Phar-Mor Inc. was a discount drugstore chain that was founded in 1982 by Michael J. “Mickey” Monus. Within ten years of their first store opening, Phar-Mor had 310 stores, and over 20,000 employees in 34 states. Mickey Monus also owned Tamco warehouse, which was the distributer for Phar-Mor. Mickey Monus also owned 60% of each of the ten teams in the World Basketball Leage (WBL). While everything seemed to be growing, and succeeding rapidly, in reality the company was losing money. Between shortages and overbilling of inventory, moving company funds for personal uses, and the embezzlement of funds from Phar-Mor into WBL, Monus was finally in the spotlight and being investigate. In 1992, Phar-Mor went bankrupt after being accused of embezzlement. Due to this investigation, it also came to light that Phar-Mor’s independent audit company, Coopers & Lybrand LLP, was also involved with the fraudulent activities; charges were also presented agains Coopers.
Sarbane’s and Oxley was created to give investors more security after the Enron scandal cost them billions of dollars. Senator Paul Sarbanes and Representative Michael Oxley drafted the bill which contained 11 sections, in which companies are obligated to abide by.
SOX and Phar-Mor Fraud
While it is almost impossible to say that SOX would have prevented the Phar-Mor scandal, we can be assured that it would’ve uncovered the truth to their fraud earlier in their timeline, and prevented such high losses to investor. In the…