Phar Mor Case Summary

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Phar-Mor Inc. was a discount pharmaceutical chain founded in 1982 by Michael Monus. The first store was opened in Youngstown, Ohio as an affiliate of Giant Eagle, a family-owned grocery chain ran by David Shapira. Shapira was a friend of Monus and will eventually become his business partner. Phar-Mor’s business tactic was to sell large quantities of merchandise in exchange for a small profit margin. The company would buy high volumes of products from manufacturers for cheap and then sell them for 25 to 45 percent off the suggested retail price. Low priced drugs gained popularity with the public and the company quickly grew to become one of the largest drug/retail company in the US, opening over 300 stores in 34 states by the early 1990s. Even …show more content…
Monus was an avid sports fan so he formed the World Basketball League (WBL). He owned at least 60 percent of each of the ten teams of the WBL. This meant that he was responsible for each teams’ expenses and losses. Allegedly, each game averaged $13,000 in losses and in order to cover up for these losses, Monus embezzled approximately $15 million from Phar-Mor. In addition to the WBL, Monus also embezzled money for personal use. Monus wasn’t the only person committing illegal activities. The scandal involved Phar-Mor’s CFO Patrick Finn, Vice President of Finance Jeffrey Walley, Controller Stanley Cherelstein, and Accounting Manager John Anderson. They lied and forged documents in order to cover up all the fraudulent activities that was going on.
It wasn’t until 1992 that Monus and his accomplices’ fraudulent activities would be noticed. The WBL travels expenses were paid using a Phar-Mor check. This caught the attention of the travel agent who then contacted sources from Phar-Mor. Word eventually got back to David Shapira, co-owner and CEO of Phar-Mor. This prompted Shapira to open an internal investigation. It was revealed that Monus had “embezzled millions to cover the league’s cost, and had conspired to inflate the value of Phar-Mor’s inventory in order to gain executive bonuses and other financial advantages”

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