Walt Pavlo

Walter "Walt" Pavlo Jr.
Born:	1965 West Virginia
Charges:	Wire fraud, Money laundering, Obstruction of justice
Sentence:	41 months (served approximately 2 years)
Facility:	Federal Prison Camp, Edgefield
Status:	Released

Walter "Walt" Pavlo Jr. (born 1965) is an American author, speaker, and white-collar crime expert who served approximately two years in federal prison after pleading guilty to wire fraud, money laundering, and obstruction of justice for his role in a $6 million embezzlement scheme while working as a senior manager at MCI Communications in the mid-1990s. Pavlo, who had been responsible for billing and collection of nearly $1 billion in monthly revenue at MCI, devised a scheme with a colleague to siphon money from delinquent customer accounts into offshore accounts in the Cayman Islands. After his crimes were discovered and he pleaded guilty in 2001, Pavlo served his sentence at Federal Prison Camp Edgefield in South Carolina. Since his release, he has become one of the most prominent voices on white-collar crime, authoring the book "Stolen Without a Gun" with Forbes journalist Neil Weinberg, teaching at business schools, and speaking to corporate audiences, law enforcement, and professional organizations about fraud, ethics, and the psychology of white-collar criminals.

Summary

Walt Pavlo's story represents a classic case study in how ordinary corporate employees can rationalize increasingly serious criminal conduct. He did not set out to become a white-collar criminal; rather, he drifted into fraud through a series of rationalizations that allowed him to convince himself that his actions were justified or at least excusable. His subsequent career as a fraud educator has given him a platform to explain the psychology of white-collar crime from the inside, helping organizations understand how to prevent employees from following the same path.

Pavlo's fraud at MCI began with what he later characterized as a corrupt corporate culture that encouraged employees to manipulate financial results. He learned techniques for hiding bad debts and making the company's financial performance appear better than it actually was. When he began diverting money to his own accounts, he rationalized the theft by telling himself that MCI was corrupt anyway, that he was underpaid for his work, and that the company could afford the losses. These rationalizations allowed him to cross ethical and legal lines that he would have considered unthinkable at the start of his career.

Since his release from prison, Pavlo has built a career helping others understand how white-collar crime happens and how organizations can prevent it. He has spoken at more than 100 universities, corporate events, and professional conferences, and has consulted with law enforcement agencies including the FBI. His willingness to discuss his crimes frankly and to explain the thought processes that led him to steal has made him a valuable resource for fraud prevention education.

Background

Early Career at MCI

Walt Pavlo Jr. was born in 1965 in West Virginia and pursued a career in finance. In 1992, he joined MCI Communications, which would later become part of WorldCom and eventually the second-largest telecommunications company in the United States. Pavlo quickly impressed his supervisors and was promoted to become second in command of the carrier finance division, where he was responsible for billing and collection of nearly $1 billion in monthly revenue.

MCI's carrier finance division dealt with wholesale customers—other telecommunications companies that purchased network capacity from MCI. Managing accounts receivable in this division involved substantial amounts of money and required judgment about how to handle delinquent accounts. Pavlo's position gave him both the opportunity and the authority to manipulate how customer debts were recorded and managed.

Corporate Culture and Rationalization

According to Pavlo's own accounts, the corporate culture at MCI in the mid-1990s tolerated and even encouraged manipulation of financial results. He was taught techniques for hiding bad debts from customers who were unlikely to pay, allowing the company to report better financial performance than reality warranted. This culture of manipulation, Pavlo has argued, set the stage for his own criminal conduct by normalizing dishonesty.

Pavlo's rationalization process illustrates how white-collar criminals often drift into crime rather than making a conscious decision to become criminals. He convinced himself that the manipulations he was performing were acceptable because everyone else was doing them, that the company was treating him unfairly by not paying him what he deserved, and that MCI was so large and profitable that his theft would not really harm anyone.

The Fraud Scheme

Diverting Customer Payments

In 1996, Pavlo and a colleague devised a scheme to profit from their positions at MCI. They identified customers with substantial overdue balances who were unlikely to pay and offered to "resolve" these debts in exchange for payments to accounts controlled by Pavlo and his colleague. The scheme essentially involved extorting payments from delinquent customers in exchange for making their debts disappear from MCI's records.

The payments were routed to accounts in the Cayman Islands, where they could be concealed from U.S. authorities and from MCI. Over approximately six months, Pavlo and his colleague diverted approximately $6 million from MCI customers using this scheme.

Discovery and Consequences

The scheme was eventually discovered through internal controls or tips—accounts that were written off raised questions when customers subsequently claimed they had made payments. The investigation revealed Pavlo's role in the fraud, and federal prosecutors charged him with wire fraud, money laundering, and obstruction of justice.

Pavlo's arrest and prosecution occurred during a period of heightened scrutiny of corporate fraud. His case was one of many that exposed problems in corporate finance and internal controls during the late 1990s and early 2000s. MCI itself would later be acquired by WorldCom, which collapsed in one of the largest accounting frauds in American history.

