ADA Survey Addresses How Embezzlement is Discovered

The American Dental Association’s Council on Dental Practice recently released the results of a survey completed last year on embezzlement.
One of the questions on the survey addressed the question of behaviors exhibited by embezzlers. The answers were enlightening.

The pie graph below highlights the most commonly observed behaviors (please note that, due to multiple responses, the total exceeds 100%).

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Observed behaviors of embezzlers, 2019

As you can see, possessiveness about the embezzler’s duties and a reluctance to cross-train other team members was the single biggest factor, given by almost 50% of respondents. Closely related was territoriality about the embezzler’s workspace, with over 25% of respondents reporting that behavior.

Defensive when questioned about financial matters, and complaints from other staff about the affected employee, or observed bullying on the part of the thief, we also observed by many victims.

Employee behavior is still one of the key elements in detecting embezzlement. Our Embezzlement Risk Assessment Questionnaire has been taken by thousands of dentists and provides a good barometer for employee behavior. You can access the Questionnaire HERE.

Lots Going On at Michigan’s Muskegon Family Care

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There seems to be a lot of activity at this federally-funded medical and dental clinic.

First, media reports suggested that the State Police were investigating “possible embezzlement involving staff members at the Muskegon Family Care facility in Muskegon Heights.”

The media reports single out former CEO Sheila Bridges and discuss a 2014 federal review that identified inappropriate spending on the part of Bridges, including first-class airfares, five-star hotels, and limousines.

The interim CEO of the clinic, citing financial difficulties, laid off about two thirds of the employees on February 14, 2020 and announced that it would shut down on March 13, 2020.

Some of the fired workers commenced a lawsuit on February 16, claiming that they received inadequate notice of termination.

On February 17, 2020, a news release indicated that the shut down would actually take place at the end of March 2020. (see https://www.mlive.com/news/muskegon/2020/02/muskegon-family-care-health-clinic-announces-closure-apologizes-for-misunderstanding.html)

Next, on February 21, Sheila Bridges, the former CEO, filed a “whistleblower lawsuit” against the clinic, claiming claiming it had a “sexually hostile” working environment, and that she was fired after making a complaint against a member of the clinic’s board in November, 2019.

Her lawsuit also claims that officials at Muskegon Family Care made “false statements” to others that implied Bridges had embezzled from the health clinic. (see https://www.mlive.com/news/muskegon/2020/03/former-ceo-files-whistleblower-lawsuit-against-muskegon-family-care-clinic.html for a discussion of the lawsuit).

On February 28, 2020, Dan Oglesby, the newly-appointed CEO of the clinic, announced that the planned closure would not be taking place and that the clinic is accepting new patients. (see https://www.mlive.com/news/muskegon/2020/02/new-muskegon-health-clinic-ceo-makes-stunning-announcement-it-wont-close.html)

Stay tuned – we expect that there is more to follow.

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Glendale CA Man Sentenced to Three Years for $2.1 Million Bank Scam Involving Dentists

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A Glendale man was sentenced to three-plus years in prison for stealing the identities of at least 11 dentists and filing fraudulent claims to banks that offer lines of credit to dentists, according to a statement from the U.S. Department of Justice on Tuesday.

Ararat Yesayan, 39, was ordered to pay $2.1 million in restitution. In May he pleaded guilty to one count of conspiracy to commit bank fraud.

From October 2010 to March 2014, Yesayan and co-conspirators impersonated dentists via personal identifying information such as dental license numbers, according to the Department of Justice statement.

Those involved in the conspiracy acquired commercial office space in the names of victim dentists using this personal information, and then submitted change of address requests to the Dental Board of California. Mail was sent to the newly opened sham offices, among them offers for lines of credit.

“Using the victim dentists’ names, Yesayan and others applied for lines of credit offered by banks to dentists and, upon approval, submitted numerous fraudulent dental claims in the names of fake patients for procedures that were never performed,” the Department of Justice said in its statement.

Once the claims were approved by the banks, money was wired to Yesayan-controlled bank accounts. Banks affected include Citibank and GE Capital Retail Finance Bank, now Synchrony Bank.

Two other Glendale men were allegedly involved in the scheme, Varooj Arakelian, 49, and Artin Sarkissians, 42. Arakelian is scheduled to go on trial June 23.

