MJ has worked with the practice for more than15 years, managing the back-office and the bookkeeping. Not only is he a valued and trusted member of the staff, he is also the senior partner’s brother-in-law. He is dependable, gets his work done, and is ready to chip in when others need help. In fact, MJ rarely takes more than a few days off. Everyone agrees that they don’t know how they could get along without him.
MJ sounds like a perfect employee, and that may be true. There are, however, some serious red flags present in this—all too real—story. A trusted employee and a family member can gain ever-increasing amounts of control over almost any office process and game it to their advantage. Rarely taking days off can mean commitment; it can also mean a need for control and secrecy.
In MJ’s case, what appeared as dedication to the practice was indeed a need to prevent others from seeing his actions. He had created several shell companies and was diverting payments to these for apparently legitimate purposes. The amounts were within reason, and the system had been in place for so many years that no one even thought to question it.
The scheme fell apart in this instance only when MJ needed surgery and another person had to complete the bookkeeping duties. Suddenly, there were no invoices from these shell companies. When the books from several years’ past were audited, the practice found that MJ had embezzled over $700,000. Although his scheme was thwarted, the challenge of dealing with the legal aspects and the interpersonal conflict related to it was just beginning.
Diagnosis:
Medical practice embezzlement
Recommendations:
- Review our blog Red Flag Checklist Do You Have an Employee at Risk for Embezzlement
- Remember to Trust but Verify—especially for employees with access to money and financial processes
- Consider video recording of all areas where cash transactions occur
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