2-Minute meeting

INFORMER

[2-minute meeting]
?Fraud triangle? is
topic of Virchow
Krause seminar

?I?d like you to leave with an understanding of how fraud works,? said Craig Siiro, a partner with accounting firm Virchow Krause.

He was explaining the intent behind his firm?s hosting of Walt Pavlo, who served prison time for defrauding MCI/WorldCom. Siiro drew a picture of ?the fraud triangle, with pressure being one side, opportunity being the second and rationalization being the third.?

Then he introduced Pavlo, who has been on the national speaker circuit addressing white collar crime. ?How did I go from being a good boy to being an embezzler?? said Pavlo, who went on to describe an elaborate scheme involving fake invoices and fake European investors. ?I spent two years in federal prison. I did the crime and I certainly did the time.?

Pavlo was selling long-distance access to customers, and he said the pressure began when the company wanted him to attract ?third-tier? customers, new businesses with no credit history. It was a high-profit, high-risk business. It cost MCI 1 cent a minute, which they sold for 10 cents a minute. The independent business owner charged perhaps 15 cents a minute, and then the end user paid $3 a minute.

Eventually he wrote a memo to his new boss, stating the bad debt from these customers would be $180 million the following year. (The budget was $10 million.) The boss ?came back and said we can?t write off this. We can do $15 million. He said, can you fix it??

?The only way I could do it is go out and try and then come home at the end of the month and cheat,? he said.

Siiro of Virchow Krause said Pavlo?s pattern is typical of cases he?s seen. ?They start small and they build. I?ve seen in every case, people say, ?I never would have guessed it.' ? He served on a panel about preventing fraud after Pavlo?s speech.

Vance Opperman, president and CEO of Key Investment Inc., doesn?t believe that ?everybody does it,? as Pavlo asserted. ?Be aware of three areas,? he advised business owners.

?One, There is great mischief available in the way our audits are conducted,? he said.

?Two, many of these matters are not one person, and many have no remorse at all.?

?Three, not all people are going to be crooks. I think there are wide numbers of people full of character. One thing I found comic about the presentation was 'everyone does it.' No, they don?t.?

Advice: Put programs in place to identify pressure points and nip them in the bud.

Require all managers to take a vacation every year. When they?re gone, their substitutes can examine accounts, Opperman said.

Look at compensation, making sure that money isn?t tied to unrealistic goals.

?What?s the tone at the top?? Siiro said. ?Is it a nurturing environment??

Try to make it to: Virchow Krause has articles outlining how to prevent fraud. Craig Siiro, Virchow Krause: 952.351.4796; cs****@***********se.com; www.virchowkrause.com

Prez at WomenVenture
confab recalls big hair
era, urges big dreams

Tene Wells wanted to enjoy the moment as she took the stage, with the crowd pushing 2,000 at the 12th annual WomenVenture conference. ?Let?s enjoy our power for just a few moments,? said the St. Paul resource organization?s executive director, who was once its client.

?WomenVenture taught me to figure out how to make the kind of impact we wanted to make in the world,? Wells said, recalling the 1970s and '80s, when women began flooding the workplace. ?We all had big hair and we all went to corporations.?

?Dream big,? she urged the attendees.

?Finance that dream. Make money so you can support yourself independently,? she continued.

?And finally, when you?ve made it, reach back and help someone else. Reach back and help one of your younger sisters.?

Sherry Lansing, keynote speaker, evoked the same era, when women began taking jobs that only men had held in the past. She took the top job at 20th Century Fox in 1984 and became the first woman to head a major film studio. She was named chairman of the motion picture group of Paramount Pictures in 1992, presiding over the blockbusters Forrest Gump, Braveheart and Titanic, ?the highest-grossing motion picture of all time,? as her biography describes it.

Lansing said her first lesson in business came from her mother. Her father died when she was a girl, and his business partners came to tell her mother that they would take care of her. ?She said, you will teach me how to run the business,? Lansing said. ?My mother was living in a generation when women didn?t have a voice.?

Lansing?s aspirations weren?t appreciated, she said. ?Beauty was praised, and the way you carried yourself was praised,? she recalled. ?Because that is how you got a husband.?

She recalled her struggle to enter the movie business and work her way up, eventually becoming an independent producer and working for years to get Fatal Attraction made. ?No one wanted to make a movie with Michael Douglas,? at the time, she said.

They finally landed the hot director Brian dePalma and received backing for the film from Paramount, only to have dePalma say he wouldn?t direct with Michael Douglas.

?We all face moral choices,? Lansing said. She decided to stick with Douglas, get a new director, and of course the film went on to be a mega-hit.

Try to make it to: WomenVenture?s 13th annual professional development conference is Nov. 7, featuring Sara Blakely, inventor of Spanx, the ?innovative undergarments sweeping the world!? It?s now a $150 million company. Nomination deadline for WomenVenture ?unsung hero? and ?pioneer? awards is March 30: 651.646.3808;  www.womenventure.org

Bill George stresses
integrity to entrepreneurs
at ClubWOW event

?I?m convinced entrepreneurship and small business is the future of the Minnesota economy,? said Bill George, former CEO of Medtronic Inc. who built it to $60 billion in market capitalization during his tenure.

He was preaching to the choir, a group comprised mostly of business owners at a ClubWow s