Are You Getting Embezzled? with David Harris: Howard Speaks Podcast #143 - Dentistry Uncensored with Howard Farran - Dentaltown

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Overcoming a troubled adolescence, David Harris has become the world’s leading expert on dental office embezzlement. He is the CEO of Prosperident, the world’s largest dental embezzlement investigation firm. Prosperident’s team of specialized investigators is consulted on hundreds of frauds annually committed against both general dentists and dental specialists. David has had the distinct pleasure of hearing cell doors slam shut on many embezzlers. David is a licensed private investigator with a graduate degree in applied mathematics and a CPA. David is “dual certified” in fraud investigation – he possesses both the Certified Fraud Examiner designation from the Association of Certified Fraud Examiners and the Certified in Financial Forensics designation from the American Institute of CPAs. David is a Mensa member and belongs to several organizations for dental consultants and speakers. David has been interviewed on the subject of embezzlement by many leading dental publications and organizations. He is also a prolific writer and authors or co-authors a dozen or more articles annually that appear in major dental publications. David has lectured at several US and Canadian universities in the faculties of business, law and dentistry. David has spoken at regional, national and international dental conferences. He is a highly entertaining and engaging speaker who draws on a vast amount of experience in his field.

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Howard Farran and David Harris interview transcript

Howard Farran: It is a huge honor today to be talking to an expert if not probably the only expert I know who does this full-time, and that is you have an MBA, a CPA. I don't even know what a CMA, CFE, CFF is but basically, long story short you've built your entire life and career on embezzlement in dentistry.
David Harris: That's right.
Howard Farran: I think it's an emotional problem because a lot of dentists I think the ones I've talked to that found out someone embezzled them I don't this it really was so much the money. It was just the violation of their emotional trust. They can't believe this right-hand person that they had in their office for 15 years. Who they went to their daughter's baptism and he went to their mother's funeral. It was just they had this beautiful, loving, respecting relationship for 15 years, and he found out she was stealing from him, and it's just emotionally crushed him. Do you think the issue is more financial or emotional turmoil that somebody violated you?
David Harris: The emotional part is certainly very real Howard. Yes, you're absolutely right. Every embezzlement victim who I have ever talked to has that feeling of violation. They've trusted somebody and then that person leverage that trust into a theft. On the other hand, money can be important too, and I've seen embezzlements of close to $2 million take place. I don't care how much you are invested emotionally in somebody that's a heck of a lot of money.
Howard Farran: Most of people I've just heard just say you can't steal $2 million if somebody only has $40 in their wallet but so let's back all the way to the beginning. Who's David Harris and how did you become an embezzlement expert and why did you pick dentistry?
David Harris: I didn't really pick dentistry at all. Dentistry picked me a very long-
Howard Farran: Is that because you're bold and handsome like me or is that why they picked us? I'm pretty sure we just got lucky in life and we-
David Harris: We got lucky in life. It was 1989. I was doing investigations for a bank. I'd left my job. I was sitting home kind of wondering what was going to happen and the phone rang, and it was a dentist friend of mine. He said, "I think my front desk person is stealing from me, and I really don't know where to go with this other than you." I really had nothing going on that week, so I said, "Okay I'll meet you at your office after hours tonight. We'll sort it out." I did, and this was back in the days of pegboard. In other words, before people were using practice management software. We found out what she was doing. Fired her. The doctor promised me to buy me dinner that he never did. My introduction to the type [fist 00:03:05] in this of the dental profession but that's okay, and I went back to watching T.V and, I didn't think anything more of this until 2 weeks later.
2 weeks later I was going into my own dentist office for an appointment, and I was about to go through the front door of his office, and I looked through the glass, and I saw sitting there the same woman that we fired at the other place 2 weeks earlier. I turned around hoping that she didn't see me. I sprinted to the nearest payphone called the doctor's office, fortunately, this was before most people had call display in their businesses. Identified myself as a local orthodontist because I knew I had to get past the gatekeeper. I got the dentist on the phone and said, "Hi, it's not Doctor Jensen. It's David Harris. I'm the guy who's supposed to be in your chair right now and obviously, you know I'm not but let me tell why." I told him about the time bomb that was ticking away in his front desk, and he asked me in his packed voice, "What the heck do I do now?" Half way through my second sentence he'd hired me. That's how I got started-
Howard Farran: That was 1989?
