503:. He wrote "The Coster-Musica scandal aroused considerable excitement in the American business world at the end of 1938. Coster-Musica had carried out swindles on a widespread scale, including drug smuggling, weapons sales, and crooked dealings, and was a member of many prominent clubs. Coster-Musica had been in jail for fraud as early as 1906. He was convicted in a huge financial scandal in 1913. Given his connections to 'high society,' he did not serve time in prison. His company collapsed when the fraud was discovered. 13,500 stockholders lost over $ 100 million. He committed suicide because he feared his well-placed friends were no longer able to protect him from the wrath of those he had cheated."
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a sales agency that handled a large volume of Girard orders. In truth, it was nothing more than a "letter-writing plant" that generated fake purchase orders and mailed them to Girard. Another brother, Robert, under the alias Robert
Dietrich, was Girard's head of shipping. He forged the necessary documents to make it look like the inventory had actually been shipped out. Another brother, George, under the alias George Dietrich, served as company treasurer and moved money between accounts to make it look like the "customers" had paid for the "orders."
404:. Also, he and his wife Carol (whom he had married after wrecking her previous marriage to a business associate) moved to an 18-room, seven-acre estate in Fairfield. While it was an open secret that Girard was really a bootlegging operation—in fact, it was the biggest bootleg distributor on the East Coast—Coster's ties to Connecticut politics and business, as well as his talent for bribery, kept any investigations from going anywhere.
254:), pledging 216 crates of hair as collateral. However, a bank clerk discovered a bill of lading for Musica's collateral had been altered. Suspicious bank representatives went to the piers to inspect the hair and discovered that the crates held only a small layer of valuable hair. The rest of the contents were nearly worthless ends and short pieces. The total value of the contents in the warehouse was about $ 250.
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hunch, he contacted Dun & Bradstreet, who informed him W. W. Smith's report was a forgery. He also discovered that the crude-drug division was more or less nonexistent and that, in 1929, Coster had looted the division of $ 640,000 to cover losses on the stock market. Altogether, Thompson discovered Coster had stolen $ 3 million from McKesson over the years.
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As in the past, Coster brought his family in on this latest scam. He claimed to be running the company for the widow and sister of Horace Girard—roles played by his mother and sister Grace, respectively. His brother Arthur, under the alias George
Vernard, set up W.W. Smith & Co. On paper, it was
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was able to track them down by following a $ 12 steamer trunk Philip had bought at the
Knickerbocker. Musica pleaded guilty in return for the dismissal of all charges against his family, claiming he'd been bilked by two European firms. Although the banks only recovered $ 70,000 of the $ 600,000 he'd
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Unlike U.S. Hair, Adelphi's business was very real. However, the great majority of Musica's profits came from bootleggers who bought his tonic in large quantities and distilled out the alcohol to make beer and liquor. With the high premiums earned from the bootleggers, Musica was once again rolling
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Not long after getting out of jail, Musica founded the United States Hair
Company, ostensibly to sell hairpieces that fashionable women of the day used to create elaborate hairstyles. Good-quality hair sold for as much as $ 80 a pound. Musica had his mother gather up nearly worthless sweepings from
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Musica got word that he'd been unmasked and that federal marshals were on their way to arrest him. Unwilling to face almost certain conviction and a long prison term, he locked himself in the bathroom and shot himself in the head on the morning of
December 16. He was careful to stand in a way that
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Julian
Thompson, the company's treasurer, was puzzled by this demand. He figured a firm as successful as McKesson shouldn't need to obtain an outside loan. Several aspects of the company's arrangement with W. W. Smith and Co.--which had been inherited from the Girard merger—also troubled him. On a
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to audit Girard & Co. In those days, auditors didn't check inventories, but only checked a company's books and supporting documents. Relying entirely on fraudulent documents provided by Girard, Price
Waterhouse listed the company as having $ 1.1 million in sales, profits of $ 250,000 and
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Like
Adelphi's business, Girard's hair tonic business was very real, but most of its profits were generated from bootleggers, who simply bought Coster's tonic in large quantities and distilled out the alcohol to make booze. The bootleggers paid far higher premiums than the drugstores that made up
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Then just as fast as Musica rose, he fell—and this time almost as ignobly as he had three years before. By the time U.S. Hair went public, it was $ 500,000 in arrears to several banks. Two
British banks got suspicious of U.S. Hair's financing and refused to honor some company drafts, sending U.S.
