Hello Curious Cat-
The details you remembered gave me a great deal of information to go
on!
I believe that the case you’re thinking of is the bankruptcy of Phar
Mor stores, and the conviction of Phar Mor’s CEO Michael “Mickey”
Monus on over 100 fraud charges. Phar Mor ended up with about 300
stores, but the nearly all of the rest of the details you remember are
correct. Although Monus and Phar Mor had many Pennsylvania
connections, he was actually convicted in an Ohio court, and his first
store was in Youngstown, OH. (Not far from PA.)
The Youngstown Accountability Task force described this case this way:
"The rise and fall of Mickey I. Monus, the Phar-Mor drugstore magnate
once hailed as a civic hero for bringing new jobs and fresh money into
the valley, now serving an 11-year sentence for embezzling millions
from his company and triggering $1 billion in losses to investors and
related companies"
http://www.kbkusa.com/countywatch/Newpaper%20articles/plain_dealer.htm
You were also quite correct in remembering that Phar Mor was a WalMart
Threat. In fact, Sam Walton once announced that the only company he
feared at all in the expansion of Wal-Mart was Phar-Mor.
Mark F. Murray, "When a Client Is a Liability," Journal
of Accountancy, September 1992, pp. 54-58.
You can find that and more in this Accounting Textbook chapter
synopsis;
http://www.swcollege.com/vircomm/skousen_acct/sts/sts05.html
One of the best overall descriptions of the case can be found here:
(about ¾ of the way down the page – look for the case study called
“Far More Ghosts” (nice pun, eh?) The “Ghosts” refers to “ghost
inventories”, which is the topic of the overall page. The page is
part of the AICPA Online website – the American Institute of Certified
Public Accountants.
http://www.aicpa.org/pubs/jofa/jun2001/wells.htm
The accounting tricks concerning “ghost inventory” were exactly as you
recalled. The AICPA website describes them as follows:
“The finance department was able to conceal the inventory shortages
because the auditors observed inventory in only four stores out of
300, and they informed Phar-Mor, months in advance, which stores they
would visit. Phar-Mor executives fully stocked the four selected
stores but allocated the phony inventory increases to the other 296
stores.”
Mickey Monus and his CFO, Patrick Finn, were sentenced to prison for
the fraud in December 1995.
http://www.sharon-herald.com/localnews/chron/chron1995b.html
Here’s the 6th Circuit U.S. Court of Appeals case citation held by
Emory University’s Law School, with Monus’ convictions were upheld and
sentencing remanded to the district court.
http://www.law.emory.edu/6circuit/oct97/97a0311p.06.html
In this citation, Circuit Court Judge Kennedy, in rendering his
opinion, outlined Monus’ convictions:
“Defendant Michael Monus was convicted on all counts of a 109 count
indictment that charged him with conspiracy to commit mail fraud, wire
fraud, bank fraud, and transportation of funds obtained by theft or
fraud under 18 U.S.C. § 371 (count one); with bank fraud under 18
U.S.C. § 1344 (counts two and three); with wire fraud under 18 U.S.C.
§ 1343 (counts four, five, eight, ninety-one, and ninety-two); with
mail fraud under 18 U.S.C. § 1341 (counts six and seven); with
interstate transportation of property obtained by theft or fraud under
18 U.S.C. § 2314 (counts nine through ninety, and ninety-three through
106); with filing false income tax returns under 26 U.S.C. § 2706(1)
(counts 107 and 108); and with obstruction of justice under 18 U.S.C.
§ 1503 (count 109).”
The case citation gives a great deal of detail about the case,
including a detailed account of the accounting frauds, the claim by
Mr. Finn and others that they were (as you also remembered) just
trying to save their jobs.
The sports connection you remembered was correct, as well. Monus
started the "WBL" the World Basketball league, under an interesting
premise in which no players would be over 6 feet tall. (Monus himself
was not a tall man.) He put $10 million of Phar Mor money into the
endeavor.
Monus had other sports-related ambitions as well, including a part
ownership in the partnership holding the Colorado Rockies Baseball
Team, who eventually sued him.
Faegre and Benson (law firm)'s page on the lawyer (Colin Deihl) who
represented the Colorado Rockies Baseball Team in their suit in US
Bankruptcy Court against Mickey Monus:
http://www.faegre.com/firm_lawyers_detail.asp?key=1583
PBS's show Frontline did a story on Mickey Monus in 1994, entitled
"How to steal $500 million":
http://www.pbs.org/wgbh/pages/frontline/programs/categories/info/1304.html
The search strategies included the following:
Searches on Bankruptcydata.com
Google Searches:
“Accounting Irregularities”
fraud bankruptcy Northeast
“inventory fraud” retail bankruptcy
“Phar Mor” fraud
“Mickey Monus”
“WBA” basketball |
