Article Date: 5/1/2009

Four Tough Lessons on Theft And Fraud

Four Tough Lessons on Theft And Fraud

These real-life cases illustrate why you must slam the door on embezzlement.

Bonita Springs, Fla.


While I am compensated to teach my clients how to be more efficient, productive and profitable, I also learn from each on-site visit. What I learn about embezzlement amazes me. If you follow the articles I've written for OM, including the column "Fix This Practice," you know the main points of my message:

► Maintain an awareness of all office activities.

► Pay attention to detail.

► You, the employer need to police staff (the state patrolman concept).

► Organize to include systems of checks and balances.

► Provide structured training programs that teach adherence to your standards and operating procedures.

► You, the owner, must monitor finances on a monthly basis.

► Provide a system of profit sharing for staff.

The following "real life" cases illustrate the importance of these points. (Note that I've changed the names of those involved.)

CASE 1: The manager in control

The owner (doctor) of a large practice, who was not "computer savvy," gave the job of implementing a new computer software program to his office manager, Sue.

In Sue's 12 years at the practice, the doctor considered her a trusted employee. She was attractive, well dressed and had excellent social skills.

The on-site computer representatives never worked with the owner. Sue established all access codes. The doctor was unaware that Sue had given herself the ability to delete transactions. Obviously, the owner enabled the problem that follows.

Note: When you create the temptation, you'll become the victim of embezzlement.

The doctor retained me to determine why his net income was decreasing even though his gross income was on the up turn. It became obvious that Sue was pocketing money from office transactions. In less than three years, she had stolen $94,000.

Note: Typically, big-time embezzlers are almost always given too much trust with too little supervision.

How to Avoid Becoming a Victim
Use the following means to prevent or detect embezzlement:
► Once a month, take a random full day of charts, and track all services and payments.
► Open boxes from contact lens and spectacle laboratories at random. Make sure the product matches a patient order.
► Don't let staff open mail. The temptation of large dollar amounts from insurance companies is difficult for many employees to resist.
► Only you, the owner, or a family member should make bank deposits. If this isn't possible, make sure that a technician or recall secretary makes the deposits, as they do not handle the money in the office.
► Periodically, put cash in the cash drawer without your employees' knowledge. If you put $23 in, there must be a $23 overage when balancing at the end of the day. If not, this is a red flag for theft.

CASE 2: Love and profit

A contact lens technician, Judy, worked in an optometrist's office for four years. Judy not only ordered contact lenses for her employer's practice, she ordered contact lenses for another optometrist whom she was dating. Judy had stolen $84,000 worth of product. This was not just a "love triangle." The other optometrist paid Judy $5 for each box of contact lenses. Again, total trust on the part of the owner led to the embezzlement.

CASE 3: Edging at home

An optician, Rod, operated an edger in his home. He didn't pay for lens blanks, rather he ordered them through his employer's (the doctor's) account. He fabricated prescriptions for patients and friends who paid him cash — at a fraction of the retail cost. Rod also made prescriptions for a few other optometrists using his employer's lens blanks. In total, Rod had stolen $104,000.

Note: Never assume your accountant is trained to uncover theft.

Understand that this type of situation is the most common. Many opticians steal lens blanks without an edger of their own — they use their employer's edger.

CASE 4: $200K in fraud

I saved the "best" for last. This case amounted to more than $200,000 in cash, check and credit card fraud. The crimes transpired through three years. The culprit, Allison, was a longtime office manager. She balanced the daily transactions and made bank deposits. The owner, an excellent clinician, issued an office credit card to Allison so that she could purchase office supplies.

The doctor made numerous equipment purchases on credit cards that were offering 0% interest for 12 months. He gave Allison full authority to apply for these cards in the doctor's name and close them prior to any interest accumulating. Allison had the authority to gather financial data for the doctor's accountant with no check and balance systems to ensure the data were accurate. Through three years, Allison:

► forged the owner's signature. Yes, she had total access to the office check book.

► charged car payments, rent, groceries and vacations to the office account (she could do this because she reconciled all credit card statements).

► did not close the 12-month 0% credit cards, as instructed and continued to charge for her personal use.

► told the staff that the owner was "overspending" and that raises would be almost impossible.

► stole cash and checks.

► stole frames and sold them.

You might ask, how could this happen? Actually, given the numerous opportunities for theft at various levels, it's very common.

I urge you to read the prevention tips in the above sidebar. Reread the first paragraph of this article, and take a true inventory of yourself and your office. Be cognizant of your office as a business, or be exposed to the crimes listed in this article. OM

Dr. Kattouf is president and founder of two management and consulting companies. For information, call (800) 745-eyes, or e-mail him at

Optometric Management, Issue: May 2009