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Musica sent his mother to Italy with the ostensible purpose of getting loans to finance the shipment of long strands of human hair across the
Atlantic. The bankers bought the story, and Musica soon set up satellite offices around the world. However, these were nothing more than maildrops for the
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operation. By importing cheese, olive oil, and spices directly from Italy (as opposed to using a middleman), he was able to underprice his competitors. Within a few years, A. Musica and Son was one of the largest importers of Italian food in New York, grossing a half-million dollars a year. The
416:, a well-respected drugmaker and distributor, was up for sale. He also wanted to avert any suspicion of his real activities. In 1926, he merged Girard & Co. with McKesson for $ 1 million. While McKesson was the surviving company, Coster became the merged company's president.
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Musica dropped out of school at the age of 14 to help out at his father's small grocery store, A. Musica and Son. Within two years, he was running the store. He soon left day-to-day operations to his younger brother Arthur while turning his own attention to building an
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Coster's downfall began in 1937, when McKesson's board ordered him to convert $ 2 million of his crude drugs into cash to build up profits and reduce outstanding debt. Coster responded with a demand that the firm obtain a $ 3 million loan "for improvements."
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The McKesson purchase gave Coster an even larger front for his bootlegging operation. However, he also pumped up McKesson's legitimate business and led a drive to open up several foreign markets. During his first full year as company president, 1927, he incorporated a
487:. A check revealed Coster's fingerprints to be an exact match to those of Musica. At a midnight press conference on December 15, officials dropped a bombshell—F. Donald Coster, the now-disgraced drug tycoon, was really two-time convicted fraudster Philip Musica.
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In 1920, after briefly going into the poultry business, Musica founded the Adelphi Pharmaceutical Manufacturing Company, under the alias Frank D. Costa, with Joseph Brandino as his partner. Its nominal business was the manufacture of a
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paper trail to support the existence of the company's nonexistent inventory. In July 1912, U.S. Hair was capitalized at $ 2 million, with $ 600,000 in assets—mostly human hair located abroad. Three months later, Musica
327:—a phony one showing sales at the normal competitive price and a real one to account for the sales to bootleggers. Operating as a doctor, Musica was able to secure a permit to import 5,000 gallons of raw alcohol per month.
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until by 1937, McKesson was the third-largest drug company in the world. However, he remained an intensely private man, in part out of fear of being unmasked. For instance, he turned down an offer to run for president in
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Musica got word that the bank had alerted federal authorities and proceeded to strip his Bay Ridge home of virtually everything of value. The Musica family fled to various cities on the East Coast before meeting in
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barbershop floors. He then put them in crates with a layer of expensive hair on top. The money was soon rolling in again, and Musica moved his family to a larger house in Bay Ridge. He also bought a suite at the
214:, tax fraud, and bribery. Musica pleaded guilty in return for having the charges against his father dropped (even though his father had signed several of the phony invoices) and served a year in jail. However,
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grew to astronomical proportions when the Musicas increased their orders. Combined with the lower prices they paid for importing directly, they substantially outsold all their competitors in Little Italy.
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assets of $ 295,000. When it examined W. W. Smith & Co., Girard's biggest customer, Price Waterhouse relied on the faked purchase orders as well as a forged report from Dun & Company (now part of
153:'s hard-charging police commissioner. He followed Roosevelt's activities in the newspapers and attended his public speaking engagements. Musica started copying the commissioner's speech and mannerisms.
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An investigator with the New York state attorney general's office thought he recognized Coster's face as that of former investigator William Johnson—the alias Musica had used after his release from
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in 1923, where he set up Girard & Co., another company that made Dandrofuge tonic. He also legally changed his name to Frank Donald Coster, or F. Donald Coster. He billed himself as a native of
428:. Unlike the rest of the company, only Coster and George Dietrich—better known as George Musica—had access to the accounts of this new division. That year, the company turned a $ 600,000 profit.
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that Brandino had been abusing the permit. Three years earlier, Musica had turned state's evidence against Brandino after the two were arrested for a Prohibition violation.
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Hair stock into a tailspin. To get as much money as possible out of the company before being unmasked, Musica sought a $ 370,000 loan from Bank of Manhattan (now part of
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When Thompson confronted Coster with his findings, Coster accused him of "trying to wreck this company." He then tried to place the company in
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laws, access to alcohol was strictly controlled, and Musica, as Costa, obtained a permit to draw 5,000 gallons of raw alcohol per month.
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as a German collaborator. Musica was apparently trying to get back at Hearst for his unflattering coverage of the U.S. Hair scandal.
