Walter Pavlo Ring Of Thieves Analysis

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Ring of Thieves Neil Weinberg, 06.10.02 MCI introduced Walter Pavlo to a world of armed thugs, duffel bags stuffed with cash and phony accounting. Now, sitting in a South Carolina prison, he points a finger back at his former employer. Walter Pavlo has plenty of time these days to walk the track inside South Carolina's secluded Edgefield prison. He takes a daily stroll with Mark Whitacre, the Archer Daniels Midland whistle-blower who is serving a ten-and-a-half-year sentence for fraud. Surrounded by drug convicts, camp fences and rolling woodlands, they chat about their pasts and draw parallels to the scandals swirling around big corporations now--at Enron, at Arthur Andersen, in telecom. Pavlo, blond and still boyish at 39, committed…show more content…
MCI signed up resellers by the dozen and let bad billings mount. When Pavlo went out into the field to dun the debtors, he found a wild and woolly world. One prepaid calling card outfit, Caribbean Telephone & Telegraph in Bloomfield Hills, Mich., signed on in early 1995. By midyear CT&T owed MCI $30 million, Pavlo says. The small firm's debt swelled faster than MCI could even track it; MCI took 60 days to get a bill out and waited another 15 days before it came due. Pavlo visited CT&T's office in lower Manhattan, seeking payment, but owner James Franklin insisted he couldn't afford to pay. Really? Pavlo says he spotted duffel bags of cash, armed guards and money-counting machines. Pavlo returned to Atlanta empty-handed and convinced that CT&T's pleas of poverty were a bit exaggerated. By February 1996 MCI had cut off service to CT&T, which had filed for Chapter 11 bankruptcy protection. Franklin blamed CT&T's problems on slow payments from its own…show more content…
"Competition among business divisions" over which one had the "youngest" receivables "has stimulated the posting of memo entries in advance of actuals," Folk, the revenue operations chief, wrote in a 1997 e-mail quoted in a lawsuit later filed by an MCI partner. "In time this practice became more the rule than the exception." Folk admitted in a deposition that this had led to "fudging" the age of receivables on MCI's books. What was in it for employees? "They get to keep their jobs." Pavlo was stuck: He knew customers were taking in piles of cash yet refusing to pay their bills; he says his MCI bosses knew of the chicanery but refused to write off the receivable. Increasingly, he feared for his job and fretted about falling into legal jeopardy. He was drinking heavily--and growing resentful. Even if MCI sold out at a premium, Pavlo wasn't going to get rich like top managers. He earned $70,000 and had vested options worth less than his salary. "I'm getting instructions from other parts of MCI that aren't in writing, like 'Make the bad debt $15 million,' but I'm the only one with my name all over this stuff," he says. "I started to feel I was going to be made into a

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