Email Scam Alert
CDA has been notified by other state dental associations of an email scam that is targeting their members. The email has the subject line “Terry Recovery,” includes an association logo, and appears to be coming from the association’s email domain. This email is a scam and should be deleted immediately.
Being the victim of theft is bad enough, but when that theft is perpetrated by a trusted member of your dental team, it’s especially harrowing. Unfortunately, theft within dental practices is surprisingly common and it’s on the rise.
One of the most common types of theft in the dental office is staff embezzlement. A survey released in February 2020 by the American Dental Association found that 48% of respondents had been the victim of embezzlement — a 13% jump from a decade prior. Surprisingly, 46% of responding practice owners had been victimized more than once.
One case reported to The Dentists Insurance Company involved a practice owner who oversaw two offices that were largely operated by associate dentists. He hired a bookkeeper to work for both offices. The owner became aware of possible wrongdoing after receiving a call from the bank alerting him of suspicious signatures on his company checks. Apparently, the bookkeeper had attempted to intercept the alert from the bank, but she could not successfully answer the account security questions. The bank called the office again after the employee abruptly ended the call.
The insured learned that the employee had been using a signature stamp on the checks to provide herself bonuses and cash advances. She listed herself as an employee on the payroll of each office to receive duplicate paychecks. She also used her company credit card to make personal purchases for herself and pay expenses for her husband’s business as well as taking cash advances at a local casino. The employee then used company checks to pay credit card bills, which she allowed to incur late and over-limit fees.
The owner filed a police report and the employee was prosecuted and ordered to pay restitution. As the former employee no longer had assets or a job, the dentist was not able to recover any funds beyond those covered by insurance.
Dental practices are typically tight-knit workplaces built on trust and camaraderie. Practice owners put their trust in their staff, especially those who have employed many years. However, long-term employees are the most likely to be engaged in theft or embezzlement. The ADA survey found that nearly 40% of employees accused of stealing had been with the practice for four years or more. These are typically employees who handle accounts receivable, accounts payable and banking functions, said Jennifer Duggan, a California attorney specializing in business and employment law.
“The prototypical thief is a long-time employee who is extremely familiar with the financial aspects of your business,” she said.
The telltale behaviors to watch for include the following:
Other best practices, such as conducting dentist-to-dentist reference checks before hiring and cross-training employees for multiple duties, can help prevent dishonest behaviors.
Implementing accounting controls thwarts potential employee embezzlement. Unfortunately, many dentists inadvertently put their practices at risk for fraud by trusting a single employee with financial responsibility or not reviewing accounts payable and receivable.
Cases reported to TDIC show instances of employees deleting appointment and ledger entries, endorsing patient checks to personal accounts, forging payroll checks, modifying payroll, misappropriating credit cards and using signature stamps without authorization. In some instances, employees have even redirected funds from dentists’ merchant account to their personal accounts or issued phony refunds to a personal account.
In more sophisticated schemes, employees fabricate fictitious vendors, create nonexistent employees, receive kickbacks from patients or from vendors for awarding company contracts or even coerce subordinate employees to carry out theft.
“Simply reviewing your bookkeeping structure and implementing accounting measures will greatly reduce the probabilities of falling victim to employee theft,” Duggan said. “Instituting controls also communicates to employees that you are paying attention and discourages even the thought of stealing.”
Other accounting controls to include:
TDIC policyholders can access more guidance on employee embezzlement, including methods, prevention strategies and recovery tips, through the Embezzlement Reference Guide.
TDIC Commercial Property insurance provides Business Owner’s policyholders coverage for employee dishonesty losses occurring within their practice. If the loss also involves the misappropriation of your identity, TDIC offers identity-theft recovery for the individual dentist under its Professional Liability policy.
If you suspect you may have been the victim of embezzlement, contact your professional insurance carrier immediately. TDIC policyholders have access to trained analysts who will discuss the situation and next steps, including best practices for documenting the fraud.
TDIC’s Risk Management Advice Line is a benefit of CDA membership. Schedule a consultation with an experienced risk management analyst or call 800.733.0633.
Reprinted with permission from the October issue of the CDA Journal.