David Harris: 1989, no big business plan. No burning desire to deal with dentists for the rest of my life but that's how I started.
Howard Farran: You've being doing dentistry for 26 years?
David Harris: That's right.
Howard Farran: I want to ask you just off the cuff things what percent of dentist ... Right now my average percent episode is about 7,000 dentists, so 7,000 dentists are going to hear this. How many of those 7,000 are being embezzled from right now?
David Harris: Rough numbers probably about 400 or 500.
Howard Farran: What percentage is that? I asked you a question you already know the answer was. What's 500 out of 7000? Was that a percent? What's the percent you're looking at?
David Harris: Probably somewhere in the ballpark of 6% to 8% of dentists are being embezzled today.
Howard Farran: Are there any red flags from 26 years of doing this? I am sure there's a lot of them but what are the main red flags? First of all and if someone's thinking their being embezzled can they contact the man?
David Harris: Absolutely.
Howard Farran: How do they contact you?
David Harris: They can send me an email, and my personal email is david@prosperident.com, and I know that most of your audience is highly literate but in case they're not I'll point out that embezzlement has 2 z's. Sometimes people spell it wrong, and it didn't work properly.
Howard Farran: David@embezzlement.com or if they go to www.prosperident.com you got a contact button there. Can they call you?
David Harris: Sure.
Howard Farran: What's your number?
David Harris: Toll-free number is 888-398-2327.
Howard Farran: Say it one more time.
David Harris: 888-398-2327.
Howard Farran: My fans of this show are mostly commuters and when you think of commuters you're probably thinking of somebody has to drive an hour across Toronto or LA, but most of them are rural. They got 70 miles drives across the plains of Nebraska. Talk to this person they're in their car driving to work. What should alarm them? What are red flags where they should say damn because they and is it someone that you usually trust? Is it someone that you're usually suspicious of? Just talk about profiling to make them wonder what the hell is going on?
David Harris: Absolutely 2 kinds of embezzlers. The first kind is a serial embezzler, and the serial embezzler is somebody who's done this before, and you make a hiring mistake, and you end up with them in your office. I think Howard when a lot of people think about embezzlers this is the mental picture they have. Somebody who's a little bit sociopathic. Who as I say has done this maybe once maybe 3 times and they just slipped through your due diligence process.
Howard Farran: Because they don't do due diligence so what should they have done? Before you hire someone should you what have Googled them? Should you have done what would have permitted you ... I like that dentist that hired that lady that you'd already busted on the office for. What should he have done at the interview that she wouldn't have made it in there?
David Harris: He probably should have been a little better phoning former employers and-
Howard Farran: Is she going to list a former employer that fired her for embezzling?
David Harris: No, she isn't but that's where the doctor has to be a little skeptical and Howard I don't want to take too much time talking about serial embezzlers because where I was going with this is that they're in the vast minority of embezzlers. In other words, about 15% of our case files involve one of those embezzlers. 85% involved the person you just described. The long term employee you've been to their daughter's wedding and they come in one day and start stealing. With the serial embezzlers, the observation I make is this I've asked a lot of doctors over the years. Do you enjoy hiring people? None of us them do. They absolutely hate that part of their life and as soon as somebody throws them a lifeline and a lifeline, in this case, is somebody who appears perfect for the job. Every ounce of skepticism just vanishes from their brain and the thought that they should check references or let me throw in a radical concept here ask prospective employees for a drug test is just the farthest thing from their mind.
What is in their mind is, "Thank God, I've found somebody, and I can stop this horrible process of hiring." What we need to do though when we're hiring somebody is we need to reconstruct their resume a little bit independently. How do you do that? They must have some former employer. When you talk to that person, first of all, don't ever call any phone number an applicant gives you. If they say that they worked for Doctor Farran in Phoenix. Go to Google or your favorite search engine find the phone number of the office and call that phone number and then you know who you're really talking to. We've seen cases where somebody has parked one of those disposable cell phones with a relative someone who answers and pretends to be the former employer. Okay so first tip.
