Dental Practice Fraud Causes 200k Embezzlement Warning

dental embezzlementThe Colorado Dental Association recently sent an email alert to member dentists regarding a $200,000+ embezzlement that occurred in a dental practice related to the processing of credit cards.

According to the Metropolitan Denver Dental Society, experts estimate that more than 50% of dentists are embezzled with an average loss of $50,000.

But, because embezzlers often steal relatively small amounts over a long period of time, the misappropriation of funds goes unnoticed.

The U.S. Chamber of Commerce estimates that 75 percent of all employees steal at least once, and that half of these steal repeatedly. The Denver District Attorney’s Office website warns, “embezzlement is at epidemic proportions accounting for 20 percent of all cases filed by the Denver District Attorney’s Economic Crime Unit.” In 1970, one in 200 employees was dishonest; it is estimated that today, one in six employees is dishonest.

The MDDS states that the most common method of embezzlement in a dental practice occurs through theft of cash, checks or supplies.

Here are a few embezzlement scenarios that occur in dental practices –

  • Cash is pocketed from patients.
  • Petty cash is stolen.
  • Cash or checks are removed from the daily deposits and replaced with subsequent receipts.
  • Insurance fraud.
  • Endorsements are forged.
  • Writing duplicate accounts payable checks or writing checks to phony vendors.
  • Stealing supplies and re-selling or returning to vendors for refunds that are pocketed by employees.

In a survey The Wealthy Dentist performed in 2010, 59% of the dentists surveyed said they had discovered evidence of embezzlement. With such a high degree of fraud, how does a dentist diminish the risk of embezzlement?

The American Bar Association offers the following checklist on how to prevent fraud and embezzlement –

  • Adopt an effective, documented system of internal controls to protect against acts of dishonest staff.
  • Bank and credit card statements can be delivered to the business owner’s home or separate address for personal review.
  • Checks and debit transactions should be reviewed with the statements.
  • Checks should require two signatures, or be reviewed by the owner.
  • A copy of the bank reconciliation should be attached to each monthly bank statement and reviewed by two parties.
  • Finance or accounting personnel should not be signers on all bank accounts.
  • Checks received in the mail should be immediately endorsed by a two-person team who opens and processes the mail.
  • After checks are properly endorsed and verified, the bookkeeper should take charge of the checks for deposit.

Have you recently experienced embezzlement in your dental practice?

For more on employee embezzlement and how to prevent it see – The Metropolitan Denver Dental Society Watchdog

Dental Office Embezzlement of $100,000 in Dental Insurance Payments

Dental Office Embezzlement of $100,000 in Dental Insurance PaymentsDental office embezzlement is still alive and well in California.

Deborah Lynn Kessler, 45, pleaded guilty to four counts of grand theft over charges that she embezzled more than $100,000 in dental insurance payments at the dental practice where where was manager.

The Orange County Register reports that Kessler signed dental insurance payments over to her personal bank accounts over the course of about three years. Investigators initially said she may have used the money to pay for an RV, boats and trips, and to cover her personal bills.

She was sentenced to two years in jail, plus an additional two more years of community supervision.

According to a 2010 Association of Certified Fraud Examiners report almost one-fourth of all embezzlement cases report losses of at least $1 million with smaller businesses being the most susceptible to fraud.

The average embezzlement scheme lasts for 18 months before detection.

The U.S Chamber of Commerce estimates that employee embezzlement costs American companies $20 billion to $40 billion a year. A long-term employee is 15 times more likely than a stranger to steal from a company.

Some of the best ways to prevent dental office embezzlement is by implementing a segregation of duties, keeping petty cash to a minimum and requiring dual signatures on checks.

Has your dental practice ever been the victim of employee embezzlement? What happened, and how did you handle it?

For more on the Orange County Register story see: Dental worker guilty of stealing more than $100,000

Dental Practice Embezzlement: Dentist Survey Video

Dental practice embezzlement dentist survey videoDental practice embezzlement can be a major dental management issue.

In a survey from The Wealthy Dentist, 52% of dentists who responded reported having been embezzled, while 48% say they have not been a victim of fraud.

“It happens to 95% of dental offices,” said an orthodontist. “The other 5% are ignorant, or have a spouse working the front desk.”

Jim Du Molin and Julie Frey discuss the problem of dental practice embezzlement:

“I was embezzled to the tune of over $1,000,000!” said a periodontist.

“You need to have several checks and balances to help prevent embezzlement, plus do random audits to let staff know you keep on top of checking records and books,” advised a pediatric dentist.

Has your dental office ever been embezzled? Any further thoughts on dental practice embezzlement and fraud?

Dental Practice Embezzlement Nets Office Manager 190k

Dental Practice Embezzlement Nets Office Manager 190kThis week, The Times-Picayune reported that a Covington, Louisiana, dental practice manager, Kelly Muller, was charged with embezzling almost $190,000 over a three-year period from the dental office she managed.

Muller allegedly added unauthorized money to her paycheck as well as made credit card purchases using the dentist office’s money.

Embezzlement is known to occur more often when just one employee has control over writing checks, balancing back statements, administering payroll, and making deposits.

The U.S. Chamber of Commerce estimates that employee fraud costs American businesses over $50 billion annually. It is estimated that 1 in every 6 employees is dishonest.

The MDDS states that the most common method of embezzlement in a dental practice is theft of cash, checks or supplies.

Here are a few embezzlement scenarios that occur in dental practices –

  • Cash is pocketed from patients.
  • Petty cash is stolen.
  • Cash or checks are removed from the daily deposits and replaced with subsequent receipts.
  • Insurance fraud.
  • Endorsements are forged.
  • Writing duplicate accounts payable checks or writing checks to phony vendors.
  • Stealing supplies and re-selling or returning to vendors for refunds that are pocketed by employees.

