Stolen Without a Gun

by Walter Pavlo Jr. and Neil Weinberg
Etika Books, 2007, 312 pp.

For nearly four decades, I have been investigating, researching and writing about occupational fraudsters. From the mailroom to the boardroom, what these criminals have in common is the inability to commit fraud once and quit.

So it was with Walter Pavlo Jr., who chronicles his descent from ambitious telecom worker to convicted embezzler in this book, which was published by a division of Pavlo’s company, Etika LLC.

The book is a terrific read—provided that you take Pavlo’s account with a grain of salt. One of the hallmarks of white-collar criminals is their ability to rationalize their actions and lay blame at the feet of others. Pavlo does his fair share of that even while admitting his guilt. Co-author Neil Weinberg, a talented writer and storyteller who is a senior editor at Forbes, serves as a counterweight to Pavlo.

One of their principal messages is that corrupt companies beget corrupt employees. Pavlo was recruited in 1992 by a subsidiary of MCI, which would later merge with WorldCom and collapse under the weight of fraud committed on CEO Bernie Ebbers’ watch. The book does not focus on Ebbers’ misdeeds or the MCI/WorldCom collapse, despite the impression given by the book’s jacket. Pavlo left MCI before WorldCom bought the company in 1998.

As MCI grew, so did its delinquencies. Pavlo was tasked with collecting on past-due accounts of large business customers. He contends that he was told to hide bad debts through accounting sleight of hand. One trick was to credit the delinquent receivable and debit a new one, which effectively brought the account current.

Pavlo alleges that Harold Mann, a delinquent MCI customer, hatched a scheme that cost MCI $6 million in losses. Pavlo pressured business customers struggling to pay their MCI bills and referred them to Mann, who, for an upfront fee and monthly payments, pledged to step in and negotiate substantial reductions in their debts.

Mann and Pavlo pocketed the loot. To conceal the crime, Pavlo developed a lapping scheme of sorts that worked by applying payments from a good customer to the accounts of those who had entered into the illegal arrangement. Ultimately, MCI’s accounting department uncovered the scheme and Pavlo and Mann were convicted and sent to prison.

Only time will tell if Pavlo has learned his lesson. I first met him about five years ago when he addressed the Eighth Annual ACFE European Fraud Conference in Copenhagen, Denmark. He also spoke at the 15th Annual ACFE Fraud Conference & Exhibition in Las Vegas.

More recently, Pavlo told his story in Fraud and the Tone at the Top , a video produced by the AICPA and the ACFE, that is available for free at http://antifraud.aicpa.org/
Resources/Fraud+and+the+Tone+at+the+Top.htm or www.acfe.com/about/press-release-08-24-2006.asp . It provides advice on how to avoid the kind of situations that plagued Pavlo.

The ACFE has used the experiences of white-collar criminals such as Pavlo for educational purposes for the last 18 years. They are paid nothing except travel expenses. We believe there is no better training experience than to hear fraudsters describe, in their own words, how and why they committed fraud. Stolen Without a Gun takes a page from that book.

By Joseph T. Wells , CPA, CFE, founder and chairman of the Association of Certified Fraud Examiners and a contributing editor to the JofA. Editor’s note: The reviewer’s opinions do not necessarily reflect those of the Association of Certified Fraud Examiners.