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chapter
17
&
No Such Thing as a Free Lunch
SUZANNE COGGINS

atti Clinton was a struggling 23-year-old mother with a 5-year-old son. She rarely
P referred to his father, and it was common knowledge that she couldn’t count on
child support. Little was known about her family background, but she was an intelligent
young woman just trying to make a decent living.
Patti applied for a position as a front desk assistant at the Family Wellness Practice
Center. Though she had no experience in medical offices, she was willing to learn. Her
pleasant smile and demeanor led the office manager, Lucy Green, to believe that Patti
would be a wonderful match for the practice.
During the interview, Patti admitted that her work history was spotty, but attributed it
to constant chaos in her relationship with her son’s father. She declared that she was now
focused and ready to start a career in medical office assisting.
When the Family Wellness Practice Center opened, Dr. Richard Steever had a vision to
provide top-notch medical care. After finding an easily accessible first-floor office suite in
an ideal location, he proudly had his name painted on the double doors.
With everything in place, Dr. Steever’s practice began. Soon after, his appointment
book filled up. He and his staff were overwhelmed. Not anticipating such rapid growth,
Lucy scrambled to hire additional help. Before long, the office staff had grown from two to
six. Scheduling patients and exams and calling in prescriptions became paramount. Patient
satisfaction was high.

The Lunchtime Bandit

In Dr. Steever’s office, there was a rule: The rookie employee covered the workplace while
the rest of the personnel went to lunch. Day in and day out, Patti was left alone, manning
the front desk while everyone but the doctor ate out.
It wasn’t long before she started showing suspicious behavior. First, Lucy noticed that
Patti’s wardrobe was undergoing a transformation.
‘‘Sandra, have you noticed that Patti seems to be wearing a lot of new clothes these
days?’’ she asked the insurance clerk. ‘‘How can she afford them? I don’t even have the
money to dress like that, and I’m married—with a second income!’’

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‘‘I’ve noticed the new clothes,’’ Sandra answered after a long pause, ‘‘and she has also
been buying her son some expensive toys during her lunch breaks.’’
Sandra leaned over her turkey sandwich and whispered, ‘‘Do you think she could be
stealing money from the office?’’
Both women made a decision to keep their eyes and ears open. They would not say
anything to the doctor because at this point, it was merely speculation.
Lucy and Sandra didn’t have to wait long. As luck would have it, later that week a patient
came in with a statement that she had received from Dr. Steever’s office. Mrs. Dawson was
quite upset about her bill. Included in the amount due was a $50 copayment.
‘‘I don’t owe this,’’ she explained to Lucy. ‘‘I paid $50 cash to the girl at the front desk.’’
Then she produced the receipt. Mrs. Dawson claimed that at the time she paid the
copayment, the girl at the front desk took the money but did not voluntarily give her a
receipt. ‘‘I practically had to beg for it,’’she said. Lucy apologized profusely, made a copy of
the cash receipt, and assured the patient that she would not be billed for the $50 copayment
again.
When the office closed for the day, Lucy went to the cash receipt book to try to
find the carbon copy of the receipt issued. The book was a generic fill-in-the-
blank type. In the upper right-hand corner there was a blank place for the person
filling out the receipt to hand-write a number. The space was always left blank.
Numbering receipts was not a procedure that was followed. So, she went to the date
indicated and tried to find the carbon copy. But she couldn’t find one. Looking carefully
to see if any pages had been ripped out, she noted that none were missing. Could
someone have a duplicate receipt book? It seemed possible since it was available at any
office supply store.
Next, Lucy accessed the insurance file. She pulled Mrs. Dawson’s chart to see if there
was any indication of a $50 cash payment or to see if there were any errors. To her surprise,
she discovered that the paperwork for billing the insurance company was not in the file.
Then she pulled the master list and searched for Mrs. Dawson’s name. She scanned the list
three times but was unable to find any documentation stating that the insurance company
had been billed for this visit.
The next morning, Lucy called a private meeting with Sandra. She inquired about a
backlog of unbilled insurance issues. Sandra assured her that all the paperwork had been
submitted. Since completing a daily cash log was not part of the office procedure, they
could not check if a cash entry had been made. They did, however, go to the patient sign-
in list for that date. A cursory check of two patients that had been seen before and after
Mrs. Dawson revealed that there was no insurance activity and no paperwork for those
patients, either. Before they went any further, Lucy and Sandra decided that it was time
to call in the doctor. Neither one of them wanted to approach Dr. Steever with this
discovery. He was a kind and generous man, a physician they admired and respected.
Most of all, they knew he completely trusted his staff. He would be devastated. Dr.
Steever was committed to his staff, having said on many occasions, ‘‘My success will be
reflected in your paychecks.’’ Lucy and Sandra contemplated how this situation would
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158 chapter 17 no such thing as a free lunch

