Tone at the Top: How management can prevent fraud by example, part one

Preventing fraud is good business. Inspiring employees to follow ethical standards starts with the tone at the top in the executive suite. Learn the steps to prevent fraud in your workplace. 

In January of 2001, Walt Pavlo received a 41-month federal prison sentence for money laundering, wire fraud, and obstruction of justice. Pavlo claimed that he was pressured by his bosses to commit financial statement fraud at MCI WorldCom. As a senior manager in billing collections, he dealt with customer payments, credits, and reconciliations of accounts. Upper management described revenue projections and, according to Pavlo, pressured employees to meet or exceed these projections. As Pavlo watched his bosses manipulate the organization's financial records, he and his colleagues soon began to do the same. Pavlo and his supervisors then began meeting to devise ideas on cooking the organization's books. His supervisors taught him how to conceal uncollectible debt, which boosted the company's assets and profits. Pavlo's employees then followed his fraudulent example. Auditors eventually found Pavlo's unusual journal entries, confronted him, and he confessed.