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PHAR-MOR DISCOVERS MAJOR FRAUD ASKS FBI TO INVESTIGATE

 PHAR-MOR DISCOVERS MAJOR FRAUD
 ASKS FBI TO INVESTIGATE
 YOUNGSTOWN, Ohio, Aug. 4 /PRNewswire/ -- David S. Shapira, president and chief executive officer of Phar-Mor Inc., today announced the company has discovered a fraud and embezzlement scheme totaling some $350 million and including criminal activity on the part of Michael(Mickey) Monus, former president and chief operating officer, and Patrick Finn, former chief financial officer.
 After taking on the additional responsibilities of president and chief operating officer on July 27, Shapira, with the support of the Phar-Mor board of directors, called for a financial review. That review led to the discovery of the scheme, and the company dismissed Monus and Finn on Friday, July 31.
 As a result of this intricate criminal activity to defraud the company and its investors, lenders and creditors, Phar-Mor is taking a one-time write-off of approximately $350 million. Despite this write- off, Shapira said Phar-Mor remains a strong company with a net worth of $220 million.
 Phar-Mor's attorneys and internal auditors worked around the clock for five days to piece together details of the elaborate financial swindle. Among the irregularities, Phar-Mor's investigation uncovered evidence indicating that financial statements were falsified to conceal losses and to overstate income. There is also evidence that Monus, with Finn's assistance, diverted company funds for his personal use.
 All evidence uncovered by the company has been turned over to the Federal Bureau of Investigation and the United States Attorney for the Northern District of Ohio. Phar-Mor also will take all appropriate legal action to recover losses resulting from this fraud.
 Shapira said a plan to return the company to profitability is already being implemented and includes the following steps:
 -- Joel Arnold, senior vice president of operations, has been named acting chief operating officer and Tom Bielawski, head of the Phar-Mor internal audit team, has been named acting controller;
 -- Phar-Mor has retained Deloitte & Touche to replace Coopers & Lybrand as its external auditors. Irwin Cohen, national partner in charge of Deloitte & Touche's retail practice area, will lead the new auditing team;
 -- Phar-Mor's board of directors has retained independent counsel to assist in the investigation of the financial irregularities;
 -- Phar-Mor is streamlining its operations to reduce overall costs, including layoffs already in progress;
 -- The company will completely evaluate all product categories to determine the proper merchandising mix to ensure the profitability of its stores;
 -- The company has been meeting with its banks to assure their continued support.
 "To say that the actions of two former officers of this company were outrageous and shocking does not begin to convey my feelings," said Shapira. "I intend to return Phar-Mor to profitability as soon as possible and to re-establish honest relationships with our banks and our vendors. My one consolation in all of this is that this fraud was limited to a few members of senior management and that overall Phar-Mor has extremely competent and honest employees operating the company. "Millions of Americans depend on Phar-Mor, especially in these difficult economic times. We have kept our commitments to our customers and we will continue to do so in the future."
 In its nine year history, Phar-Mor has experienced rapid growth, achieving sales of $3.14 billion dollars in the fiscal year ending June 30, 1992, and opening its 300th store in July, 1992.
 PHAR-MOR LANDMARKS
 1982
 -- First store is opened in Niles, Ohio (near Youngstown).
 1983
 -- Two stores opened in Western Pennsylvania (Pittsburgh and Erie).
 1984
 -- Total stores in chain by year's end: 20
 1987
 -- Phar-Mor nearly doubles store count, by opening 32 stores during the year, to total 68 stores by year's end.
 1988
 -- The chain's 100th store is opened in Boardman, Ohio (near Youngstown).
 1989
 -- Total sales top $1 billion for the first time.
 1990
 -- Total sales top $2 billion for the first time.
 -- The 200th store is opened in Hermitage, Pennsylvania.
 1991
 -- Annual sales reach $2.85 billion.
 -- Total employees: 25,000
 1992
 -- Phar-Mor enters its 33rd state, opening three stores in Utah in February - March.
 -- Phar-Mor opens its 300th store in Ashtabula, Ohio, July 22.
 -- Fiscal year ends June 30 with gross sales exceeding $3.1 billion.
 -0- 8/4/92
 /CONTACT: Carol Robinson of Phar-Mor, 412-456-3845/ CO: Phar-Mor, Inc. ST: Ohio IN: REA SU:


CD -- PG007 -- 6629 08/04/92 11:50 EDT
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Publication:PR Newswire
Date:Aug 4, 1992
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