reflect on them since it was their responsibility to see that all office and insurance
functions were accurate.
After hours, the women approached Dr. Steever to explain what they had found. He
was shocked. ‘‘How could this be happening?’’ he asked.
Everyone was silent. Finally the doctor said, ‘‘This is out of my league. I’ll call the police
for advice. I don’t want to accuse her if she’s innocent.’’

Trail of Tears
Soon after, I received a call from Detective Duane Lunsford. He was one of three local
police officers who had accepted our invitation to attend an all-day fraud seminar with our
Certified Fraud Examiners. As president of our local chapter, I decided that one of our
goals for the year was to involve local law enforcement officers in our training. We knew
that every policeman or woman knew exactly how to handcuff and arrest someone. But
fraud investigation education was minimal. Detective Lunsford asked if I could come by to
review the case with him.
He informed me that Dr. Steever had met with the chief of police that morning and the
matter had been turned over to him. Detective Lunsford was tall, and wore a starched
white shirt with a blue pin-striped tie. The only indication that he was a police officer was
the shiny police badge clipped to his belt. The following day we visited Dr. Steever’s office.
Initially we met with Lucy. Clearly, she felt some responsibility for the circumstances.
During the interview, she repeatedly said, ‘‘I guess I should have checked her references
more carefully.’’
I requested that she take us through a typical day at the office. We started with the
morning appointments. When patients come in, they are given a copy of the sign-in sheet.
The requested information consisted of a date, name, the time of sign-in, and the
insurance company. There was a column beside that was to be filled in with a checkmark
when the patient was called back to the examination room.
‘‘Almost all patients are seen by scheduled appointment. It is rare that we would have
any drop-ins,’’ Lucy explained.
Next, I wanted to start an information trail for all patients from the time they made an
appointment until their visits were paid. I asked her if the schedule was listed in a
computerized module or in a book. No, she said, they were in an appointment book,
written by hand in pencil.
I asked if the appointments were transferred to a daily master sheet, which could help
me determine the payment method for each visit. Lucy said that the only sheet with names
was generated by the appointment clerk who calls the day before to remind patients of their
appointment.
Detective Lunsford had already told me about their method of collecting cash. I
reviewed that procedure with Lucy, who confirmed that when cash was taken, it was
placed in a cardboard box under the reception counter. There was no cash log at all. I then
asked how often the cash was counted and a deposit made.
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‘‘Whenever,’’ she replied. Lucy said that sometimes they were so busy that there was no
time at the end of the day. In that case, they deferred the task until someone had the time. A
review of deposit slips showed intervals of up to five days between deposits.
Intrigued by the cavalier attitude toward cash collection, I asked if there was ever
reconciliation between the cash receipt book and the amount of money in the brown
cardboard box. Lucy said that they had always just counted up what was there and entered
it as ‘‘cash’’ on the deposit slip. No effort had been made to show a correlation between the
cash receipt book and the money collected.
‘‘Some people never ask for a cash receipt,’’ she explained. ‘‘However,’’ she added,
‘‘payment information is also contained on the three-part insurance form. The last, or
yellow sheet, is the patient copy. The office copy also shows if a patient paid with cash.’’ But
I discovered that there was no tracking of cash payments from those forms, either.
A quick review of the cash receipt book revealed a generic, unnumbered, two-part
book. Over half of the copies were barely legible and the space for the signature of the
person authorizing the transaction was blank. Lucy explained that the top copy was always
stamped with the doctor’s name. Thus, it was impossible to tell who had issued the receipt.
She sensed my surprise after she described how the funds were handled. Lucy
proceeded to explain that the cardboard box was almost like a petty cash fund to them.
Even the doctor had taken money out of the box to pay for pizza and drinks for an
impromptu office party.
Next, we interviewed Sandra. She explained the check-in procedure, which was pretty
straightforward. At the time the patient registered and presented insurance information, a
three-part insurance form was completed then placed in the person’s file. It was then
handed to the front desk clerk, who passed it to the nurse. After the appointment, the
nurse handed the entire file back to the front desk clerk, who totaled the charges for
the visit and handled copayments, ranging from $15 to $75. If the patients had not met
their insurance deductible, the full amount was due, which varied from $150 to $500.
Occasionally there was a cash-paying uninsured patient. But these were rare occasions.
The files were then filed in a portable plastic container, which Sandra picked up daily to
perform her entries into the insurance billing system. I asked her if she ever ran a checklist
against billable visits and the sign-in sheet for the day. She looked at me over the top of her
glasses and sighed. ‘‘No,’’ she said, ‘‘we really never felt the need to do that.’’
Lucy then helped us by reconstructing the schedule of the office personnel. She showed
us the calendar for everyone involved in front desk activities. After carefully reviewing the
schedule, Detective Lunsford and I determined that Patti was responsible for front desk
collections approximately one and a half to two hours per business day. Because she
covered lunch, she was unsupervised during this time. Furthermore, our suspect shared
the same lunch block as the doctor. Hence, patients were not seen when Patti was on
break. Lucy also indicated that our suspect readily volunteered to cover the front desk if
someone needed to leave for an appointment.
Feeling confident now that Patti had been given the opportunity and means to steal cash
from the office, we conducted a thorough paper audit of daily patient sign-in sheets against
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160 chapter 17 no such thing as a free lunch