Second tip is when I get you on the line, and I'm asking you about Suzie, who's applying for a job at my office some questions I should ask you. Who did Suzie work for before she started with you Howard and when she left you where did she go? The other thing I should do is ask you an open-ended question about employment dates. In other words, rather than saying to you Suzie said that she worked with from this date to this date can you please confirm? What I should be saying is Howard can you please give me Suzie start date and end date? I'm going to compare those to the resume, and I'm going to see if they're the same. If they're not, she's hiding a job. There's some other employer she doesn't want me to talk to. When I ask you about who was the previous employer and who was the subsequent employer again I'm looking for things that I can bring home and compare to the resume and find a discrepancy. If you say after she worked for me she went to work for Doctor Jones in Scottsdale and I don't see Doctor Jones on the resume anywhere.
My next call is going to be to Doctor Jones, and I'm probably going to have to hold the phone out there because I'm going to get an earful about Suzie. The other question I should always ask a former employer and it's a simple one but I try to keep it very unambiguous. The question I would say to you is Howard if you had a job that Suzie was qualified for and if Suzie was available would you rehire her? If the answer to that is anything other than yes absolutely, of course, I should run the other way. When we're trying to keep serial embezzlers out, we want to confirm exact dates of employment from former employers. We want to ask about continuity on the resume, and we want to ask if you would rehire. When we're dealing with current staff because these ones are the bigger dangers.
David Harris: What do you call them?
David Harris: Current employees.
Howard Farran: Okay, current now. Serial embezzlers and that's 15% then current employees is the other 85%.
David Harris: Exactly when we're dealing with those people what I would tell your audience is that they can probably improve at sporting the type of behavior that employees exude when they're embezzling. Simple example most embezzlers do not want to take a vacation because embezzlement requires control over the flow of information in the office and they can only exert that control if they're there. Embezzlers will come in early or stay late or come in on the weekend. Because typically they want alone time in the office to steal and if you think about particularly the front desk. An embezzlement is not confined to front desk employees but for most people who work at the front desk their day is really a series of interruptions, and it's hard to get enough concentration to be able to do something for 20 minutes. It's an estimate typically what embezzlement takes. They need alone time. They will come in at 6:00 in the morning or they'll stay late, or they'll come back after hours. That's how they get it, so that's something that we absolutely want to watch for.
We are also looking for territoriality, so we have people who don't want share their job. They don't want to cross-train somebody else to do their work. It may take a little more subtle for them like they may not want the office to upgrade its practice management software to a new version. The reason is because they have some game that's working with Eaglesoft 15, and they're concerned that is they upgrade to Eaglesoft 17 that whatever they're doing is going to be shut down. They will discourage that, and we understand that nobody really enjoys change, but the reaction here can be stronger.
Another thing that you will see embezzlers do is they will discourage the doctor from hiring a consultant because embezzlers know they can fool the doctor. That's not terribly hard in general, but somebody who consults in many offices is probably a lot bigger challenge, so those are some of the things. There's a longer list, and actually, I was going to make an offer to your audience. We have a questionnaire that's available on our website, and it's called the embezzlement risk assessment questionnaire. It's 35 odd questions. It takes about 10 minutes. We normally charge for it, but we decided for this summer to make it available to people at no charge.
Howard Farran: Did you ever start a thread with that?
David Harris: No, but it's a great idea.
Howard Farran: What's the name of it? What's the title of it?
David Harris: It's the embezzlement risk assessment questionnaire.
Howard Farran: What I want you to do is start a thread under finance or whatever and call it the ... What do you call it the embezzlement?
David Harris: Risk Assessment Questionnaire. ERAQ for short.
Howard Farran: ERAC risk assessment questionnaire and it's 31 questions or how many?
David Harris: The current version is 35. 10 minutes to complete.
Howard Farran: Why don't you start a thread and say please take the or Howard and then what I can also do is I can also post this video on that thread also. Then they can take the questionnaire, and they can get that rolling then I'll put this video up there because what I like about Dental Town is that nobody has to ever practice solo again so there can be a community and thank you for posting. You posted like 40 times. If you've ever done a Dental Town CE course? I'm going to try and throw you under a bridge and get you to put that up. I really wish you would do that because this is one of those big fear to-do list because I think that dentist is not only is he feels emotionally taking advantage of. You loved someone; you trusted them. Now they've used that against you, and they just spend so much time learning how to do an implant and a root canal and a bone graft they just never really take the time to learn a CE. Do you want to go over those 35 questions?