Indictment, Prosecution, and Sentencing

Guilty Plea

Rather than go to trial, Pavlo chose to plead guilty to wire fraud, money laundering, and obstruction of justice. By accepting responsibility for his crimes, he received some consideration under federal sentencing guidelines. His cooperation also allowed prosecutors to pursue other individuals involved in the scheme.

Pavlo was sentenced to 41 months—three years and five months—in federal prison. He was also ordered to pay restitution, with payments continuing from any subsequent earnings for 27 years after his release. This restitution obligation represented a long-term financial consequence of his crimes that would follow him throughout his post-prison career.

Reporting to Prison

In March 2001, Pavlo reported to Federal Prison Camp Edgefield in South Carolina to begin serving his sentence. Prison camps are minimum-security facilities that house non-violent offenders and lack the fences and guard towers of higher-security facilities. Pavlo's assignment to a camp reflected his status as a non-violent, white-collar offender.

Prison Experience

Pavlo served approximately two years at FPC Edgefield before his release. The prison camp experience, while significantly less harsh than higher-security facilities, still represented a dramatic change from his previous life as a successful corporate executive. He lost his career, his marriage (his wife filed for divorce during his incarceration), and his financial security.

Upon release, Pavlo emerged with few resources. He returned to live with his parents while attempting to rebuild his life. His restitution obligation meant that any future earnings would be partially diverted to pay back what he had stolen, creating an ongoing financial burden.

Post-Release Career

"Stolen Without a Gun"

Pavlo partnered with Forbes journalist Neil Weinberg to write "Stolen Without a Gun," a book detailing his crimes, his prosecution, his prison experience, and his reflections on how he came to be a white-collar criminal. The book provided an inside account of corporate fraud that resonated with readers interested in understanding the psychology of white-collar crime.

The book served multiple purposes: it told Pavlo's story, provided insights useful for fraud prevention, and established his credentials as an expert on white-collar crime. The publication launched his second career as a speaker and educator on fraud and ethics.

Speaking and Teaching

Since his release, Pavlo has spoken at more than 100 universities, accounting firms, corporations, and professional conferences. His presentations provide insight into how fraud happens from the perspective of someone who committed it—a perspective that academic experts and prosecutors cannot offer. He explains the rationalization processes that allow otherwise law-abiding individuals to convince themselves that criminal conduct is acceptable.

Pavlo has also worked with law enforcement agencies, including providing training to FBI agents on white-collar crime investigation. His inside knowledge of how corporate fraud operates has proven valuable for investigators seeking to understand the tactics and psychology of white-collar criminals.

Writing and Commentary

Pavlo has continued to write about white-collar crime, contributing articles to Forbes and other publications. His commentary provides analysis of high-profile fraud cases and discusses broader issues in corporate governance, ethics, and fraud prevention. He brings a unique perspective as someone who has both committed and been punished for corporate fraud.

Public Statements and Positions

Pavlo has been consistently candid about his crimes and his culpability. Rather than minimizing his conduct or blaming others, he accepts responsibility for his choices and uses his experience as a cautionary tale. This acceptance of responsibility has been central to his credibility as a speaker and educator.

His presentations emphasize the gradual nature of the slide into criminal conduct. Pavlo did not wake up one day and decide to become a criminal; rather, he made a series of small compromises that eventually led him across the line into serious crime. He argues that organizations need to understand this psychology to prevent fraud effectively.

On corporate culture, Pavlo argues that organizations that tolerate small ethical compromises create conditions where larger frauds can develop. He advocates for strong ethical cultures, robust internal controls, and clear accountability for misconduct at all levels.

Terminology

• Wire Fraud: A federal crime involving the use of electronic communications to execute a scheme to defraud.

• Money Laundering: The process of disguising the origins of illegally obtained money.

• Obstruction of Justice: Interfering with the administration of justice, including destroying evidence or lying to investigators.

• Restitution: Court-ordered payment to compensate victims for losses caused by criminal conduct.

See also

• Jeff Skilling
• Bernie Madoff
• White Collar Crime

Frequently Asked Questions

Q: Who is Walt Pavlo?

Walt Pavlo is a former MCI Communications executive who served federal prison time for money laundering and wire fraud and has since become an author, speaker, and white-collar crime expert.

Q: What was Walt Pavlo convicted of?

Pavlo pleaded guilty to wire fraud and money laundering for his role in a scheme to defraud MCI of more than $6 million.

Q: What does Walt Pavlo do now?

Pavlo writes about white-collar crime for Forbes, consults on fraud prevention, and speaks about ethics, fraud, and the consequences of white-collar crime.

Q: Where did Walt Pavlo serve his sentence?

Pavlo served his federal sentence and has since used his experience to educate others about fraud and its consequences.

Q: What books has Walt Pavlo written?

Pavlo co-authored 'Stolen Without a Gun' about his crimes and incarceration, and continues to write about white-collar crime issues.