Phar-Mor Inc., the discount drugstore chain that was pushed into bankruptcy in August, said Friday that a scheme by former executives to inflate profits was more extensive than previously estimated.
The company said that so far the fraud and embezzlement scheme amounted to $499 million, not the $350 million it estimated when its existence was first disclosed.It says the scheme was carried out by Michael I. Monus, Phar-Mor's former president and chief operating officer, and other former executives.
In a news release Friday, Phar-Mor said the fraud largely involved improper or overvalued inventory, invalid or uncollectible accounts receivable, underestimates of liabilities and improperly claimed or valued assets.
An audit of Phar-Mor's balance sheet as of Sept. 26, 1992, is being conducted by Deloitte & Touche, the company said. Phar-Mor said Friday that changes in its accounting policies on inventory and fixed assets had resulted in charges of $102 million.
The company has established a reserve of $209 million to cover liabilities as part of its restructuring. Criminal indictments against Monus; Patrick Finn, Phar-Mor's former chief financial officer; and other executives are expected soon.
The company also announced a number of personnel changes. Daniel J. O'Leary, named earlier this month as chief financial officer, was approved Thursday for that job by Judge William T. Bodoh of U.S. Bankruptcy Court, Phar-Mor said. O'Leary previously served as president of Fay's, a diversified retailing firm.