What do a bankrupt Youngstown, Ohio, pharmacy retailer, the defunct World Basketball League, and the Colorado Rockies of Major League Baseball have to do with each other? The answer is one man, Michael Monus, the former president of Phar-Mor, Inc. Monus, along with business partner David Shapira (former Chairman and Chief Executive Officer of Giant Eagle, Inc. of Pittsburgh, Pennsylvania) started the discount pharmacy chain in 1982. From one store located in Cleveland, the chain grew to 300 stores nationwide before a massive embezzlement and fraud scandal was uncovered in 1992.
What were the factors and conditions within Phar-Mor that caused the scandal to erupt and lead to the shuttering of a large company with over $3 billion in annual sales? How did Monus’s love for sports and athletic competition lead to his role in founding the Colorado Rockies MLB franchise and in funding the World Basketball League with money stolen from Phar-Mor? What were the repercussions of the Phar-Mor scandal on former employees and the town of Youngstown?
Who is Michael Monus?
Michael Monus was born in 1947, the son of businessman and World War II veteran Nathan Monus of Youngstown. Michael Monus grew up in a privileged world, attending exclusive preparatory schools before graduating from Babson College in Wellesley, Massachusetts.
The Rise of Phar-Mor
Phar-Mor was the brainchild of Monus who, seeing the impact of the loss of blue-collar jobs in the auto, tire, and steel industries in the Youngstown and Cleveland areas, launched an idea to open a chain of low-cost discount pharmacies. After discussing the plan with his friend and eventual partner, David Shapira (whose family founded the Giant Eagle grocery chain in Pittsburgh), and receiving an initial investment from Giant Eagle, the company was formed, opening its first store in Cleveland.
Phar-Mor, which competed in areas that were dominated by Wal-Mart, sought deep discounts from suppliers, often entering into anti-competitive agreements with certain product suppliers for exclusive rights to offer their products to Phar-Mor customers. From its inception, the company rapidly grew to 100 stores in 1988 and 305 stores in 1991.
Sports, Phar-Mor, and its Downfall
Monus was an avid sports fan and had an interest in becoming the owner of a professional franchise. Given his shorter 5’9″ stature, his own dream of being a professional basketball player was never realized; however, in 1987 he helped form the World Basketball League (WBL), a minor league basketball circuit of players under 6’5″. Notable WBL players who later played in the NBA include Tim Legler, John Starks, Keith Smart, and Mario Elie. Monus and his partner John Antonucci of Youngstown became the initial majority owners of what would become the MLB franchise Colorado Rockies on July 5, 1991.
It would be discovered in 1992 that Monus and CFO Patrick Finn had embezzled $10 million in funds from Phar-Mor to cover losses incurred by the WBL. Further investigations, along with allegations of malpractice from Phar-Mor’s auditor, Coopers & Lybrand, prompted by a call from David Shapira for an investigation, resulted in Monus being convicted of embezzlement and fraud and serving 10 years in federal prison. CFO Finn received a sentence of 33 months for his role in the scandal and cover-up activities.
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Desmond Trevor writes on law, politics, banking, financial regulation, white collar crime and other relevant topics. Those who’d like to start a proper, lawful banking career should view the banking jobs with moneyjobs.com.