David Harris: I think there are probably more productive things that we can talk about.
Howard Farran: Okay, so what would be the next productive? Is there any profiling? Is it older versus younger? Blondes versus brunets, boys girls? Religious non-religious? Is there any profiles that you're picked up in 26 years? You know a bald guy would never do it. You know an Irish person would never do it so who's doing this?
David Harris: I'll answer that in couple of ways. First of all-
Howard Farran: Let me just you. Have you ever had a short fat bald Irish Catholic guy caught embezzling?
David Harris: Yes.
Howard Farran: No, you have not.
David Harris: Yes, I have.
Howard Farran: Really?
David Harris: Sorry about that.
Howard Farran: Okay then at that point it's open to anybody but have you seen any profiles?
David Harris: For sure. There is no demographic profile. In other words, the embezzler could be anyone. The majority of embezzlers that we see in dental offices are female but that-
Howard Farran: That's because 99% of the employees are female.
David Harris: That's it and to the extent that there are male employees. There are male embezzlers as well. Embezzlers are predominantly front desk staff but not exclusively.
Howard Farran: What percent would be front desk and what would be next? Hygienists and something what percent is front desk?
David Harris: From what we see, it is probably 90% to 95% front desk.
Howard Farran: Of those 90% to 95% front desk what percent of those were the office manager? Is it usually the top dog?
David Harris: It is frequently the top dog. Probably and I'm throwing out a statistic because honestly we haven't studies this subjectively 70% to 80% would be the top dog, and the balance would be somebody else in the office.
Howard Farran: How many times is it working someone working solo versus someone who's got another receptionist in on it? 2 people handling this?
David Harris: There are 2 kinds of multi-person fraud. The first one is collusive fraud so in that collusive fraud it's as you described. You have 2 people who are combining to steal. We see that one I honestly don't have any good numbers on it. It's more common than people think. The one thing I'll say about collusive fraud though is that normally these 2 people have some kind of relationship outside the office. One that we see sometimes is it's a mother and daughter or 2 siblings who are combining to steal. As a thief and full confession time a long, long time ago I used to be one. The biggest risk that you can take is going to somebody else and saying, "I'm embezzle from Howard, and I think you should as well." That's a huge risk, and you would only do that is you only knew the other person very well. There's normally some kind of linkage that they have outside the office.
Howard Farran: You said you used to do this yourself. Is that how you got into it?
David Harris: Back in my teens yeah.
Howard Farran: Back at your teens?
David Harris: I wasn't very good at it. Got caught quickly. Decided that a life change was in order, and I've flown pretty straight ever since, but I do remember the thought process. Actually, when we hire investigators, that's what we're looking for. They obviously have a dental background. Everybody who works at [Pro-spe-rit-an 00:20:10] has worked in the dental office or has worked with dentists for a long period of time but then the next question how well they can anticipate what a thief would do in a given situation. Interesting statistic and I didn't realize this until a couple of weeks ago. Fully 20% of the people who work here have at least 1 parent who's a dentists. How's that for neat stat?
Howard Farran: That is a neat stat so then what would be the next most productive thing to talk about this? Actually prevention or where did you want to go with it. You've been doing this since you're ... I'm probably not swell enough to even ask the questions.
David Harris: Let's talk a little bit about profile. A little bit more about profile if we could and-
Howard Farran: Because I'm thinking it's a woman and she's desperate. She's got 2 or 3 kids, or her husband left her. He won't apply the child support, and desperate people do desperate things and yeah I have 4 boys and if that meant to feed them I had to steal. I'd steal to feed my 4 boys. Is it desperate people?
