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04-19-2004, 06:22 AM
Originally found on Fed-CURE
White-collar cons tell what led to crimes
Web Posted: 04/19/2004 12:00 AM CDT
Aïssatou Sidimé
Express-News Business Writer
When he was 32 years old, Walt Pavlo stole $6 million from his then employer, telecommunications giant MCI. He and three cohorts served from 18 months to six years in federal prison. Pavlo must repay at least $800,000.
Karen Bond {of FPPP} took $880,000 owned by two elderly sisters who were longtime family friends by funneling it through her Ohio law firm. She was sentenced to 38 months in prison and must repay the money.
In cautionary tales told while on probation, Bond and Pavlo have advice for those with assets: It pays to be constantly vigilant of financial caretakers and corporate executives.
White-collar crimes accounted for about 18 percent of all federal convictions in 2001, according to the U.S. Sentencing Commission. Almost two-thirds were for fraud, with the rest including embezzlement, forgery, counterfeiting, tax law evasion and money laundering.
Pavlo says his theft was the result of working in an amoral corporate culture that stressed meeting ever-higher performance goals by any means in the mid-1990s.
"I never went to MCI to embezzle," said Pavlo, who was MCI's senior manager of billing and collections and who now works at a nonprofit organization teaching entrepreneurial skills to at-risk youths. He said his performance reviews were "always perfect." He wasn't reprimanded or fired.
But four years after he arrived at MCI, the company's corporate customers began skipping payment of bills that, collectively, amounted to millions. He and colleagues decided to hide the losses temporarily starting in 1995. They refinanced bad debt and shifted payments from good customers to bad ones by creating a dual set of records.
"I felt it was for the benefit of the company," Pavlo said. "I thought it was a minor problem that we could correct over time."
Everyone went along because his or her pay was tied to stock options that depended on keeping the stock prices up, he said.
The losses didn't turn around — they mounted. Pavlo began to fear for his job.
In fear and anger and feeling encouraged to bend rules, Pavlo said he began building a nest egg. He told delinquent customers that a third party had bought their debt. He instructed them to pay the fictitious third party via MCI. Pavlo then funneled the money to bank accounts in the Cayman Islands. It worked for six months.
He said he was busted when the accounting department called him to check on a fake account that they didn't recognize. He resigned immediately. After a three-year investigation, he pleaded guilty to wire fraud and money laundering and got a lighter sentence for revealing details of the bank accounts.
As in Pavlo's case, corporate thefts often start as a way to get through a personal or financial crisis. Those who've committed crimes say they didn't think they would get caught.
"I thought, 'How would I be caught? Who was going to tell? The customers who were running up all these bills and not paying, or the company I was doing this for?'" Pavlo said.
Karen Bond got into trouble when her Type A personality, often prized in the business world, ran amok.
In 1997, a client asked Bond to manage almost $880,000 of assets in exchange for caring for the client, who was in her 90s, and the client's octogenarian sister, who had Alzheimer's disease. With part of the money, Bond said she bought a house where they all lived for two years.
Then her control-oriented personality began to interact with her undiagnosed bipolar disorder.
"No one in the manic phase should be in charge of anything, let alone someone's assets," Bond, 47, said.
The sisters eventually moved to a nursing home, while Bond bought five cars and $24,000 in jewelry, including an $11,000 diamond, and took seven trips in one year. She also used $45,000 for office and personal items, according to a Columbus (Ohio) Dispatch article.
In 1999, she surrendered four of the five cars, the house and her license to practice law in Ohio and pleaded guilty to interstate securities fraud.
While in prison camps in Fort Worth and Kentucky, Bond said she met other white-collar criminals, some with professional degrees, who'd committed mail fraud, tax evasion and insurance fraud. Some exhibited mental illness much like her own.
"Companies need to pay attention to the mental health of employees," she said.
In the past, white-collar criminals were encouraged by light sentences and special prisons that housed them, said federal white-collar defense attorney Douglas McNabb, who's defended dozens in several states.
"They didn't want to get caught but knew that if they did they would be going to some place cushy," he said.
In almost every white-collar crime conviction, the defendant pleads guilty, according to the Bureau of Justice Statistics. They average about two years in federal prison camps, where the nicest ones have no bars, fences or barbed wire and allow prisoners to work in towns. An Oklahoma camp had an 18-hole golf course. A New York facility has a kosher kitchen.
Tougher sentencing guidelines passed down last November should nix any future incentives, McNabb said. Now most white-collar criminals won't be able to get into the camps without first going to standard prisons, and sentences run much longer for crimes committed after Nov. 1, 2001.
But the best deterrent comes from aggressive internal and external monitoring, Bond and Pavlo said.
Top managers should spend time talking with senior managers, stressing and modeling ethical behavior and adjusting performance goals to meet reality, Pavlo said.