In a survey The Wealthy Dentist performed, 59% of the dentists surveyed said they had discovered evidence of embezzlement. With such a high degree of fraud, how does a dental practice diminish the risk of embezzlement?

The American Bar Association offers the following checklist on how to prevent fraud and embezzlement –

  • Adopt an effective, documented system of internal controls to protect against acts of dishonest staff.
  • Bank and credit card statements can be delivered to the business owner’s home or separate address for personal review.
  • Checks and debit transactions should be reviewed with the statements.
  • Checks should require two signatures, or be reviewed by the owner.
  • A copy of the bank reconciliation should be attached to each monthly bank statement and reviewed by two parties.
  • Finance or accounting personnel should not be signers on all bank accounts.
  • Checks received in the mail should be immediately endorsed by a two-person team who opens and processes the mail.
  • After checks are properly endorsed and verified, the bookkeeper should take charge of the checks for deposit.

Could your dental practice survive a $190,000 embezzlement?

What safety nets do you have in place to prevent embezzlement from happening at your dental practice?

To read more about the Louisiana dental embezzlement case see: Covington Woman Accused of Stealing $190K From Dentist’s Office.

Dental Practice Management: Dentist Embezzlement Survey

Dental Practice Management: Dentist Embezzlement SurveyA recent survey from The Wealthy Dentist reveals that 52% of dental practices who responded have been been embezzled, while 48% have not been a victim of fraud.

The reason why dental practices are at high risk is because the dentist is the central figure generating the revenue stream that moves the practice forward.

Many dentists do not have the time, the interest, or the resources to establish effective internal control systems and monitor them on a regular basis.

As a pediatric dentist expressed, “You need to have several checks and balances to help prevent embezzlement, plus do random audits to let staff know you keep on top of checking records and books.”

Of the dentists who responded, 90% of urban dentists answered yes to being embezzled, with only 43% of suburban dentists and 40% of rural dentists stating they had been embezzled.

Here’s what dentists has to say about dental practice embezzlement:

“Always double-check. Remember what Harry Truman said, ‘The buck stops here’ Do not create or allow situations to occur that would allow some one to embezzle you.” (General dentist)

Do not blindly trust even your most loyal employee! Run an audit trail every week!(Alabama dentist)

“Much easier with computer dental management software. Hard to do with a pegboard system of old. Balancing day-sheets by using old defunct accounts, etc. makes it easier to hide in a variety of ways. Small offices with key employees tied up with no cross-trained duties, one person business offices.” (General dentist)

“We need to be more educated on how they manage to do this.” (California dentist)

“Many dentists make so much money when some of our staff are not well-paid, so it is not a surprise.” (California dentist)

“You can only make it more difficult, you can’t prevent it entirely.” (Florida dentist)It happens to 95% of dental offices. The other 5% are ignorant, or have a spouse working the front desk.” (Colorado orthodontist)

It’s the person w all the passwords and been with you the longest. They know your moves and you trust them. Don’t have that person have access to your check book. Have your CPA’s bookkeeper do you checkbook reconciliation and run periodic reports for account receivable and check against bank deposits. Watch your cash.” (Michigan dentist)

“Don’t trust anyone except your wife, especially your most trusted, long-term employee. Monitor, audit, but never trust!” (General dentist)

“Thank God for computer systems that can now track corrections made!” (Texas dentist)

“I make all the deposits and look at the daily reports. You have to be hands-on to some degree otherwise you leave the door wide open for theft.” (California dentist)

Over 1,000,000 dollars!” (Texas periodontist)

Each year Marquet International, an independent investigative, litigation support and security consulting firm studies major embezzlement cases in the United States and issues a report on their findings.

The following statistics are highlights based upon The 2011 Marquet Report on Embezzlement. Here’s what they found:

  • Vermont had the highest Embezzlement Propensity Factor followed by Connecticut Pennsylvania, Montana, Virginia, Iowa and Idaho – identifying these states as having the highest risk for loss to embezzlement in 2011;
  • The financial services industry suffered the greatest losses due to major embezzlements;
  • Non-profits and religious organizations combined accounted for about one-sixth of all the major embezzlement incidents in the 2011 study;
  • The average loss for 2011 was about $750,000; the median loss was $340,000;
  • Nearly three-quarters of the incidents (72.3%) were committed by employees who held finance/bookkeeping and accounting positions;
  • The average scheme lasted nearly 5 years;
  • The most common embezzlement scheme involved the issuance of forged or unauthorized company checks;
  • Nearly 22% of the cases in which a motivating factor was known involve perpetrators who reportedly had gambling issues;
  • 5% of the cases involved perpetrators who had a prior criminal history;
  • The average embezzler in this study stole $15,189 per month from their employer;
  • Nearly two-thirds (64%) of the incidents involved female perpetrators;
  • Male perpetrators, on average, embezzled about 25 percent more than females;
  • Nearly 90 percent of the cases involved individual perpetrators;
  • The average adjusted age of perpetrators at the commencement of their embezzlement was just under 43 years;
  • 40 – 49 year-olds caused the greatest overall losses;
  • Most major embezzlers appear to have been motivated by a desire to live a relatively more lavish lifestyle, rather than driven by financial woes; and,
  • The average prison sentence was 4 1/3 years (52 months) for convicted major embezzlers.

For tips from The Wealthy Dentist on preventing embezzlement see Dental Practice Fraud Causes 200k Embezzlement Warning.

What has been your experience dealing with dental practice embezzlement?

Do you have advice for other dentists?

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