What NOT To Do If You Suspect You Have Been Embezzled

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What NOT To Do If You Suspect You Have Been Embezzled

December 06, 2016

By Pat Little, DDS, FAGD, CFE

As dentists, we have invested enormous time and resources obtaining our education, growing our practices, and pursuing other professional endeavors. Additionally, we invest heavily in training and developing our dental team to assist us in achieving our professional and financial goals. Sadly, over the course of our careers, there is a three in five chance that one or more of our trusted team members will commit embezzlement.

This is a violation of our trust and can be emotionally and financially devastating. Some of you have already been embezzled in the past and know all too well the consequences that result from this crime. Embezzlement also impacts the rest of your team, and they often are afraid you will no longer trust them, which can have a significant impact on team morale. Additionally, you will be required to hire, train, and build trust with a new team member. Therefore, it is imperative that you learn to recognize the early warning signs of embezzlement in order to minimize its impact. It is also paramount that you respond correctly if you suspect someone on your team may be committing embezzlement. If you become concerned that embezzlement is occurring, the natural instinct is to start collecting information and asking questions. Unfortunately, this is often the wrong response. In this article, I will explain how not to react if you suspect embezzlement is occurring in your office.

What not to do

If you suspect embezzlement, stealth is essential, and what not to do is to alert the staff that you have concerns.

I admit that it’s easy for me to say, and I’m sure I would have had the same challenges when I practiced. However, if your suspicion turns out to be unfounded, it will be far better if your team remains unaware of your earlier suspicion.

First, mistakenly accusing a suspected team member of impropriety can lead to a wrongful termination lawsuit or other legal issues. At best, the bond of trust that you had with the employee will likely be forever broken. Also, terminating employment based on suspicion may lead to some type of severance obligation. Delaying termination until sufficient evidence is gathered allows a “for cause” discharge, and is far less likely to lead to severance-related liabilities.

Second, alerting the suspect prematurely will give him/her time to hide or destroy evidence. We have seen computers stolen, hard drives removed, backups stolen or destroyed, mysterious computer crashes, and the removal of charts and other patient records from the office. While not our client, we know of a doctor whose office was burned to the ground in an effort to destroy evidence (which in this case was fairly effective!).

For reasons known or unknown to the doctor, an embezzler faces some type of tremendous pressure and has rationalized that the best solution is to steal from you. As the embezzlement ensues, the pressure and stress steadily increase. If the embezzler becomes concerned that you may have discovered suspicious activity, the natural reaction is to “cover their tracks.” Once evidence is lost, it will make the investigation more difficult and expensive, could prevent an effective prosecution or civil recovery, and may well inflict even more emotional and financial damage.

With this in mind, please consider the following advice:

What not to do is to ask unusual questions or ask for additional reports.

We doctors are often creatures of habit, and for better or for worse, we tend to be consistent in the way we manage our practices. If we suspect someone in our office may be committing embezzlement, the natural tendency will be to start a self-directed investigation by asking questions that typically are not asked. Also, there is a tendency to request additional reports. Additional information requests or changes in procedure will raise suspicion.

What not to do is to ask the staff to contact outside advisors, your state’s dental board, or insurance companies.

While contacting these entities may be a necessary part of an investigation, these inquiries should be made privately. Any requested documents should be sent to a private location. Faxes can be especially problematic because the documents will be clearly visible to anyone walking by the machine. If you suspect that fraudulent insurance claims may be involved, you could be held vicariously liable for your employee’s actions. Contacting an insurance company prematurely could result in an audit with severe consequences. In this type of situation, it is best to retain an investigator and attorney who are familiar with the dental profession. They will conduct the investigation and communicate with external entities (on a “no-names basis”, if necessary) on your behalf.

What not to do is to bring in outside advisors during normal office hours, and don’t have these advisors call the office.

While it is common to have your accountant visit during tax season, it is unusual to have accountants show up unexpectedly. Compound this with visits or telephone calls from attorneys and management consultants, and you have the makings of a disaster.

What not to do is to make bank, vendor or advisor changes.

Any sudden changes of this nature are a sure tip-off that something isn’t right. Gather the evidence first, terminate the employee if appropriate, and comfort the rest of your team before proceeding with major changes in operations. Remember, your remaining team members are going to be feeling shock, hurt, and outrage as well. Throwing too many changes into the mix will add to the stress. Obviously, if one of these parties either participated in, or was negligent in their duties, a change must be made, but again, the change should occur after the employee is terminated and you and your team have had time to digest what has occurred.

What not to do is to suddenly upgrade software, increase the number of technical support calls, or change your backup procedures.

If you suspect embezzlement is occurring, make multiple backups of your practice management software, financial software, and any other systems that might be affected. However, these activities should be performed after hours in private.

While in general software should be kept updated, it is important not to update during the investigation. We have had clients who became concerned that embezzlement was occurring and called technical support for advice. That advice often included immediately upgrading the software. However, the upgrade process could delete or overwrite data thus destroying evidence. Also, if an employee notices that software has been upgraded, he/she may become suspicious. Once the investigation is complete, a review and update of your business processes are important.

What not to do is to contact law enforcement – yet.

If you really want to cause the suspect to panic, get the police involved early in the process. This will also alarm your other team members and likely alert your patients that something isn’t right, especially if law enforcement interviews them. Also, the criminal justice process can be protracted. The best course of action is to hire an investigator experienced in dental fraud investigations. The investigation should be conducted in stealth. It is rare that one of our investigators has to make an in-office visit. The dental team is completely unaware that an investigation is taking place. Indeed, the suspect is oblivious to the investigation until he/she is confronted with the evidence. Once employment is terminated, only then would it be appropriate to file a criminal complaint. By having the evidence clearly documented, the investigating officer will be able to conduct a more thorough and expeditious investigation.

As hard as it may be, the key is to stay as calm as possible while evidence is being gathered. Force yourself to smile and say good morning just like you always have in the past. Yes, you may lose some additional money to embezzlement while the investigation is ongoing, but that is far better than botching an investigation, having evidence destroyed which could result in vandalism and theft, and possibly being the recipient of a wrongful termination lawsuit. It is prudent to retain a professional familiar with dental embezzlement to conduct a thorough investigation in stealth. If embezzlement is discovered, the suspect will have no time to react and can be removed from the office so that the remainder of the investigation can be completed and handed over to the proper authorities. Being a victim of embezzlement is a tough and emotional experience. Having the embezzler get away with the crime adds insult to injury, so stay the course and remain calm. Then again, that’s easy for me to say, but please consider taking my advice.

Prosperident has developed a complimentary “ Embezzlement Risk Assessment Questionnaire

This questionnaire identifies many of the behavioral warning signs that are associated with embezzlement and assigns them a numerical value. Doctors should review this checklist regularly and take swift action if a sufficient level of warning signs is evident. This questionnaire can be obtained by emailing: requests@prosperident.com.

Do you have questions about embezzlement?  Give Prosperident a call at 888-398-2327 or click HERE to contact us.

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