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Content retrieved from: https://www.sfvbj.com/news/2020/mar/04/glendale-man-sentenced-21-million-bank-scam-involv/

Prejudicial Comments by Judge – Montana Woman Gets New Trial

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Linda Faye Harris

The Montana Supreme Court on Tuesday reversed a Missoula woman’s two embezzlement convictions based on a few key factors, among them a state prosecutor’s concession she is entitled to a new trial. 

Linda Faye Harris, 61, will also appear before a new judge following Tuesday’s order. In her appeal, Harris argued the judge presiding over her case showed bias when he was open about both prematurely considering her guilty and surmising women to be more often guilty of embezzlement than men.

“It’s women that commit this crime most of the time,” District Judge Robert “Dusty” Deschamps III said, according to the transcripts from the January 2018 sentencing hearing included in court filings. “And they commit it big time. And it seems like once they start doing it, they just keep coming back. And she’s evidence of that pattern.”

Harris was convicted in a bench trial in 2017 on two counts of felony theft by embezzlement for taking $9,493 from Gentle Dental and $24,890 from Northwest Denture Center. 

Harris initially pleaded no contest to both charges. After hearing evidence presented at a restitution hearing, however, Deschamps asked Harris if she’d like to withdraw the pleas and challenge the charges at trial. She agreed, and Deschamps set the case for a bench trial.

Supreme Court Justices noted in their order, filed on Feb. 25, that Deschamps never asked Harris if she was waiving her right to a jury trial. Additionally, he had declined prosecutors’ attempts to reintroduce evidence heard at the earlier restitution hearing, instead deciding to refer back to the testimony from the restitution hearing, justices wrote. Based on that testimony, Deschamps told Harris he was already mulling a guilty verdict on one count before the bench trial had concluded.

When Deschamps convicted Harris on both counts, sentencing her to 20 years in state prison with 15 years suspended, he set the sentence to run consecutively with a previous sentence for an earlier embezzlement, a $180,000 theft for which she was serving a suspended sentence when the new charges came along. 

Harris’ attorneys argued in her appeal that Deschamps had imposed an illegal sentence because it was based, at least in part, on her gender. According to court filings that include parts of the transcript from Harris’ sentencing hearing, Deschamps had deemed embezzlement charges to be “women’s crimes.” 

“… And I just think prison authorities and the Department of Corrections need to take that into consideration when releasing these people on parole. They’re serial offenders.”

Harris’ attorneys argued in their August 1, 2019, opening brief that Deschamps’ statements warranted at least a new sentencing before a different judge. 

Assistant Attorney General Brad Fjeldheim conceded in a Feb. 20 filing that Harris is entitled to a new trial before a new judge because she had not waived her right to a jury trial. Additionally, Fjeldheim wrote, Deschamps should not have relied on testimony from the restitution hearing during Harris’ bench trial. 

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Pacific Islands Embezzlement – Guam Woman Joins Million-dollar Club

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A woman accused of writing more than $1.1 million in fraudulent checks to herself using her employer’s bank account pleaded guilty to 10 counts of bank fraud.

Teresa Pereda signed a plea agreement that was filed in the District Court of Guam on Jan. 31, admitting that she diverted money from Dr. Robert Gatewood’s company for her own use by writing unauthorized company checks to herself and associated entities for eight years.

Managed victim’s office for 27 years

Pereda was the office manager for Gatewood and had worked for him for 27 years.

The scheme began in 2011, when Pereda wrote a check to an entity associated with her, Nored Inc., in the amount of $7,317. A week later, a check for $3,397 was written out to Transpacific Association Inc.

Two more checks were written totaling $9,006 in 2011.

In 2012, Pereda wrote six checks totaling nearly $24,000.

In the subsequent years, Pereda continued writing unauthorized checks increasing the amount she took from her employer.

In 2014, she wrote two checks totaling $15,500. In 2015, four checks worth $26,950 were cashed and deposited into her accounts. In 2016, checks ranging from $5,000 to $15,000 were written to Pereda or Blessed Wholesale totaling $55,444.