insurance billings. Each business day for the past six months was pulled and a chart was
established, matching patient sign-in sheets with insurance claims.
After this task was completed, a clear picture developed. Each week, several patients
who had signed in did not appear on the insurance billing. When we discovered a case like
this, the person’s file was pulled to make sure that unbilled insurance papers hadn’t been
accidentally left there. When we were satisfied that none of this documentation existed, we
contacted the patients to verify that they were in Dr. Steever’s office on the day indicated
on the sign-in sheet. We were able to confirm with several people that they were, in fact, in
the office for treatment. Thankfully, most of them agreed to provide us the patient copy of
their insurance form.
We guessed that Patti had destroyed the insurance paper and returned the patient
folder to the filing area. She had unlimited access to the records room. Although
there was a procedure for signing patient charts in and out, certain aspects of it had not
been followed. It was impossible to determine who pulled the chart and for what
purpose.
The investigation revealed that every patient who had been seen by the doctor, but did
not have corresponding insurance paperwork, had appointments when Patti was covering
the front desk alone. All insurance billing omissions occurred between the hours of 11 a.m.
and 1 p.m.
The doctor used a payroll billing service, so there was excellent documentation of
days and hours worked. Time sheets were filled out and signed by each employee. The
office manager had kept meticulous time and attendance records. Next, we created
a spreadsheet of Patti’s daily schedule. A second spreadsheet was made to show the
days and times of the appointments that had insurance billing omissions. We then
reproduced the second one on a transparent overlay. When we placed the transparency
over Patti’s schedule, it matched perfectly. Compiling this information had been a lot of
work, but the two spreadsheets spoke volumes. There was no doubt that we had the
right suspect.
Detective Lunsford wanted to take one more step. He reconstructed everyone’s
schedule on a spreadsheet. By doing this he wanted to show that the other employees were
not at the front desk when these patients were seen.

All’s Well that Ends Well

We reviewed our findings with Dr. Steever and Lucy. Detective Lunsford informed them
that he felt he had enough evidence to charge the perpetrator for embezzlement. The
following day, when Patti reported for work, Detective Lunsford was waiting for her.
He took her into a private room and explained that there was money missing from the
office and that they would like to talk with her at headquarters. She agreed and they left in
the cruiser for the police department.
Detective Lunsford had previously agreed that actions in the doctor’s office would be
low key. His approach with Patti would be ‘‘firm but supportive.’’ He wanted to gain her
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all’s well that ends well 161