David Harris: That's part of it. We do see desperate thieves and that's exactly the label we put on them, and it's as you described. It's some level of financial pressure. Everybody's ethics become pliable, and that's what these people are doing. There is another group though and that group I would call the greedy and they're not stealing because they have to. They're stealing because to them it feels good, and I'll give you a great example. We did an investigation a couple of years ago. There was a woman who was stealing and then she won $3 million in the state lotto and after she did that she kept stealing, so it wasn't about money at that point. It was about her getting some kind of biochemical satisfaction from stealing. The way that a runner gets runner's high, and she wanted it.
Howard Farran: I'd pay 3 million just to be able to get the runner's high. Do they have an operation for that yet?
David Harris: It's called cocaine.
Howard Farran: I need a brain drain of that but so more on the profile.
David Harris: These people typically they are very smart. They feel under-appreciated by their dentist. They kind of wait for the dentist to say to them one day, "Oh, my gosh. I've been so stupid. You are off tremendous value to this practice, and I'm going to double your salary today." They wait for that conversation to happen, and they wait, and they wait, and it doesn't happen, and finally they just take matters into their own hands. They as I say feel underappreciated, and this is their way of addressing it. They are a lot more dangerous than the other group because you can spot the desperate people. When you look at the people in your office you know who's typically in financial trouble but these people aren't.
The other difference is the desperate people when they steal they are using the money to pay the mortgage or buy groceries. When the greedy people are stealing, they flaunt it. We've seen thieves who bought $140,000 BMW. Which seems a little untoward for somebody who overtly is being paid $60,000 a year or they buy the big boat or in one case they flew 6 of their girlfriends to New York for a shopping weekend. It's stuff at that level, and they're conspicuously consuming. That's the other profile. Both of these typically are long service employees. They've been with you forever. You trust them and, of course, that's a huge enabling mechanism isn't it?
Howard Farran: We've all heard the wife who's deciding to divorce you and puts that on a hold because she's siphoning off thousands of dollars a month. I know one dentist who they went on a vacation in Sydney Australia, and she actually had set up a bank account when he was down there, and she was obviously out shopping. She was down at that point, and she siphoned off for like 6 years before she filed for divorce. Is that very common?
David Harris: Usually, it's a little bit shorter-term phenomena than that. A lot of spouses of dentists and let's assume this is a spouse without a lot of independent earning ability. They decide one day that they can't live with their dentist spouse, and they're terrified. At that point when they say to their spouse I'm leaving you unless they have independent finances. They're placing their hands in the divorce court system which is very scary and typically their attorney has said to them something along the lines of "I'm not going to tell you how to do this, but I'm going to tell you that your life would be a lot easier if you have some money under the mattress." Then they see embezzlement as the way to do that.
I've also seen a case to kind of turn this around a little bit. This was 2 doctors in a group practice. One of them was stealing from the other one, and his accomplice was somebody working at the front desk who he was having an extramarital affair with to whom he had said, "As soon as we get enough money set aside I can leave my wife." I'm not sure whether he had any real intention to do that, but he was using this front desk person as his dupe to help him steal.
Howard Farran: I've heard people talking on Dental Town talking about this that one thing that embezzlers do is they try to have something to hold against you. If you're married to a woman, and it will cost you a lot of money to get divorced, and I'm stealing from you to hedge my bet I'm going to start screwing you too. Because if you ever bust me, then I'm going to say, "Shut up and go away or I'm going to tell your wife about the whole thing." Is that common or not common?
David Harris: It absolutely is. That's one form of it. The other form is if the dentist is cutting done kind of ethical corner in the office, so they're not collecting insurance coop rates, or they're overtreating people or they're somewhere cutting a corner. That is also handing the embezzler a get out of jail free card. We see a lot of embezzlers who turn around and report their doctor to the state board and sometimes it's probably justified. Sometimes I think it's just trying to give the doctor a bigger problem than the embezzler, but absolutely that happens.
Howard Farran: Then there's the substance abuse issue. If a dentist is abusing nitrous or ordering hydro-cotton or she's got ... What percent of the time do you think she's got a get out of jail card, I got something against you, and I'm going to open up your closet and show all the skeletons if you catch me?
David Harris: That's a good question, and again it's something we haven't really studied. I'll do the dangerous thing and give one of my off the cuff statistics. I'm thinking probably about 20% of the time.