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to throw Thompson off the scent long enough to cover up the fraud. However, Thompson countered by having the board file for
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Coster grew even richer, buying a 28-room mansion in Fairfield, a yacht, racing horses, a stable of cars, and a castle in
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311:. In truth, it was a front for a bootlegging venture. In those days, hair tonic and cosmetics used large quantities of
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with phony ones listing the weights of their shipments as substantially lighter than they really were. The unpaid
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Musica was mentioned in the 1938 Nazi pamphlet Roosevelt verrät Amerika! (Roosevelt Betrays America!) by Dr.
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Coster wanted to become a major player on Wall Street and saw his chance when he found out that
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waterfront. Police soon discovered the fraud, and Philip and Antonio Musica were arrested for
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when he fell into a large marble bathtub, none of his blood stained the carpet on the floor.
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480:, Coster, Vernard, and George Dietrich were arrested and released on bail on December 13.
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373:. He claimed to have practiced medicine for only three years before going into business.
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when he was seven years old. He grew up in Mulberry's Bend, a rough neighborhood in
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in 1938, one of the largest financial scandals ever perpetuated by a single person.
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The scheme succeeded with flying colors, and Coster soon moved the company to
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Called to Account: Financial Frauds that Shaped the Accounting Profession
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Selling Snake Oil: Investment Lessons from the World's Greatest Frauds
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Girard's legitimate customer base. One of his biggest customers was
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Using the proceeds from Adelphi, Musica moved to the tiny suburb of
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There was a dark secret to the store's success, however. Musica
137:, Italy, to Antonio and Maria Musica. His family moved to
397:) stating that W. W. Smith was worth $ 7 million.
290:. However, his career ended when he tried to implicate
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He was then hired as a special investigator with the
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To lend his scheme greater legitimacy, Coster asked
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and became leaders of the city's Italian community.
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625:Messing, Brett; Steven Sugarman, James J. Cramer.
585:. Charleston, SC: The History Press. p. 131.
636:. Cambridge, Mass.: Harvard Business Press, 1993.
435:. His machine continued to roll through the
262:. They got on a ship, intending to escape to
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330:Adelphi was shut down in 1923 after telling
632:Allen, David Grayson; Kathleen McDermott.
105:(1877 – December 16, 1938), also known as
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583:Connecticut Bootlegger Queen Nellie Green
661:Calvin College German Propaganda Archive
607:"2015 'Monroe Through Time' Book Launch"
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719:Italian emigrants to the United States
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657:. New York: M. Evans and Co., 1995.
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714:Suicides by firearm in Connecticut
704:People from Fairfield, Connecticut
694:American people convicted of fraud
527:. Columbus, OH: Gatekeeper Press.
478:Securities and Exchange Commission
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476:. After an investigation by the
709:People from Monroe, Connecticut
629:. New York: Career Press, 2006.
280:New York State Attorney General
16:Italian-born American fraudster
206:began a drive to clean up the
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344:McKesson and Robbins scandal
338:McKesson and Robbins scandal
123:McKesson and Robbins scandal
103:Philip Mariano Fausto Musica
33:Philip Mariano Fausto Musica
555:. New York, NY: Routledge.
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551:Clikeman, Paul M. (2019).
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298:First bootlegging venture
371:University of Heidelberg
307:called "Dandrofuge" and
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655:Bloodletters and Badmen
627:The Forewarned Investor
424:subsidiary to trade in
292:William Randolph Hearst
240:took the company public
204:George B. McClellan Jr.
634:Accounting for Success
581:Renzoni, Tony (2021).
414:McKesson & Robbins
402:Fairfield, Connecticut
355:Mount Vernon, New York
59:Fairfield, Connecticut
609:. monroecthistory.org
470:bankruptcy protection
699:McKesson Corporation
395:Dun & Bradstreet
523:Lidsky, Mo (2019).
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433:Monroe, Connecticut
232:Knickerbocker Hotel
219:William Howard Taft
67:Cause of death
323:in money. He kept
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592:978-1-4671-4793-4
562:978-1-138-32707-8
534:978-1-64237-363-9
325:two sets of books
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75:Nationality
673:Categories
613:2016-02-02
507:References
501:Robert Ley
472:under the
446:Republican
361:, with an
305:hair tonic
286:spies and
208:East River
129:Early life
115:bank fraud
93:Occupation
485:The Tombs
369:from the
309:cosmetics
273:The Tombs
225:U.S. Hair
216:President
199:In 1909,
174:Bay Ridge
111:tax fraud
452:Collapse
448:ticket.
422:Canadian
178:Brooklyn
96:Swindler
444:on the
313:alcohol
193:tariffs
79:Italian
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284:German
264:Panama
185:bribed
135:Naples
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367:Ph.D.
201:Mayor
644:Time
587:ISBN
557:ISBN
529:ISBN
442:1936
365:and
363:M.D.
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