Phar Mor Inc Case Study Essay

1168 Words Nov 1st, 2012 5 Pages
Sean Russi

The Case of Phar-Mor Inc


October 31, 2012

Case Summary

The case of Phar-Mor Inc was one of the biggest pre-Enron frauds that have been uncovered. Phar-Mor Inc established in 1982 Phar-Mor was a small little known discount drugstore. Phar-Mor became well known for offering medications at a 25-40% discount rate compared to your normal pharmacy store prices. Phar-Mor’s first six years of existence seemingly were fraud free and saw the company grow at a decent pace for their field. By 1987 Phar-Mor almost had 100 stores and was expanding even more rapidly at this point.

The first hint of fraud came up and was discovered being a billing type scheme
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This would have helped the fraud be uncovered much sooner because the auditors would have checked over the inventory procedures and the fraud would have been discovered years earlier.

Research the Waste Management scandal from the late 1990’s. Describe the scandal. Could SOX have prevented this scandal?

The Waste Management scandal of the 1990’s was one of a common type of fraud that has been seen time and again over the last two decades. The Waste Management scandal was one were performance based pay was being used so executives based on the company’s bottom line go bonus’s, stock options, and higher salaries. The executives then in turn sold those stock options right before the bottom fell out making millions of dollars on the stocks. The company’s investors lost a total 6 billion dollars due to the fraud one of the biggest losses to date at that time. The problem within the scandal was that Arthur Andersen had provided the CEO’s with steps to cover up the SEC regulations that the company was breaking (St. Pete Times, 2002). In this instance SOX again could have helped at least eventually discover the fraud but it would appear on the surface to be more in-depth then the Phar-Mor fraud. Now one of the things SOX would have stopped was during the course of the 1990’s at least 14 employees worked for both Andersen and the Waste Management Company. That would have

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