The Compliance Divas Podcast
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The Compliance Divas Podcast
#99 Prevent Embezzlement through Background Checks
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Background checks can prevent employee embezzlement. In this episode, David Harris, embezzlement expert discusses how embezzlement adversely affects dental practices and provide tips for avoiding this dilemma. Join us in listening to some of David's jaw-dropping cases.
Embezzlement Risk Self Assessment Questionnaire: https://bit.ly/2SDSQlG
Prosperident: https://www.prosperident.com/
Welcome.
SPEAKER_03I'm Leslie Cannum. I'm Mary Gavoni.
SPEAKER_02I'm Linda Harvey. I'm Olivia Juan. And together we are the Compliance Divas. Hello, listeners. I'm Olivia Wuan with the Compliance Divas. We are so excited about this episode because we're going to interview David Harris, who is the embezzlement expert, and talk with us about the importance of background checks. You know, as the compliance divas, we bring clarity and simplicity to compliance by navigating regulatory compliance to keep you on course. Please subscribe to the Compliance Divas podcast through your favorite podcast channel or on our website, thecompliancedivas.com. Any resources we mentioned during our podcasts can be found on the ComplianceDevas.com website. Please submit your questions to support at thecompliancedevas.com. So background checks have long been recognized as an important way to actually prevent employee embezzlement. And in this episode, we are going to talk with David Harris on how embezzlement has adversely affected dental practices and provide tips on how you can avoid this dilemma. Because a background check can actually reduce the odds of recruiting someone who is dishonest or even dangerous to work with. So there's such a high value in verifying employment, education, qualifications, check references, criminal background record, and so forth. But now I want to focus on David Harris. He is the owner and founder of Prosperident. He's just an amazing person, highly qualified CPA, CEO, and he runs the world's largest dental embezzlement firm. And he's also actually a certified fraud examiner. So I know the Divas have some questions to ask Mr. Harris to get some of his insight and wisdom. Mary, would you like to get us started?
SPEAKER_03I would love to. Thank you, David, for joining us and lending us your expertise for this episode. So I have two questions actually. What exactly is a background check? Can you kind of describe that for us? And then how does it help to prevent embezzlement?
SPEAKER_00Great question, Mary. And I'm really glad you started with that because a lot of times when I hear people in the dental world talking about a background check, what they're talking about is seeing whether or not somebody has a criminal record. In other words, they use background check and criminal record check interchangeably. And to me, a background check, and the word uh the words I prefer are pre-employment screening, um, is much broader. And criminal record check is part of it. And let's be clear on that part 70 million Americans. So that's one in four adults has a criminal record. And failing to check criminal records when you hire people is playing a lottery that you will sooner or later lose. But there's much more to pre-employment screening, and let's look at some of the components. One of the things that I tell people is when you interview a prospective staff member, check their photo ID and at least a couple of other pieces of identification as well. Because one of the truisms here is that you can do all the investigating you want on the wrong person, and it's completely pointless. So we need to start our process by fixing the identification of the person we're talking to. Is there forged identification out there? Absolutely there is, but relatively few people think to bring it to an interview, first of all, and second, to bring not only primary forged ID, but also secondary stuff. Secondary Mary could be anything, library card, gym card, whatever. But we want three pieces of ID with somebody's name on it. Um, but let's keep going into the other parts of pre-employment screening. One thing that absolutely astounds me is that relatively few dentists, when they're hiring, drug test applicants. And you know, there are probably 200 million jobs in the United States I could not get without a drug test. And yet dentistry, which let's face it, has the keys to the pharmacy, typically doesn't test. Um, another thing that is really, really important is checking with former employers. And bear in mind that the applicant may not want you to do this, especially if there's something unsavory to be found. Um, a couple of rules there. The first one is don't ever phone any phone number that an applicant gives you. If the applicant says that they worked for Dr. Mary Gavoni, Google is really cheap to use. Go online, find the phone number, call that number, and then you know you're talking to Dr. Gavoni. Um, you know, if you phone, if you phone the number the applicant gives you, you might end up talking to their aunt on a disposable cell phone who pretends to be Dr. Gavoni and gives a great reference. So um talking to former employers is important. Um, a few other things to look at. One is that I don't hire anybody without looking at their social media activity a little bit because you can learn a lot about somebody that way.
