Theft in the office: How to avoid being swindled

Dr. Villalobos speaks from experience. Several years ago, she discovered that one of her most trusted employees had embezzled more than $1.5 million from her practice over seven years.

The employee, Penny Bazavilvazo, was in charge of handling the day-to-day business and acting as liaison with all vendors, professionals, and organizations, including banks. Dr. Villalobos, who was extremely busy, loved the situation, given that she could devote more time to her patients.

But Bazavilvazo created a smoke screen regarding the financial aspects of the business and embezzled money, despite the fact that Dr. Villalobos signed the checks and reviewed financial data. Bazavilvazo pilfered money from hospital revenues, accounts, payroll, insurance, profit-sharing plans, credit lines, and a pet adoption fund. Bazavilvazo was prosecuted and convicted, but the process took over three years.

Because of the financial hardship caused by the fraud, Dr. Villalobos left her private practice and partnered with VCA Coast Hospital and Cancer Center in Hermosa Beach, Calif.

In an effort to help other veterinarians avoid similar situations, Dr. Villalobos teamed up with Dr. Marsha Heinke at the AAHA meeting to discuss various ways to avoid theft in the workplace. Dr. Heinke is Director of Consulting services at Owen E. McCafferty, CPA Inc., a veterinary consulting, tax, and accounting firm.

This type of theft is common. According to the Association of Certified Fraud Examiners, American businesses lose $200 billion annually to fraud. One in three American workers has stolen on the job.

Veterinarians are at a particular risk, as most of them own or work for small businesses. "Small businesses are at the greatest risk in terms of [theft having] a devastating effect on the profit margin," said Dr. Heinke.

The AAHA speakers said that after researching the situation, they discovered such a large number of swindled veterinarians that they could have started an "embezzled veterinarians anonymous club." They identified a number of characteristics that were common among victims, including being extremely busy, delegating many business aspects to staff, concentrating duties in the hands of one individual, and being very trusting.

'I trusted him' was the chant I heard time and time again from colleagues around the country, Dr. Villalobos said. "They seem so nice and accommodating while they covertly steal your livelihood."

Individuals trying to detect an embezzler can look for signs that include missing consecutive invoices, missing or lost files, slow reporting of data to practice owners or the practice's independently engaged accountant, and an employee who never takes more than a couple of vacation days off at one time. Bazavilvazo, for example, hid her actions, in part, by never taking vacations, preventing an opportunity for someone to step in and discover her misdeeds.

In trying to protect yourself against thieves, Dr. Heinke said, you can enlist the help of your accountant. "Accountants should ask for reports from your practice management system that provide a reconciliation of what is taken in terms of cash collected, fees charged, ending accounts receivable, beginning accounts receivable, and look to see what is deposited in the bank," she said. Major discrepancies may indicate a problem.

In addition, Dr. Heinke said, your accountant should help you orchestrate a solid financial report foundation for your practice in the form of the AAHA chart of accounts. This provides a standardized coding of transactions and will allow you to compare your practice with itself as well as with the industry.

But the biggest weapon you have to protect yourself are your employees. "Most theft is detected and reported by co-workers," Dr. Heinke said. For this reason, she says, big businesses often provide toll-free numbers so employees can anonymously report problems.

For small businesses, she said, you can arrange to have your CPA act as your hotline number. "You can say in a meeting, 'We don't tolerate theft in this practice. If you know someone is stealing, they are stealing from you, too. If we can't afford to pay our bills, then we can't afford to give you raises.'"

Sometimes theft takes place on a small scale, such as an employee taking money from the cash drawer. One way to curtail this kind of theft is to designate one person to be responsible for the drawer and have another person reconcile it each day.

Other times, theft doesn't involve money, but products and services instead. "In my practice, there were six people involved in allowing services, even big surgeries, to be rendered to friends and neighbors, for free," Dr. Villalobos said, describing another embezzlement problem she faced.

Another hospital had pet food delivered to a ramp at the back door of their office, and the owner was shocked to discover that, within an hour of delivery, the food was carted away by another truck.

Still another veterinarian found that an employee was tossing new product into a dumpster and returning later to retrieve and sell it. Considering the location of your dumpster and the lighting around it might be worthwhile.

To monitor product theft, some veterinarians implement a just-in-time inventory system, where only minimal product is on open shelves and the rest is stored in a locked closet. It is easier to notice a bottle missing from a stock of two or three than it is to notice one from a stockpile of bottles.

Staff may steal for all sorts of reasons, from pure greed to feeling justified because of what they perceive to be a small salary. In addition, some employees "borrow" money, secretly thinking they will pay it back, but never get around to it or, worse yet, realize how easy it is and continue to pilfer the coffers.

If you discover theft in your office and decide to pursue action against an individual, contact an attorney immediately. "You need to get yourself the advice of an attorney before you say anything or do anything," Dr. Heinke said. "You don't want yourself to be hung out to dry by an employee who alleges defamation or slander."

After consulting with a labor attorney, Dr. Villalobos learned that an employer may talk about why a person is no longer at a hospital if the employer uses language that does not imply intent. "If a call comes regarding employment or a question about the suspect, you may safely use terms such as 'there was a breach in our policy regarding the handling of money'" she said.

Unfortunately, counterattacks, embarrassment, or injured pride often deter individuals from pursuing prosecution. "I compare a victim of secretive stealing to being a victim of a malignant disease," Dr. Villalobos said. "No one wants to talk about it because it's embarrassing."

And this, Dr. Villalobos said, has to change, considering that many thieves who are not prosecuted seek out a job at another practice. "We have too look out for each other. It does metastasize to other practices."