Phar Mor

Phar-Mor, Inc. was a deep-discount store that had substantial growth in a short period of time. It started with 15 stores and grew to over 310 stores in thirty two states between 1985 and 1992. At first Phar-Mor was seen as a major prospect in the retail market. With sales of over $3 billion and growing, The key to the company’s success it was a practice of stocking up on products when suppliers where offering rock-bottom prices. However, the deep discount prices where so low that eventually Phar-Mor was no longer able to turn up a profit. In fact, it is believed that there were no profits generated after 1987. This is how the problem began, because Monus and other executives did not want the truth about there losses to damage the success and favorable reputation of Phar-Mor, they began to use imaginative accounting practices to hide their losses on the financial statements.Phar-Mor’s cover up and fraud was very extensive and went on for many years without being uncovered. In fact, Phar-Mor was deemed a hot commodity and attracted many large investors. These investors were eager to invest and willingly forked over more then $1.14 billion for further growth. These investors included some big names such as Westinghouse, Sears Roebuck & Co., Edward J. De Bartolo, and Lazard Freres & Co. The fraud was extensive and involved inventory overstatements, misappropriation of assets, and fraudulent financial reporting. The interesting thing was that the scale of collusion by management it was almost unthinkable, because it involved many people in the organization who worked together over many years to carefully cover up the fraud. The members that contributed included the president and COO, CFO, vice president of marketing, director of accounting, the controller, and many other key figures. The fact that these individuals all worked together is why the massive fraud went undetected for so many years. Eventually, the fraud was uncovered, not by the external...