|Introduction to Managerial
C H A P T E R O N E
Introduction to Managerial
Phar-Mor, Inc., the nation’s largest discount drugstore chain, filed for bankruptcy
court protection in 1992, following discovery of one of the largest business fraud and
embezzlement schemes in U.S. history. Coopers and Lybrand, Phar-Mor’s former
auditors, failed to detect inventory inflation and other financial manipulations that
resulted in $985 million of earnings overstatements over a three-year period.
A federal jury unanimously found Coopers and Lybrand liable to a group of
investors on fraud charges. The successful plaintiffs contended that Gregory Finerty,
the Coopers and Lybrand partner in charge of the Phar-Mor audit, was “hungry for
business because he had been passed over for additional profit-sharing in 1988 for
failing to sell enough of the firm’s services” (Pittsburgh Post-Gazette, February 15,
1996). In 1989, Finerty began selling services to relatives a...