In 2017, she wrote five checks totaling $34,851. The following year, three checks totaled $30,585. The plea agreement states Pereda wrote seven fraudulent checks in January and February 2019 totaling $54,947.

Prosecutor: Pereda wrote 284 fraudulent checks

According to court documents, Pereda had access to the company’s bank account and routinely completed checks linked to the account in order to pay the company’s bills.

The government alleges she diverted money from the company for her own use by writing the 284 fraudulent checks to herself and other associated entities and submitted them to obtain cash and for subsequent deposits into bank accounts under her control.

Pereda obtained signed blank checks from her boss based on her fraudulent representation that the checks would be used to pay company bills.

The plea agreement states she falsified check stubs to make it appear the checks were issued for business purposes and she falsely recorded the transactions in the company’s ledger.

Pereda was indicted by a federal grand jury on Dec. 11, 2019, and charged with 40 counts of bank fraud. She was picked up by U.S. marshals and has been held in custody awaiting a status hearing scheduled for April 29 before Senior Judge John Coughenour.

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Content retrieved from: https://www.postguam.com/news/local/woman-pleads-guilty-in-million-dollar-fraud-case/article_7a04e122-4664-11ea-a96c-875f88b239d3.html

ADA says Embezzlement is Increasing

The American Dental Association’s Council on Dental Practice recently released the results of a survey completed last year on embezzlement.
There are some interesting results, and they generally do not constitute good news for the dental profession.
First, compared to a similar survey released just over ten years ago, the prevalence of embezzlement in practices is noticeably up. The 2008 survey had found that 35% of respondents had been victims of embezzlement. The survey released in February 2020 showed that 48% of those responding had been embezzled. This increase of 13 percentage points in ten years is significant and should be a cause for alarm among practice owners. The logical conclusion is that embezzlement will sooner or later affect more than 90% of practice owners.
The 2020 survey did something that the previous survey did not. For those who had been embezzled, it asked them how many times they had been victimized. From those who had reported being embezzled, 26% (i.e., 54% of those who had been victims) indicated that it had happened once, 23% of victims reported being stolen from twice, 5% of those stolen from declared three embezzlements and an astonishing 18% (which is 8% of all dentists surveyed) confirmed having been victims at least four times.

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Many dentists believe in the honesty of long-service employees. The survey tested that hypothesis directly, asking embezzlement victims how long the thief had worked for them at the point of discovery. The following graph shows the results:

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As you can see, almost half of the stealing employees had been employed for four or more years.
The survey asked how embezzlement was discovered. Predictably, there was a wide variety of answers, ranging from reported by another employee (28%) to discovery when changing accountants (3%). While the ADA did not do this in its survey, one additional analysis that we performed was to taxonomize the means of discovery into two categories; embezzlement discovered by the planned operation of a practice’s system of controls (of which an example would be discovery by reviewing the audit trail in a practice’s software) and stealing discovered by some chance occurrence (for example, when discovery is caused by a patient complaining about their account). This analysis revealed that only 17% of embezzlement was discovered through the systems employed by practices, with a staggeringly high 83% revealed through unpredictable events. Clearly, practice systems are not providing the protection that practice owners believe they are. David Harris, Prosperident’s CEO, is part of a group writing a series of articles designed to help practice owners receive a higher level of protection from their systems. The first article in the series is available here — https://www.dentistryiq.com/practice-management/financial/article/14073216/busting-embezzlement-part-1the-problem.
The survey also looked closely at the behaviors displayed by embezzlers, and the results are consistent with something that we have been saying for many years – embezzlers exhibit certain telltale behaviors, and one of the best ways to detect an embezzlement problem is to look for these behaviors. Here are the most prevalent behaviors of embezzlers, as determined by the survey (the percentages add up to more than 100% due to multiple responses):

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Our Embezzlement Risk Assessment Questionnaire provides an excellent way for a practice owner to evaluate the behavior of employees. It is available at a modest cost in our electronic store at www.prosperident.com/store.
The ADA survey validates what our own experience over the last decade has suggested – embezzlement is on the increase in dentistry. Practice owners need to be both vigilant and proactive in dealing with it. Prosperident’s Office Protection System provides an effective way of protecting a practice or a group of practices from embezzlement. More information is available here — https://www.prosperident.com/office-protection-system/ .