SPEAKER_02I love how you summarize this and came up with the term pre-employment screening because it does involve multiple components in addition to a criminal background check. And wow, I was amazed that you said that one out of four adults have a record. And also the points you made about drug screening and how important it is considering the work setting that they're going to be in. Now, I know that Mary has some questions that she wanted to ask of you.
SPEAKER_03So, David, you've explained to us in a little more detail about this pre-employment screening. I love that term. Um, what are some other components that you would add into that pre-employment screening?
SPEAKER_00Um, if somebody is going to have um financial responsibility, Mary, one thing to consider is a credit check. And what I'll say about the credit check, but it's really a much broader comment, especially right now when everybody's having trouble finding staff, is that we need to be interpretive. In other words, bad credit doesn't mean don't hire somebody. What it means is you have to put on your detective hat, understand why they have bad credit, and then decide whether that poses a threat to your practice or not. For example, sometimes people uh have some kind of uninsured medical expense and it trashes their credit for years. And in that case, you know, you've got this single identifiable phenomenon that caused the bad credit. And I would tend not to hold that against somebody. Uh, on the other hand, you have people living beyond their means, which also will sooner or later trash their credit. And that terrifies me. Because those are people living on borrowed money, and when they lose the ability to borrow, they're next going to borrow, in other words, embezzle from you. Um, another one that people don't think of very often, but I think is important in certain cases, particularly if somebody will be driving a vehicle for your practice. Um, you know, I think of orthodontic practices, for example, that often have the vehicle that goes and picks kids up after school and brings them to their appointments and takes them home after. Um, but looking at somebody's driving history is um if you if it's justifiable in the circumstances, is also a really good idea. One thing we see about a lot of embezzlers is they tend to have all kinds of motor vehicle violations. And these are people I think who have a belief that the rules that apply to everybody else just don't apply to them. I was looking at one the other day, and she had at least 20 moving violations since 2012. Um, you know, and and if uh somebody had brought me that profile in advance and said, should I hire this person? My answer would be no way.
SPEAKER_02That's interesting because I've seen that on background checks as well. Uh, not only DUIs, but traffic violations, uh interesting things on their history that we would have not picked up on had we not run a check. Mary, did you have a follow-up question for him?
SPEAKER_03What type of permission do you need to get from the potential employee to do these checks?
SPEAKER_00Um, that's a good question. And it's one probably that practices should direct to their HR advisor. Um, I'd suggest a couple of things. In general, um, permission should be obtained for everything, even if it's not legally required to get that permission. One of the things I encourage offices to do, Mary, is to have an application form when somebody wants a job. So rather than submit a resume and a cover letter, here's our application form, please complete it. And it does a couple of things. It kind of homogenizes the information coming in so that you can compare applicants more easily. Um, it will encourage them to ask questions that they might not be on a resume, like what kind of practice management software are you good at? And also it provides a place where you can get consent for these things. The other advice I'd give is that when you post a job, make your criteria explicit. In other words, let people know that there will be background checking, which might include a criminal records check. And the whole point when you're hiring is to have unsuitable applicants self-select out and do it as early in the process as they can. I mean, if somebody gets to the very final stage of hiring with you and you end up rejecting them, you you've invested a lot of your time in that. So the whole idea is if you tell people that you're going to be doing a criminal records check and you're doing pre-employment screening, some people just won't bother to apply. And that's exactly what you want.
SPEAKER_02That's so true, David. Thank you for that information. I know some years ago I assisted a dentist with a board complaint. And when I was present during the interview, the board official asked for a copy of the job application. And the dentist said, Well, we've always just collected resumes. So I thought it was really interesting that the board asked about the application process because this assistant that had been working there, her license had expired. So if there was a pre-employment screening process like what you just talked about, they would have caught that. Now I know Linda Harvey has some questions for you as well, David.
