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When dental fraud goes unprosecuted

March 13, 2018
When dental practices fail to prosecute employee fraud, the perpetrator is free to move on to the next victim. It's time to break this cycle.
Jean Patterson, MBA, CPA, CFE, Owner, J Patterson Consulting

Let's say you discover that your dental office manager has been stealing from you for years. Now what? You want the fraud stopped, of course, but what's the best course of action? Immediate termination, or immediate termination followed by prosecution? The answer depends on whether you want the perpetrator stopped for just you, or forever.

The choice not to prosecute

Prosecution makes it difficult (or impossible) for a fraudster to continue activity at another dental practice. Yet dental practice owners and managers often choose not to go down this road.

The Association of Certified Fraud Examiners (ACFE) publishes a biennial report titled, Report to the Nations of Occupational Fraud and Abuse.1 It compiles results of investigations submitted by ACFE members during the previous two years. The 2016 report covers 2,410 cases investigated between January 2014 and October 2015. It also contains insight into why fraud goes unprosecuted.

In the report's Case Results section, Figure 102 lists the eight most common reasons why fraud is not reported to law enforcement. The reasons are those given by victim organizations regarding the decision not to prosecute. Here are the top four in order of increasing occurrence.

Fourth (18.8%): Too costly

In order to pursue prosecution, there are three general requirements:

  • Adequate supported evidence
  • The opinion by law enforcement and the court that the case has merit based on the quality of the evidence
  • Evidence in a clear form that allows a reasonable person to understand the facts of the case

Gathering "adequate supported evidence" and presenting it in a clear form can be expensive. Costs must be incurred to determine the amount of the loss, as well as to present evidence. Also, paying a professional to perform the investigation and prepare a report is vital to establish credibility.

Third (23.3%): Private settlement reached

A private settlement requires legal counsel, but not support of evidence in a form presentable to a jury. The cost of a private settlement agreement is significantly less than prosecution, and there is a chance that some restitution may be made. However, the downside of a private settlement is that it generally involves an agreement not to disclose details. This may be a suitable solution for the victim, but it does little or nothing to stop fraud against a new target.

Second (35.6%): Internal discipline considered sufficient

In the ACFE report, there is little explanation for this reason not to prosecute. However, it indicates that management feels it can handle the matter internally. It is possible that management believes that the consequences it can impose on the fraudster are satisfactory.

Without more information, it is difficult to comment on this motivation not to prosecute. However, if a practice is vulnerable enough to become a victim of fraud, it's fair to question the effectiveness of the practice's discipline procedures. If internal discipline consists of termination only, the stage is set for peers to become victims.

Top reason (39.0%): Fear of bad publicity

No one wants to advertise that they've been taken advantage of. But discretely handling the issue will not stop the activity for other practices in the future.

It is not my intent to show disrespect toward a serious social issue, but perhaps the dentistry needs a "Me Too" response to what has been happening in practices for years. If dental professionals shared their experiences as victims of fraud, as well as what they changed to prevent further fraud, future incidences could be avoided. Staff would also be aware that embezzlement in this profession is not taken lightly.

Terminating an embezzler without prosecuting is the same as delivering the risk to the next employer. Perhaps it is time to come forward and share your employee fraud experiences with your peers. Make sure that dental employee fraud stops with you. Incur the cost so that others can avoid the experience of being robbed. Remember: Someone else may have chosen prosecution so that you wouldn't be a victim.

Read more about embezzlement

True dental fraud: The lake house

An interview with a dental practice embezzler


1. Report to the Nations of Occupational Fraud and Abuse 2016 Global Fraud Study. Association of Certified Fraud Examiners website. Published 2016. Accessed February 1, 2018.