"There was an assumption that you knew right from wrong, but it was not reflected in business practices because we were definitely bending every accounting rule," he said of MCI. "Every employee is capable of this. They all have a breaking point if left alone, isolated, and they're asked to compromise something within themselves."
asidime@express-news.net
http://www.mysanantonio.com/global-includes/printstory.jsp?path=/business/stories/MYSA19.01R.white_collar_criminals0419.421cbcba.htm l
White-collar cons tell what led to crimes
Web Posted: 04/19/2004 12:00 AM CDT
Aïssatou Sidimé
Express-News Business Writer
When he was 32 years old, Walt Pavlo stole $6 million from his then employer, telecommunications giant MCI. He and three cohorts served from 18 months to six years in federal prison. Pavlo must repay at least $800,000.
Karen Bond {of FPPP} took $880,000 owned by two elderly sisters who were longtime family friends by funneling it through her Ohio law firm. She was sentenced to 38 months in prison and must repay the money.
In cautionary tales told while on probation, Bond and Pavlo have advice for those with assets: It pays to be constantly vigilant of financial caretakers and corporate executives.
White-collar crimes accounted for about 18 percent of all federal convictions in 2001, according to the U.S. Sentencing Commission. Almost two-thirds were for fraud, with the rest including embezzlement, forgery, counterfeiting, tax law evasion and money laundering.
Pavlo says his theft was the result of working in an amoral corporate culture that stressed meeting ever-higher performance goals by any means in the mid-1990s.
"I never went to MCI to embezzle," said Pavlo, who was MCI's senior manager of billing and collections and who now works at a nonprofit organization teaching entrepreneurial skills to at-risk youths. He said his performance reviews were "always perfect." He wasn't reprimanded or fired.
But four years after he arrived at MCI, the company's corporate customers began skipping payment of bills that, collectively, amounted to millions. He and colleagues decided to hide the losses temporarily starting in 1995. They refinanced bad debt and shifted payments from good customers to bad ones by creating a dual set of records.
"I felt it was for the benefit of the company," Pavlo said. "I thought it was a minor problem that we could correct over time."
Everyone went along because his or her pay was tied to stock options that depended on keeping the stock prices up, he said.
The losses didn't turn around — they mounted. Pavlo began to fear for his job.
In fear and anger and feeling encouraged to bend rules, Pavlo said he began building a nest egg. He told delinquent customers that a third party had bought their debt. He instructed them to pay the fictitious third party via MCI. Pavlo then funneled the money to bank accounts in the Cayman Islands. It worked for six months.
He said he was busted when the accounting department called him to check on a fake account that they didn't recognize. He resigned immediately. After a three-year investigation, he pleaded guilty to wire fraud and money laundering and got a lighter sentence for revealing details of the bank accounts.
As in Pavlo's case, corporate thefts often start as a way to get through a personal or financial crisis. Those who've committed crimes say they didn't think they would get caught.
"I thought, 'How would I be caught? Who was going to tell? The customers who were running up all these bills and not paying, or the company I was doing this for?'" Pavlo said.
Karen Bond got into trouble when her Type A personality, often prized in the business world, ran amok.
In 1997, a client asked Bond to manage almost $880,000 of assets in exchange for caring for the client, who was in her 90s, and the client's octogenarian sister, who had Alzheimer's disease. With part of the money, Bond said she bought a house where they all lived for two years.
Then her control-oriented personality began to interact with her undiagnosed bipolar disorder.
"No one in the manic phase should be in charge of anything, let alone someone's assets," Bond, 47, said.
The sisters eventually moved to a nursing home, while Bond bought five cars and $24,000 in jewelry, including an $11,000 diamond, and took seven trips in one year. She also used $45,000 for office and personal items, according to a Columbus (Ohio) Dispatch article.
In 1999, she surrendered four of the five cars, the house and her license to practice law in Ohio and pleaded guilty to interstate securities fraud.
While in prison camps in Fort Worth and Kentucky, Bond said she met other white-collar criminals, some with professional degrees, who'd committed mail fraud, tax evasion and insurance fraud. Some exhibited mental illness much like her own.
"Companies need to pay attention to the mental health of employees," she said.
In the past, white-collar criminals were encouraged by light sentences and special prisons that housed them, said federal white-collar defense attorney Douglas McNabb, who's defended dozens in several states.
"They didn't want to get caught but knew that if they did they would be going to some place cushy," he said.
In almost every white-collar crime conviction, the defendant pleads guilty, according to the Bureau of Justice Statistics. They average about two years in federal prison camps, where the nicest ones have no bars, fences or barbed wire and allow prisoners to work in towns. An Oklahoma camp had an 18-hole golf course. A New York facility has a kosher kitchen.
Tougher sentencing guidelines passed down last November should nix any future incentives, McNabb said. Now most white-collar criminals won't be able to get into the camps without first going to standard prisons, and sentences run much longer for crimes committed after Nov. 1, 2001.
But the best deterrent comes from aggressive internal and external monitoring, Bond and Pavlo said.
Top managers should spend time talking with senior managers, stressing and modeling ethical behavior and adjusting performance goals to meet reality, Pavlo said.
"There was an assumption that you knew right from wrong, but it was not reflected in business practices because we were definitely bending every accounting rule," he said of MCI. "Every employee is capable of this. They all have a breaking point if left alone, isolated, and they're asked to compromise something within themselves."
asidime@express-news.net
http://www.mysanantonio.com/global-includes/printstory.jsp?path=/business/stories/MYSA19.01R.white_collar_criminals0419.421cbcba.htm l