SPEAKER_04Well, thank you, Olivia. David, like Olivia, I was shocked to say, hear you say that one in four individuals has a criminal record. Oh my gosh, I'm certainly going to be looking at dental teams a little differently now. And and may and some of them may be innocuous. They may not mean that it's going to be they're going to become an embezzlement uh king or queen, if you will. Um, but I wanted to come circle back to before we talk about my original question, to something with drug testing. And that is a really important piece that you mentioned because more and more general dental offices are providing in-office sedation for their patients, which means that they have more drugs and narcotics, including narcotics, on site. And oftentimes they don't have the right protocols in place, David, for monitoring those properly, like you're supposed to under the federal controlled substances laws. So that's a huge risk in offices that I think they're not realizing. Um the doctors uh look at the piece that they're meeting the Board of Dentistry requirement, but they don't realize that there's federal DEA laws they have to comply with as well. More than just having a DEA license. So, all that being said, what I want to circle back to my original question, David, was uh having to do with um the background check or pre-screening along with HIPAA compliance. And we all know that over the years that we've seen lots of dental offices and settlement agreements and fines with the Office of Civil Rights for other kinds of violations, but these violations can be criminal or civil. So I'm reflecting upon the fact that with these criminal penalties, when someone is stealing the patient's identity for commercial advantage, personal gain, malicious harm, there's a big penalty in place for that. 10 years in prison at a minimum and a big fine. So I was curious, in your career, David, have you come across anybody that's also stolen patients' identities in addition to stealing money from the doctor?
SPEAKER_00Oh, absolutely, we have. You know, thieves, Linda, kind of start with uh a need. You know, there's a hole that they're trying to fill by stealing, and um, they're not necessarily very particular about from where that hole gets filled. So stealing from the practice is is one possibility, and often it's the easiest. Stealing from insurance companies is another, and the third place they can steal is from patients. Um we saw one case, it was actually a Canadian case, and it was a prolific dental embezzler. I mean, she had hit more than 10 offices in her career, yes. And uh one of her tricks was uh she claimed unemployment insurance for about 40 different people. And the place where she got all their information to originate those claims uh was from her work as the office manager of the dental practice. Um so yes, I uh identity theft of patient identities is is highly possible.
SPEAKER_04My jaw just dropped when you said she'd been in 10 offices, David. And and I'm sure our listeners probably heard that large log bang from all of our jaws. So if I could just take that case for just a second, and maybe I'm wrong, but David, that tells me as a risk manager that nobody along the line did any of these pre-screening steps that you've just mentioned that all seem so practical to be sure that you're making the best hire for the practice. Um, and I know the labor pool has been very tight since COVID, but even before then, um you've been in business for a long time and seen probably hundreds, if not thousands, of cases over the years. So it's just surprising to me that um the doctors are not choosing to safeguard their practice and their license, their patients um more carefully. And I know many do. Um, so uh thank you for bringing that to light. I'm just shocked by that.
SPEAKER_00Well, yes, I I think you should be. In fairness to dentists, um, they despise in general, they hate hiring. You know, and I've I've had rooms of 150 dentists, and I've said, okay, can I please see a show of hands for how many of you enjoy hiring Seth? And nobody puts up their hand. Um, they absolutely despise it. And it's hard, especially now with, as you say, a diminished labor pool. It's hard to find good people. And like any job you despise, when a shortcut magically appears, you tend to take it. And the shortcut is, you know, I've met this person, I feel comfortable with them. I'm just gonna skip the the kind of onerous background process because you know, it involves making phone calls and um talking to people and things like that. And uh a lot of dentists would just rather not do that part.
SPEAKER_04Yeah, it's um it's the path of least resistance, isn't it, David?
SPEAKER_00It is the path of least resistance. And the other thing I'll say is that you know, the the the serial embezzlers, the people who do this over and over again, um, you know, they're pretty good students of human nature and they they understand how to um manipulate the dentist who's about to hire them. For example, um, you know, we saw one rather prolific embezzler a little while ago, and all of her job history that she listed was either with DSOs or university dental schools. And what I I think she understood the psychology of the doctors hiring her, in that they're gonna look at this and say, all right, so if I phone Aspen Dental and look for a job reference, I'm gonna end up talking to six different people. And at the end of that process, they're gonna say, we can only confirm dates of employment, so I won't bother. And you know, when I call the the university that she listed was Vanderbilt in in Tennessee. You know, when I call Vanderbilt, I'm gonna get the same kind of runaround, so I won't bother. Now, that wasn't her true employment history at all, but that was how she presented it as a way of discouraging the people about to hire her from you know making the phone calls they should make.
