Phar-Mor Summary

 Essay regarding Phar-Mor Overview

Phar-Mor, Inc.

Key points

• Started in 1982 with you store. Approximately 310 shops in 1992 with revenue of $3 billion • Retail medicine store- highly competitive, deep discounts • Mickey Monus, president and COO, found guilty of embezzling $10 mil in 95 • Monus had an extravagant life style

• Sentenced to 20 years in prison

• Monus and Patrick Finn his CFO

• Manipulated We. S. accounts (understate expense of goods sold and overstated inventory) intended for 6 years • Inventory travelled from $11 million in 1989 to $153 mil in 1991!! • Investors dropped over $1. 1 billion after Stk. Equity over-stated by $500 million. • Problems: Poor MIS, poor internal control (bypass accounts payable handles by having a supply of empty checks), hands off managing style of CFO, inadequate inside auditing, collusion among upper management, and existence of related functions • Scam team included several ex - auditors coming from C & L who also knew what the auditors would look for and were thus in a position to hide the fraud • Fraud was discovered every time a travel agent received a Phar-Mor check for World Basketball League expenses and authorized by Monus (Monus was the founder of the World Basketball League) • Travel agent showed check to her landlord who was a Phar-Mor investor. Homeowner called Phar-Mor CEO • Fraud ended in the final of 2 hundred stores, sitting off of sixteen, 000 employees, and filing for personal bankruptcy • Emerged from personal bankruptcy. Now 106 stores in 19 declares • Coopers & Lybrand sued by simply Phar-Mor, credit card companies, and investors for over captal up to $1 billion claiming that C & L was careless in performing the audits • Settled at the end of 1995 with most plaintiffs- terms nondisclosure • Several plaintiffs would not settle right up until February 1996. Court found C & L doing having a " knowing or reckless overlook for materials problems in the condition of Phar-Mor (equal to fraud).

Problems

• Taxation Failure

• Objective associated with an audit- fairness of financial...

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