A half-finished mansion on Creekside Drive in Youngstown, Ohio, is the last monument Mickey Monus built to himself The 14,000-square-foot behemoth, with grand curved staircase, indoor pool and basketball court, was to be home base for Michael I. Monus, president of the $3 billion Phar-Mor discount drug chain, partner in the Colorado Rockies expansion baseball team and up-and-coming icon in the American cult of the entrepreneur.
Now people are discovering a different Mickey Monus. Phar-Mor has accused him and others of pulling off a $350 million swindle-what experts say could be the biggest corporate fraud this century. Monus, 45, was fired on July 31. The company says he had been cooking the books like a master chef for at least three years. Accountants, lawyers and FBI agents are still trying to figure out exactly what happened. So far, there's been no criminal charge. Monus is keeping a low profile and has said only that he will clear his name.
Meanwhile, the Creekside mansion stands quietly, its shiny insulation paper exposed to the August heat. The construction workers are gone, leaving only twittering birds in the big wooded lot-and the occasional rubbernecking townsperson with the nerve to pass a police barricade. Last week Phar-Mor filed for bankruptcy protection and sued its erstwhile accountants, Coopers & Lybrand. Coopers counter-sued; each says the other should have uncovered the scheme long ago. But it's hard to know who could have predicted such a spectacular scandal. Even in the bright light of success, Mickey Monus was an enigmatic loner. An obsession with making his mark powered Monus's climb; it also seems to have caused his fall.
Shy and ungainly, Monus became a national figure in business and a local hero. Acquaintances say he grew up lacking the gentility of his parents, whose marriage had joined two of Youngstown's finest families. Monus is "unprepossessing," says John McHale, executive vice president of the Rockies. His large, fleshy face wasn't brightened by warmth or an easy smile. He liked to dress casually, but still looked stiff. "He seems to have been born without any natural grace," says Nancy Beeghly, a columnist for the Youngstown Vindicator.
He went to prep school, then Babson College, and came back to work for relatives in the distribution business, just in time to watch the steel mills of the Mahoning Valley shuttered and unemployment spike. In the early 1980s, he and a friend, David Shapira, visited a "deep discount" drugstore in Cleveland and decided they'd seen the future. The Phar-Mor stores they launched did what they came to call "Power Buying," scooping up huge batches of inventory at special prices. Shoppers got fewer selections but great savings. The formula worked. Phar-Mor soon outpaced the companies that had provided the start-up money, primarily Pittsburgh-based Giant Eagle, a supermarket chain in which Shapira's family holds the biggest share. By 1988, there were 100 Phar-Mor stores, and Venture magazine honored Monus, who was running the show, as one of the year's top entrepreneurs. By 1991, there were more than 200 Phar-Mors, coast to coast. Big money-from Westinghouse Credit Corp. and an investment arm of prestigious Lazard Freres-- signed on to the cause.
For downtrodden Youngstown, Mickey, as everyone knew him, was a savior. It wasn't just the thousands of jobs Phar-Mor brought to the valley, or the abandoned buildings that Monus renovated to install his national headquarters right downtown. Monus seemed bent on restoring Youngstown's self-esteem. Locals gush about how Phar-Mor lured a Ladies Professional Golf Association tourney to Youngstown the last three summers-and ESPN came! Proceeds were used to fund Camp Tuff Enuff, for kids "at risk" for drug abuse. Monus founded the semipro World Basketball League and a hometown team with the only possible name: the Youngstown Pride.
But was Monus "beloved"? No, says a local official. Repeatedly described by acquaintances as "tight-lipped," Monus would brush by colleagues without acknowledging them and, in meetings, pace up and down, rarely making eye contact. He was such a tough negotiator that suppliers' reps "dreaded" meetings, says an industry executive. No doubt Monus could be highly persuasive; one admirer describes him as very articulate. But he seemed to sparkle only when he could play or hobnob with athletes on the basketball court or the golf course.
Success did not transform Mickey Monus. In fact, the way he threw his weight around began to leave marks. Phar-Mor stores kept getting bigger as he expanded into lines such as sportswear and fax machines that violated his own stick-with-the-basics formula for recession-proof growth. When Monus appeared to be using his post as Youngstown State University board chairman to help a friend, "it left a bad taste," says one local business leader. After a divorce, he took to hanging out at the Boatyard, a local bar where the walls are hung with outboard motors and the bathroom vending machine offers "Double Your Pleasure" packs: two condoms and two sticks of Doublemint gum. When he married a new young bride, she wore a $500,000 18-karat-gold mesh dress loaned by Carillon Importers, which sells oceans of its Absolut Vodka through Phar-Mor.
