A massive corporate fraud, initiated by Mickey Monus and involving the embezzlement of millions of dollars for the World Basketball League (WBL), was ultimately exposed by a seemingly minor financial irregularity, leading to the downfall of the company, legal repercussions for key individuals, and a debate about auditor responsibility.
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his uh his
funds monus's pension for doubling up
his bets was about to prove his
undoing the wbl was a disaster soaking up
up
money remarkably monus directed that far
more funds be used to keep the league
going by 1991 millions of dollars had been
been
embezzled but then a check to this
travel agency for wbl expenses would
cause the entire scheme to unravel the
travel agent showed the check to her
landlord who happened to be a farm more
investor he brought it to the attention
of David
shapira David shapira called in pad Finn
for an
explanation now try to put yourself in
Pat Finn's shoes for a moment what would
you have done well true to form Finn
stonewald then admitted that a million
dollars of far more money had gone to
support monus's basketball league when
in fact when more than 10 million had
already been embezzled for this purpose
shapira said he wanted to see the check
registers himself so Finn raced back to
monus afraid the entire fraud might now be
be
exposed monus suggested one last
desperate gamble according to Finn he
said there was still time to paper over
the wbl fraud as long as they didn't
lose their nerve I felt like I um I was
almost like in quicksand
I kept sinking deeper and deeper and
deeper but I always had a belief that we
could fix it I never wanted to tell
myself that um that we couldn't fix it
because if we couldn't fix it there was
nothing but
bad I remember it very distinctly he he
called Stan and myself in his
office and he said that well we have to
we have to get these checks and and type
over who they were paying out to or
white out who they were paid to I flat
out refused I soon as I heard that I
said there's no way that I'm going to do
that finally someone had drawn the line
but there was still Stan cherelstein
finnn asked his controller to come to
his home the next
morning I arrived at Pat's house early
Saturday morning we look through the
journals very briefly before we looked
at each other and knew that there was no
way that we could cover up up $10
million in advances to the world
basketball league and I think at that
point in time he and I both knew that it
was over Shapiro needed to find out how
much money was missing who did he turn
to the Auditors Coopers and livebrand
when we first heard that these checks
had been found we pulled together the uh
audit team who simply went out to start
start digging into areas that uh uh had
not been dug into prior to u to to this
discovery Coopers began interviewing
employees who could tell them what
they'd missed John Anderson was anxious
to talk they needed my help I knew that
I wanted divorced from from the pat fin situation
situation
and and I must admit I was overwhelmed
but at the same time I was I
was I was not hesitant or reluctant at
all to kind of show them everything that
I knew was going on Anderson told them
the wbl payment were just the beginning
of a huge fraud with Anderson leading
them by the hand Cooper's now discovered
the full extent of what it had missed
during four years of audits the board
had to do something it fired the
Auditors blaming them for not finding
the fraud the game was
over in fact the company that even
Walmart feared hadn't earned a dime in 5
year a tip about a check for travel
arrangements had led to the discovery of
one of the biggest corpor frauds in US
history for Mickey monus it also
appeared to be over pharmore fired him
and he was indicted on 129 criminal
counts the government accused him of
directing the fraud their Chief witness
would be his Protege Pat Finn if
convicted monus would face life in
prison and fines of more than $36
million overnight farmor's image of
success was snuffed out company filed
for bankruptcy revealed feeling that it
needed half a billion dollars to erase
the losses and the shock wave spread
quickly across the nation's business
Community as suppliers Banks and
investors learned that they'd been
backing a loser all these
years farmor's last official act before
it filed for bankruptcy was to sue
Coopers and liebrand claiming their
audits fell far short of accounting
standards were in fact
incompetent but Cooper and liebrand has
its excuse it was royally snookered just
like everyone else when you have the
most Senior Management of the company
particularly it's financial management
uh consciously setting out to fool the
Auditors uh to hide information from
them as they've testified in the monus
trial it's very hard to get around that
kind of activity uh by the by the Senior
Management but according to the SEC
Auditors have a responsibility to do
more the Auditors at the end of the day
have no room to compromise they have a
responsibility to dig deeper to be
skeptical to ask questions and to impose
a discipline on management and on the
financial reporting process that may
otherwise not be there if found
negligent Coopers will be liable for
hundreds of millions of dollars but
they're fighting back we're suing David
shapira as the CEO uh and our assertion
is that he either knew or was recklessly
indifferent in not knowing of what was
going on around him uh we believe that
they are principally responsible for the
fraud surprising to many Mickey monus's
first trial ended in a hung jury oh no
we had our minds made up he was as
guilty as I'm standing here really
there's more than enough fact to convict
I feel but some people just refus to see
the facts who was undecided one person
hung the whole jury every single kind I
believe the person was paid off myself
just I mean ta the FBI is taking these
allegations seriously and is
investigating for possible jury
tampering John Anderson in return for
his cooperation was never prosecuted
despite his role in hiding the fraud for
four years he still sees himself as a
victim you see him I used to have this
belief that all people were good and
that all people had good
intentions and where I'm at right now is
I really have a hard time trusting
people and that's something I have to
learn to do again cuz I want to do that
again but having been to this particular
experience that
really has has made me look at people
and situations and business and in unfavorable
unfavorable
Manner and I have to to learn to trust
people again Stan chlin was fired by far
more but never charged with anything
he's named in several civil suits
brought by investors and now Works in
Florida as an accountant I really think
that the situation at Farm more occurs
at small companies and midle middle siiz
companies all the time
time
and my
recommendation to any accountants or
chief financial officers would
be don't let it happen don't let it
start because once you start it's very
easy to let it happen a second time and
who knows where where it will
end it ended in jail for Pat Finn last
February having admitted his
responsibility for crafting the fraud he
reported to a federal prison to begin
serving a 33 Monon
sentence it's okay to be loyal it's okay
to uh to
uh as I to try to build a company to
nurture something from the beginning
but never never lose sight of yourself
never compromise yourself for that it's
not worth
it it's not worth
it no matter how much of a team ball
player you think you
are you're just destroying yourself and
destroying things that are that are
important to you you can understand
certain things you can understand
aggressive accounting you can understand
people who are Executives who are hard
charging who are optimistic that's how
they get to be
leaders those very things that made
someone a superb executive a superb
account a superb Chief Financial
Officer sometimes also make them a superb
criminal Mickey monus is still gambling
still denying everything and now awaits
the start of his second trial about the
jury will have to decide whether Mickey
entrepreneur what a sad day it is for
Youngstown what a black day it is for young
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