SPEAKER_04Well, I'm picking my jaw up now, David, and I'm gonna return the mic back to Livia. So thank you so much for sharing that. That that is truly eye-opening, and I think our listeners are gonna take away some extremely valuable information today.
SPEAKER_02David, I've had a similar experience, but a little different, where the individual, and I asked about a gap that was missing in her work history, and she said that those were the years that she spent at home, staying at home with her small children, when it really worked out that she didn't list the previous employer because she had stolen money there. So interesting in learning these traits of these embezzlers. Uh, Mary had some additional points that, or rather, I'm sorry, Leslie, I don't want to miss Leslie. Leslie had some questions as well, and then we'll get back to Mary.
SPEAKER_00Um, just before we go there, Olivia, can I address that issue? Because gaps in employment are one of the ways, exactly as you said, that people try to hide unsatisfactory work situations. Um, what I tell Dennis is this any absence from the workforce for more than a month needs to be supported by documentation. And if somebody was out of the workforce for three years, they would have things like tax returns to prove it. Um, so we we shouldn't be shy about saying to somebody, you know, I it's our policy. And I always recommend that when you when you ask people for other for additional information, you start with with the words, it's our policy, which comes across a lot nicer than, well, I don't know whether I should trust you or not. So um, but it's our policy that absence from the workforce for more than 30 days needs needs to be substantiated. So bring in your unemployment paperwork, bring in your tax returns, um, something that will prove that what you say is true is.
SPEAKER_01Good points. Leslie. David, you brought up so many excellent points that we need to focus on. And I think today, in our uh workforce numbers, people who are leaving the industry and having a difficult time finding new people to take their places, that all of these things should be taken into consideration and not dismissed just because we need somebody in our practice right away. Uh, I want to just share with you before I ask you a big question about embezzlement. I want to share with you uh why in California it would have been a very good idea for people to, dentists, to have collected three pieces of ID on a particular hygienist. Uh in uh a little bit earlier last year in San Jose, there was a woman who posed as a dental hygienist who was not licensed as a dental hygienist, but she managed to get jobs in 10 different offices in California from 2015 to 2020. And uh she actually had stolen uh a hygienist identity, and a smart uh pre-employment screening process would have been to get ID and a couple of additional pieces of ID uh to verify that she was who she said she was. But interesting that you would have brought that up today and would have made good sense for the uh San Jose practices. I do want to ask you about can you share with us what is the most egregious embezzlement case that you've ever worked on?
SPEAKER_00Um that's that's a good question, and I'm not sure how to answer because uh the degree of egregiousness could be measured by dollars or um, you know, boldness with which somebody stole. So I maybe I'll give you a couple. Um we we typically see a case most years that exceed where more than a million dollars is stolen. And we have we have part of our website called the Hall of Shame, where we profile embezzlers, and there's part of the hall of shame known as the Million Dollar Club. And those are um embezzlement's high achievers. Uh so if if anybody listening is kind of curious, they can go to prosperident.com and uh find our hall of shame and uh spend a spend a little bit of time reading about some of these people. The biggest embezzlement I've ever seen was close to $2 million, and that was taken from a two doctor practice over about six years. Uh so that's one kind of egregious. But you know, there are other kinds. Um, one of the funniest phone calls I ever got in my career came one day. I picked up the phone, the gentleman said, I'm an orthodontist, I practice with another orthodontist, and we have this unwritten arrangement with each other where when patients pay cash, we just put it in our pockets and we don't tell the IRS. But David, the reason I'm calling you is that I think my partner is stealing more than I am.
SPEAKER_01Oh my goodness.
SPEAKER_00That was the call. And it takes a lot to render me speechless, but that did it. Uh, it just took me uh 20 seconds to kind of collect myself after that. Anyway, as it turned out, Leslie, he was right. The amount that his the differential amount that his partner had taken was about $300,000. And um happily it all came back. Um needless to say, they're not partners anymore. Um, and that was probably the most um artistic report we have ever written because we had to dance in the elephant, we had to dance around the elephant in the room called tax evasion. But we see what we refer to as fratricide cases, meaning doctors stealing from each other. Um, probably about 8% of our caseload is those, which is a shockingly high amount to me when you consider that you know it's still a minority of doctors who practice in groups. So that's a that's another kind of egregious. Um, and then we have the frequent flyers, and I I I mentioned the the lady with 10 or more practices, and there are there are quite a few people like that around, you know, who've who've hit up at least three or four. And when the when the doctor's interviewing these people to hire them, they're also reverse interviewing the doctor. Like, how easy are you going to be to steal from?