Howard Farran: Okay, 1 in 5. 80 to 20 so where did you want to go next with this? Because you know this better than I do. I don't want lead you down a nonproductive interview. Where would you want to go next? Do you want to go prevention or do you want to go? What do you want to talk about?
David Harris: Let's talk about a couple of things. Prevention first and then maybe we should finish with telling people what to do and probably, more importantly, what not to do if they suspect that they have a problem. Here's the problem with prevention and, unfortunately, I think a lot of dentists misunderstand the problem. What most people do when they think about embezzlement is they want to analogize from other types of crime and the thing that they will see as the burglar alarm. Everybody has this idea that if we make it hard for somebody to steal in our office, they will not try. A lot of what's been written about prevention which I disagree with quite strongly is around the concept of making the practice a harder target. For example, Howard, you will see a lot of people advise a doctor that, you really should make the bank deposit yourself, and I'm sure you've seen that advice. I've seen it on Dental Town.
What somebody's thinking is "We will stop an embezzler from stealing money out of your bank deposit." Let's assume for a moment that you have somebody in your practice whose already decided that stealing from Howard is the right thing to do, and their first plan is to take money out of your bank deposit, but you frustrate that by making the deposit yourself. What you're left with at that point is somebody who has said, "I'm okay to steal from Howard," and they can't do it that way. Are they going to give up? Of course, not. They're going to look at what other possibilities they have in stealing from you. To give you a number we've cataloged about 300 different ways to steal from a dentist and we're not done.
Howard Farran: We live in the United States. They made drugs illegal and go and have 1 million people in jail for drugs and I could buy anything in Phoenix in an hour.
David Harris: Of course, you can.
Howard Farran: Just buying gas and [inaudible 00:29:55] okay.
David Harris: Yeah, it's not hard. Again people assume that something like a burglar alarm will work in a dental office. When you think about what alarms do though they don't prevent crime. They divert it to another victim so if I'm in Phoenix, and I'm walking down your street, and my plan is to rob your house, and I get to the front door, and I see the alarm sticker or the one that will really stop me. The NRA Life member sticker which I'm sure you have there or I hear the Doberman barking. I don't go home and join the church choir. What I do is I keep walking down your street until I find one of your neighbors that looks like an easier target.
Howard Farran: That's well said. My police stations have always told me that your house is meant to be saved. It has to be a harder target than your neighbor so put up the beware dog sign. Put the alarm thing. Put more stuff in your yard that the neighbor doesn't have and they will his house.
David Harris: That is so true but the reason it's true is because as a burglar I can chose my victim. As an embezzler, I can't. If I work for you, I only have one possible target. It's you. I am not going to decide, "Well I'd like to steal but really it's too difficult at Howard's office. So I am going to quit my job there. I will go find a job with another dentist, and I will invest a year to 3 years that it takes me to learn their systems well enough and to know the doctor well enough to be able to steal." That isn't how an embezzler thinks. What they think about is "If I can't steal that way I will do it that way," and they've got lots of choices. There's a porosity to a dental office that I think a lot of dentists don't appreciate. They will think for example that if I just make some kind of policy that will stop embezzlement. Who's going to apply that policy? Normally the embezzler.
I was speaking at a conference a while ago, and I was talking about how embezzlers cash checks. Because a lot of doctors think that cash can be stolen but a check payable to the doctors is a little bit more difficult to monetize, and it's not. One doctor was sitting in the back of the room, and he said, "Well that will never happen in my office," and I asked him why? He said, "Well because we have a stamp that says for deposit only, and we stamp the checks." I asked him a really simple question that pricked his balloon. I said, "Do you stamp them yourself?" He said, "Well no, of course not." My comment to him next was, "Okay let me see if I understand this. Let's assume that you have an embezzler in your office and by definition, they don't feel a huge compulsion to follow a society's rules. Why on earth is she going to follow yours?" He had no answer.
There's a problem with prevention, and the problem is that you have somebody in your office who knows you really well. Who knows what you look at and what you don't and is quite willing to adapt to whatever procedural changes you might make in your office so in that very unequal battle my general suggestion to your audience is the embezzler will win every time. What I tell audiences is let's not go with prevention. Let's talk about detection and how do we detect embezzlers? Typically by their behavio