While empires like Michael Milken's or Donald Trump's seemed to crumble slowly, Monus's collapsed almost overnight. The basketball league sprang leaks first. "Please be honest about the [league's] financial position'," begged a memo from the Dayton Wings last spring. "Enough is enough." Team owners threatened to keep their players out of the All-Star game in May, till Monus ushered them into Phar-Mor's boardroom and said the money was coming. It didn't. But Phar-Mor itself appeared to be thriving. On July 22, Monus cut the ribbon at the 300th store in Ashtabula, Ohio. He promised 300 more, and told local reporters: "There's no stopping us now." Two days later Phar-Mor's board stopped him. Hidden at headquarters, the company alleges, were two sets of Phar-Mor books, one with hugely inflated profits. According to court documents, Monus embezzled about $10 million, mostly to prop up the basketball league. But with his board, banks and investors thinking Phar-Mor was worth more than twice its real value, Monus could pull in more pay and perks, sell stock at inflated prices and attract still more cash to keep it all afloat.
Notifying the Feds, investors and then the public, Shapira swung into action. Locks were changed, 1,000 workers laid off, a tiny handful of alleged accomplices fired. The league and the Pride went belly-up. In Youngstown, heads were spinning. "This is just incredible," says a local woman whose husband grew up with Monus. "A brain tumor. That's the most likely explanation."
In fact, Monus's descent is far from incredible. Steven Berglas, a Harvard Medical School psychologist who treats top executives, says that many powerful men spiral into what be calls "the success syndrome." Of course, most execs keep the dark side of ambition at bay. But for others, often desperately insecure beneath the pinstripes, no achievement is enough. They leave marriage for sexual conquests and hang out with athletes for some borrowed glory. They ravenously seek more thrills, trying to "dare the Devil and beat him," says Berglas. As the rules of reality pale, behavior ranges from tormenting headwaiters to breaking taboos. Whether it's John De Lorean, Donald Trump or John Gutfreund, the common note is self-destruction.
The public, at times, is almost a coconspirator. Long fed on the Horatio Alger myth, Americans in the 1980s made entrepreneurs into superheroes, displaying a profound will to believe. In fact, some in Youngstown think there's more to this story. "It doesn't smell right," says a caller to local station WWBN, wondering if Monus might be the fall guy for a larger scam.
How can a $350 million fiction last so long.? Private companies like Phar-Mor aren't exactly structured for scrutiny; they don't have to file with the Securities and Exchange Commission, where most cases of fraud surface. While Monus wasn't technically top dog at Phar-Mor, he had lots of freedom. Until last fall there was no internal-audit department in the company, and, as in many such companies, the board was quite literally family, from Monus and Shapira circles. Shapira insists that the board was plenty active-but fully deceived-until he got a "tip" in late July.
Sadly, failures of private companies are hardly private matters. Big out-of-town creditors are outnumbered by the little guys like Frank Cardon, a local computer salesman who says he's not only lost his biggest client but stands to lose $35,000 in unpaid bills. Local officials are scrambling to keep the LPGA from defecting, and along with it, critical tourism and charity dollars. Season tickets have been thrown out and laid-off workers aren't spending money. But the loss is more than economic, says columnist Beeghly. "We were the fifth largest steelmaker in the world," she says. "I don't think we ever got over that. People wanted something magical again."
Thursday night, Monus surfaced at the Boatyard, quietly celebrating his 45th birthday. The town didn't turn out to wish him well. But there is sympathy as well as anger for Mickey; never well loved, he seems not to inspire hate. Behind the cool exterior, the awkward little boy shows through. Says one local observer: "It's hard to look at Mickey and see him as a mastermind." Even as a bad guy, Mickey Monus doesn't quite fill the role.
Big Savings for the Shoppers, But Losses for the Investors Large and Small
The chain grew to 300 stores within a decade. At the dedication of No. 300, Monus promised 300 more. Just a few days later, his board members had shown him the door, and some of the stores will probably close.
Enjoying a Little Borrowed Glory--And Building Up His Hometown's 'Pride'
Youngstown Pride players hoist the chief after winning the 1989 championship of the World Basketball League, now defunct
Making It in the Big Leagues
Monus gets the National League's nod to invest in a new team
The Last Monument-- Like the Rest, Incomplete
One neighbor calls it "the monstrosity," but Monus was building the house of his very big dreams. At 14,000 square feet, it's still not as big as a Phar-Mor store.
The Cofounder Takes the Holm
David Shapira says he was completely deceived. Now he's helping the Feds to build a case against his longtime buddy.