SPEAKER_01I am definitely going to pay a visit to your Prosperity Hall of Shame and take a look at some of those cases. I it's always interesting to see what people have done and and uh how sometimes doctors can be duped not only by people who work for them, but people who they work with, associates or other doctors. So that's very interesting.
SPEAKER_00Yeah, and maybe I'll address one comment that was brought up earlier about the the shortage of people right now. And I one thing I hear, especially when I speak to a live dental audience, is well, you know, when I when I post a job and I only get one applicant anyway, there's no real point in screening them. Um, or alternatively, you know, if if it if it defers my hiring decision by three or four days, somebody else will probably have grabbed them by then, and there's no point. And I say a couple of things to those people. First of all, um, I understand that the current climate forces people to lower their standards and hire people that in other situations they would not. I totally get that. However, if you are going to lower your standards, you need to know by how much. Uh no dentist would want to unknowingly hire uh a child molester or an embezzler. The second thing I say is if you have to, and I don't I don't recommend this if you have a choice, but sometimes you don't, um make the person a conditional offer of employment and then do the pre-employment screening after. If if the concern is that they're not going to be on the market for long, and if I did there, I'll lose them, then hire them, but follow through with with your background screening.
SPEAKER_02I agree, David. That that's perfect information to share. And and I have found that dentists seem to be some of the most trusting potential employers ever, and in addition to being so busy and with their businesses, their practices. So this is all great information. Uh Mary, I thought you had a point you wanted to ask.
SPEAKER_03Well, first, David, you have left us all speechless today, but information that we need to know so that we can obviously advise our clients on things that they need to do. So, aside from background checks, and I think we all agree how important that is, are there some other tips that you have for doctors to avoid embezzlement from their practice?
SPEAKER_00Absolutely. Um and let me tell you how an embezzler thinks. So I'm your office manager and I plan to steal from you. The first question I ask is really simple. Does my doctor do any kind of comparison between what practice management software says the practice collected and what goes into the bank? Okay, and we all know practice management software records all collections and it prints off a total at the end of the day. And there are two kinds of dentists. There are those who will sit there with that report at the end of the day and they'll go on to their online banking and they'll check the deposit and make sure that A equals B. And then there's the other 85%. If you are in that 85%, what that means is that the dumbest, laziest thief on the planet can successfully steal from you. Okay, if I can simply divert some money that should be deposited and think that my doctor will never notice, and I'll also mention your accountant will not notice that. If I can do that and get away with it, that's how I'm going to steal because it's simple, it's clean, I don't have to play any games and practice management software. I just deposit less money than what comes in. So the first thing is that needs to be checked. And the tradition in dentistry was that it was checked daily. Personally, I think doing this with monthly totals makes a lot more sense and is also a heck of a lot less work. So that's the that's the first very basic protection. And as I say, it's a long way from universal. The second basic protection is did the information that get entered entered into my practice management software make sense? In other words, what I do think you should check at the end of each day from your report is okay, did every patient I see today are they on this list? Um if I see a three-surface filling recorded, did I do a three or did I do a four? Because the difference will, if if a three is recorded and I did a four, it will cost me money. Um the third thing is treatment should be entered into practice management software in the operatory. You know, especially when practice management software was new and there wasn't such a thing as an operatory terminal. It was it was very um customary for their the receptionist to enter treatment either from the chart or some kind of roading slip. Um, and that's a monumentally bad idea in my mind. It should be entered in the operatory by the by clinicians. So if you're a hygienist at the end of the appointment, you enter in what you did. If you're a dentist, probably your assistant is is entering into practice management software while you're working. So that that is important, and it really adds an additional complexity when people are trying to steal because uh the patient standing in front of them already has treatment entered, which means they already have a balance that they own.
SPEAKER_02Um that's interesting, David. I I had a a case years ago where the cache was edited after the patient left.
unknownYep.
