E&Y, failed to fulfill their basic obligations to the investing public by not conducting proper audits. This case is a sharp reminder to outside auditors that they must carry out their duties with due diligence. The $8.5 million settlement, one of the highest ever paid by an accounting firm, reflects the seriousness of their misconduct," Robert Khuzami, director of the SEC's enforcement division, said in a statement.

It's pretty amazing the SEC is still cleaning up accounting frauds from the early years of this century.

You can read the entire SEC release by clicking here.

-- Frank Ahrens
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