Embezzlement prevention: Checks and balances for everyone

No doctor wants to think that someone as trusted and integral to their practice as their office manager would steal from them, but stories of precisely that happen all too frequently. And it's not just petty cash, in any sense of the term, at stake. But it's hard to screen potential employees for trustworthiness, which is why checks and balances should always be in place to prevent fraud from occurring.

Recently in Mass., the family of 90-year podiatrist Irving Snyder discovered that his office manager had shopped and gambled away $1.2 million of the doctor's earnings, leaving them without even enough money for his funeral, the Boston Herald reported. The office manager, Gloria Balestracci, didn't just steal during the 13 years she was employed by the practice, either. The deception continued while she worked as the doctor's primary home and health aide after his retirement.

Balestracci's methods were not sophisticated. According to authorities, she simply forged Snyder's signature on checks to herself and to family members and made credit card payments from his account to credit cards in her name. When Snyder's family pressed her about suspicious activity, Balestracci told them the doctor was helping to pay for cancer treatments that she later admitted to never having. Balestracci was indicted in March on charges including larceny, forgery and making false tax returns, and is scheduled to be arraigned this week in Bristol Superior Court.

In another case, an Iowa obstetrician has, so far, unsuccessfully tried to hold his bank accountable for not catching the fraudulent check activity of his office manager, who he is accusing of forging checks over several years totaling more than a half of a million dollars ($547,996), the Des Moines Register reported.

The bank, which has refused the doctor's demand for reimbursement, now is defending itself in a lawsuit brought by the doctor. While court papers filed by the doctor accuse the bank of breach of contract, breach of fiduciary duty and being "negligent in honoring [forged] checks," the bank has held firm that "when authority is given to employees, it is the responsibility of the business owner to carefully monitor how that authority is used."

The office manager, who admitted she had a gambling problem, pleaded guilty to theft and forgery accusations in March.

Given that it's not uncommon for victims of embezzlement to discover too late that an employee has difficulties with money, it may be tempting for practices to check potential hires' credit upfront. But practices should take great care in making sure such a screening process is legal and transparent, American Medical News reported.

First, consider that federal law prohibits denying employment because of bankruptcy; at least seven states restrict the use of a credit report in hiring, according to the article. Next, practices should keep in mind that many trustworthy individuals have had their credit affected by the recent U.S. recession. Further, experts contend that there is no documented evidence to prove that a candidate with poor credit will be a greater threat to steal from the practice.

If practices decide to check potential hires' credit anyway, they need the candidate's permission to do so. If the employer withdraws a job offer because of credit history, federal law requires that the applicant receive a copy of the report and be allowed to respond to or rebut its contents. This discussion is critical to the practice, according to amnews, because it gives the employer the chance to consider any red flags in context and make an informed decision whether to make the hire.

To learn more:
- read the article from the Boston Herald
- read the story from SouthCoastToday.com
- see the story from the Des Moines Register
read the article from American Medical News