SPEAKER_02And then they edited it to say uh delta dental adjustment. So until I actually looked at the audit trail and pulled the files, patient didn't even have delta dental. And so it was a pattern. So is that something you look at too? Is the audit trails?
SPEAKER_00Um, I'm not sure the audit trail is the best place for a doctor to look. And and the reason I say that, Olivia, is simply because of the volume of it. If you're a one dentist, one hygienist practice and you want to print your audit trail for the next last year. Um, I hope you have six or seven thousand uh blank pages because that's what you're gonna need. Um yeah, I wouldn't I wouldn't rush to do that necessarily, but there is a day-end report that you should look at. The other thing you should do is what I call articulation. And not I'm not talking in the sense of the relationship between the mandible and the maxilla. What I am talking about is this if your practice was open 20 days this month and you have 20 day-end reports in your left hand, and you have one monthly report in your right hand, the total for fees, adjustments, and payments for the 20 should add up to the one. If they didn't, then somebody came in after hours and did stuff, and that's when that kind of stuff that you described a minute ago, Olivia, takes place.
SPEAKER_03Awesome. Mary. Thank you, David, for making that clarification about the audit trail because it could be overwhelming for someone to look at. Um, I have advised practices or doctors in the past to really um really tighten down what you're looking for in the audit trail because you can customize the information you get. Um, and I've seen a couple of practices where we uncovered some embezzlement where the um practice administrator was creating just an unbelievable number of credit balances in patient accounts so that then the cash would balance at the end of the day. So those would be, I guess in my mind, and hopefully you would recommend that, looking at those as well.
SPEAKER_00I absolutely I do. I again, it's just the audit trail itself that probably isn't the best place to go. Um, you know, the the audit trail is a listing of every line item that was posted in a practice. So when you think of a patient who's in for a hygiene visit, um, that occupies about a third of a page on the audit trail. Like there's a lot of stuff there. And especially if you're not looking at it every day, I mean, if you decide you're gonna look at the audit trail for a month, you know, don't make a lot of plans for the next eight hours. If you um want to look at things, every every practice management software has a day-end report. So that's that's kind of a one-day version of the audit trail, but it also has things like totals that the audit trail does not.
unknownRight?
SPEAKER_00The audit trail doesn't tell you total deposits today were X, but the day-end report does. So start that, start with that, and then practice management software will also allow you to print some things that I consider to be high-risk transactions. So most software will do a deleted or a deleted and modified transactions report. And now instead of trying to find this stuff in a um, you know, in a very big haystack, we can kind of isolate on the exact things we want to find. So again, I'm I'm not an audit trail fan. Um, but there are there are other reports in practice management software that are more important. And to me, again, that big one is that day-end report, or sometimes it's called a day sheet that that software can can print for you.
SPEAKER_03That's a really important clarification, David, and thank you. And can you share with our listeners a resource for us? I think you mentioned that you have a risk self-assessment tool that we can make available to our listeners.
SPEAKER_00I sure do. But before I go there, one last thing I want to say about reports. Um, and if you're listening and you're a practice owner, um, read my lips. Print your own damn reports. As soon as you allow somebody in your practice to print a report and hand it to you, you gave up control over the parameters under which that report was generated. And it's very easy for somebody to do selective reporting. So print your own reports. Um, to the resource that Mary asked about, yes, it's called the embezzlement risk self-assessment questionnaire. It's designed for a practice owner to determine the level of risk that they have that they're being stolen from. It's very quick, it's about a 10 to 15 minute job to complete online. Um, the software does the scoring for you. You get back an email with a score, and the score tells you how likely it is that you have a problem. So we sell this on our website for $139, but um, I had agreed to make it available to um listeners of the Compliance Divas podcast at no charge. So in the show notes is a link. Help yourselves.
SPEAKER_02Thank you so much, David, for offering that valuable tool to our listeners. We appreciate your generosity and also the amazing education that you have provided for us during this episode. Truly a wonderful topic. So, as the compliance divas, we bring clarity and simplicity to compliance by navigating regulatory compliance to keep you on course. Please submit your questions to support at thecompliancedevas.com, and any resources that we mention will be available on our website. Thank you again, David, for joining us.