When it comes to understanding white collar criminals, Walter A. Pavlo, Jr. wants financial services professionals to know one thing: they look a lot like them.
Pavlo, who was once a promising rising executive at MCI WorldCom, was sentenced to 41 months in federal prison and ordered to pay more than $6 million in restitution for his participation in accounting fraud at that company. He is now a founder of 500 PearlStreet, an organization aimed at promoting education on white collar crime.
Pavlo, who spoke to an audience comprising more than 900 investment advisors and wealth managers at the Investment Management Consultants Association’s New York Consultants Conference on Tuesday, recalled how he crossed the line at his job and the toll it took on him personally.
“I was traveling the country for three weeks out of the month, trying to find legitimate ways to collect money when I could,” Pavlo said. “And when I couldn’t, I spent the last week of the month making up numbers.”
The scheme, which Pavlo said gave him a sense of empowerment at the time, was one of the worst decisions he ever made.
“Over a period of time, it ate at me and ate at me and ate at me,” Pavlo said. “When you cross a line that way that I did, you go home at night and it doesn’t leave you. How do I get back to being the person that I thought I was?”
While prison is often regarded as the ultimate sentence for white collar crimes, Pavlo said it was the easiest part of his experience. The real hardship came when his marriage of 13 years failed and he risked the relationship he had with his two young children.
“Going to prison is the least of the punishments,” Pavlo said. “Give me another year in prison to wipe away the pain that I caused my family. Give me another year in prison to allow me to work again.”
Financial professionals need to understand just how much they are personally susceptible to behaving in a way that is contrary to their personal beliefs, Pavlo said, citing a study that was done including two groups of college educated women. In the test, the majority of a group of 30 women said they would walk out on a job interview or refuse to answer inappropriate questions regarding their attire or romantic status. In a separate group of 30 women who were actually put in that interview scenario, however, not one of them walked out or refused to answer a question.
“How can you know how you’re going to react and, when the situation presents itself, you do something completely different?” Pavlo said. “We’re all like that.”
Financial professionals, who face pressures that are all about performance, need to be especially cognizant of the risks they face in their positions in a society that rarely questions good news.
“If you think about it, good news is WorldCom, is Enron, is Bernard Madoff,” Pavlo said. “There’s a lot of good news out there that people won’t question as much as they should.”
For individual financial professionals, particularly financial advisors, that means they must be aware.
“You need to know that good people go to jail,” Pavlo said. “If your compliance program tells you to do the right thing, then maybe you need to know what is on the other side of it.”
Pavlo co-authored the book Stolen Without A Gun, which recounts his personal ordeal, with Neil Weinberg, editor-in-chief of American Banker. Like On Wall Street, American Banker is also a SourceMedia publication.