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Busting embezzlement: Part 1—The problem

Dec. 10, 2019
The primary purpose of this series of articles from Sandy Baird, David Harris, and Jean Patterson is to improve the ability of dental practice owners to identify possible embezzlement through the use of financial indicators.

Virginia’s Deanna Gray owes a dentist for whom she used to work $421,119. This amount was ordered by a court in restitution for embezzling funds from this dentist between 2012 and 2016. Since Deanna is currently serving a five-year prison sentence and will have limited employment prospects after her release, her dentist is not expecting repayment anytime soon.

Could this be happening in your practice right now? The real question is, how would you know? The answer is by knowing the indicators (red flags) of embezzlement and what to do if you detect them.

Embezzlement red flags can be behavioral, as shown by conduct or actions of the embezzler, or financial. Multiple studies suggest that far more embezzlement is uncovered in dental practices by behavioral indicators than by financial ones. In part, this is because most practice owners find the behavioral indicators more intuitive and visible. Our primary purpose in writing this series of articles is to improve the ability of practice owners to identify possible embezzlement through the use of financial indicators.  However, before jumping into specifics, four fundamental points must be stressed.

  • First, analysis of financial information will not prevent embezzlement. The purpose of regularly analyzing financial information is early detection, which could greatly reduce your theft loss.
  • Second, you, the owner, or an outside expert should be the person to run and analyze these reportsnever an employee, no matter how much you trust that person.
  • Third, while monitoring is something every practice owner needs to do, an embezzlement investigation is not. If you uncover suspicious activity, get expert help; this is not a do-it-yourself-project. You could easily do more harm than good. In this case, the word “expert” means an experienced investigator who understands dental operations and your specific practice management software. Often dentists turn to their familiar advisors, who may not have the experience or skill sets. Embezzlement investigation requires considerable technical skills, and frequently preparation of expert reports, and delivery of effective courtroom testimony. It is not the place for well-intentioned but inexperienced advisors to do on-the-job training at your expense.
  • Fourth, and most important, avoid telegraphing your suspicions to your suspect or taking into confidence any member of your team.

With these four points in mind, our intention with this series of articles is to help you construct a review process to look for indicators of embezzlement that can help you determine if you need expert help. They will also focus on solutions that are respectful of your time. We are well aware of your preference to be doing dentistry rather than analyzing data.

In our next article, we will introduce you to your adversary. We will outline why some people want to steal from you, and we will discuss their thought process once they decide to embezzle. Understanding these dynamics will greatly increase your ability to find and uncover signs of their handiwork.

So, if you are not interested in signing up for a 50-year payment plan of no returns, such as Deanna’s…stay tuned.

Sandy Baird, MBA, is a practice management consultant, coach, and speaker. With 35 years of in-office experience, she offers valuable management services and practical advice. Her passion is to help dental teams conquer challenges, exceed goals, and realize their full potential. Contact Sandy at bairdconcepts.com, or at [email protected].

David Harris, CFE, CPA, CMA, CFF, MBA, is an expert on embezzlement in dentistry. A CPA, private investigator, and forensic accountant, Harris is the CEO of Prosperident, the world’s largest firm specializing in the investigation of financial crimes committed against dentists. Learn more at dentalembezzlement.com or by calling Prosperident at (888) 398-2327.

Jean Patterson, owner of J Patterson Consulting LLC, has been a CPA for more than 30 years and a Certified Fraud Examiner since 2009. She advises dentists regarding accounting, tax, and fraud issues. She and can be reached at [email protected].