Exec Talks Ethics After Conviction

A bout of conscience brought Walt Pavlo from stashing away millions of dollars he’d swindled from MCI Telecommunications customers to public speaking on business ethics.r

Seven months after Pavlo was released from a two-year federal prison stint for money laundering and wire fraud, he’ll be the keynote speaker on Oct. 16 for the The Summit luncheon at the Church at Pinnacle Hills.r

Earlier that day, he will address the Ethical Leadership Summit at the Greystone Estate in Rogers. That event is sponsored by the Soderquist Center for Leadership and Ethics, a nonprofit Siloam Springs organization affiliated with John Brown University.r

Rehashing his misdeeds isn’t what Pavlo had planned to do with his life after prison, but he decided there’s value in business leaders hearing how he nearly got away with helping steal an estimated $6 million from seven MCI customers in a little more than six months.r

He began doing the talks just before his parole when Federal Bureau of Investigation representatives asked him to speak at a national conference.r

“I talk about my experience and the temptations,” Pavlo said. “Business is going through a change right now. Areas that were not questioned in the past are no longer left hidden.”r

At 31 years old, Pavlo was appointed head of MCI’s billing. Within months, he’d figured out that ethics were often set aside for the company’s capital gain. He told MCI higher-ups that his department’s budget would show a multimillion-dollar loss because of bad debt by some big customers. He was told the budget would reflect a profit and he had to make it happen by hiding the debt somehow.r

“I tried to think of write-offs, ways to delay, alternative financing,” Pavlo said, admitting that he was “living on the edge and wanting to be accepted” in the corporate environment.r

In June 2002 U.S. regulators charged WorldCom Inc. with fraud after MCI WorldCom admitted it hid almost $4 billion of costs. That forced the largest bankruptcy ever.r

Pavlo’s scam got started when he confided in a good friend his struggle to meet company goals and concerns about fudging the books. He and friend Harold Mann came up with a plan in which Pavlo would pressure the delinquent customers with threats and Mann would come in separately as a potential investor in the struggling company.r

Mann would ask to see company financials, then point to the large debt owed MCI and propose that his initial investment in the company go to pay off that debt. Pavlo would send a notice that the debt was paid and the struggling MCI customer would then begin to pay off their new investor — typically starting with a large down payment. r

“My justification at the time was that everybody’s dirty,” Pavlo said. “You begin to justify it, saying to yourself ‘this is how it’s done, this is how you get ahead.’ You don’t get caught, and you get a feeling of invincibility.”r

The MCI customers weren’t being ethical by running up bad debt, Pavlo said, but corporate officials responded in kind by misrepresenting the firm’s financials.r

Pavlo said his conscience began to work on him, the final straw came when his boss asked him to investigate an accounting anomaly. Pavlo resigned. At first MCI officials tried to get him to return, but a three-year investigation was launched and Pavlo turned himself in when it was clear his arrest was imminent.r

Mann, also convicted of wire fraud and money laundering, remains in the federal penitentiary at Allenwood, Penn.r

Les Gleaves, senior facilitator and design manager for the Soderquist Center, said there’s a lot to learn from Pavlo and how he was able to bilk multiple companies for millions.r

“There are lessons here for us as individuals but also as companies regarding the systems and the culture we have in place,” Gleaves said.