Discount retailer Phar-Mor Inc. said Tuesday it discovered a fraud and embezzlement scheme which amounted to $350 million in losses and involved criminal wrongdoing by the company`s former president and chief operating officer, Michael ”Mickey” Monus, and former chief financial officer Patrick Finn.
The news came a day after the Federal Bureau of Investigation confirmed that it is investigating possible criminal wrongdoing at the Youngstown, Ohio- based company.
Phar-Mor said that after taking a $350 million charge to cover the losses, it will still have a net worth of $220 million. It said about 100 employees at its headquarters will lose their jobs.
Phar-Mor called the alleged fraud an ”elaborate financial swindle” in which Monus, with help from Finn, diverted funds from the company for personal use. There was speculation Monus diverted money to one of his sporting interests.
Monus owns the World Basketball League, which last week suspended operations amid reports that it wasn`t paying bills and meeting payroll. The league is based in Youngstown.
On Monday, Monus withdrew as a leading investor in the Colorado Rockies, a new major league baseball team.
Phar-Mor, a 300-store chain, asked for the federal investigation of Monus, who with other investors contributed $26 million of the $95 million needed to pay the Rockies` franchise fee.
The alleged fraud involved overstating income and concealing losses, Phar-Mor said. The company said it turned over all its evidence over to the FBI and the U.S. attorney`s office.
Phar-Mor said it is suing to recover losses from the fraud.
The company named Joel Arnold, previously senior vice president of operations, as acting chief operating officer. Tom Bielawski, head of the company`s internal audit team, was named acting controller.
Phar-Mor also retained Deloitte & Touche to replace Coopers & Lybrand as its external auditors.