trust and be able to question her without evoking an emotional component. Hence, there
were no handcuffs and no dramatic arrest scene.
Once they arrived at the police department, Detective Lunsford took Patti into his
pink flamingo interrogation room. While I was not present, I could visualize the entire
scenario—the slender young woman sitting across from this imposing figure in a room
designed specifically to wear a suspect down. Detective Lunsford spared me no details later
as he explained the interrogation. Patti denied any involvement. Then he left her in the
room for 20 minutes, allowing her some time to think. When he returned, the detective
brought the spreadsheets we had constructed.
‘‘When I told her that we had documentation that the missing cash occurred while she
was alone at the front desk, she started to cry,’’ he explained. Patti then told the detective
her version of what happened. When she first started at Dr. Steever’s office, everyone was
nice and helpful. A month into her job, coworkers began leaving her alone at the front desk
while they all went to lunch. Patti said she had never stolen anything before, but one day
she needed $20 for her son’s preschool field trip. After she took the cash, she realized that
she would have to destroy the insurance paperwork.
Patti explained that she did not take money for a few weeks after that. Then she
gradually began taking more cash copayments. To conceal the evidence, she folded the
insurance paperwork and put it in her purse, destroying it when she got home. After
patients began requesting receipts for cash, she went out and bought a duplicate receipt
book.
The embezzlement slowly escalated. Patti said she realized that no one missed the
money and no questions were asked, so she continued to dip into the cash box. The day
Mrs. Dawson came in with the bill for the copayment, she remembered that she forgot
to destroy the woman’s insurance paperwork. After she explained everything, the
confession was written and signed. The following week, Detective Lunsford called me.
The day after signing the confession, Patti had hired an attorney and was claiming that
the confession was forced. She alleged that the detective had terrified and intimidated
her into signing it.
For the next couple of months, I did not hear from Detective Lunsford. When I called to
inquire about the status of the case, he chuckled.
‘‘Well, I had to jump through some hoops, but we re-arrested her, and guess where
she was?’’
‘‘Where?’’ I asked.
‘‘In another doctor’s office!’’ he exclaimed. ‘‘This time we marched in with a warrant for
her arrest, handcuffed her, and brought her right to jail.’’
Because this was a first offense, Patti was given suspended jail time, community
service, fined, and ordered to make restitution. Her family stepped in and repaid the
embezzled money. Dr. Steever was able to recover about 75% of his unfiled insurance
claims by submitting them to some insurance companies with a letter of explanation.
The amount taken was estimated at $2,500 to $3,000. The unbilled insurance claims
totaled $15,000.
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162 chapter 17 no such thing as a free lunch

Lessons Learned
Assisting in this case showed me how important it is for law enforcement to have the
knowledge and the skills to investigate financial crimes. Even prosecutors say that as
attorneys, they know the law, but do not have enough expertise in fraud to prosecute the
increasing volume of cases.
The doctor was completely committed to providing the best possible medical care. In
fact, he was so focused on that aspect that he neglected to address critical areas in his
practice that involved money—the very thing that would permit him to continue to offer
the best service. Regardless of your career path or business, it is important to know the risk
of fraud and ways to prevent it.
When establishing setup costs for his practice, Dr. Steever had splurged on medical
equipment, office furniture, and a state-of-the-art patient filing system. But when it came
to the financial aspect, he relied on a bare-bones setup of records and documentation,
along with a family member who helped with the accounting procedures. This was a
system that had no methods to prevent embezzlement of cash.

Recommendations to Prevent
Future Occurrences
Establish a Clear Procedure for Collecting and Storing Cash
A cash log with the amount, time, date, and name of the client should be established and
maintained. All cash should be kept in a locked box. There should be no reason whatsoever
that cash should be removed until it needs to be counted and reconciled. Cash should be
reconciled on a daily basis. In case a discrepancy is discovered, it is much easier to review
one day rather than reconstruct a long period of time. If employees are aware of this
practice, it can also serve as a deterrent. Furthermore, large amounts of cash should not be
kept in the office.

Record All Petty Cash Withdrawals

A petty cash box needs to be established with a designated amount of money for
expenditures like office parties. A valid receipt should be deposited into the petty cash box
for every purchase. That reconciliation should be done at least on a weekly basis. It should
be the objective of the office to purchase as much as possible by company check, purchase
orders, or authorized credit.

Extensive Cash Receipt Documentation

I recommend preprinted, numbered cash receipts with the name of the firm, address,
and phone number. A review of the carbon copies should be conducted routinely.
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recommendations to prevent future occurrences 163

A procedure should be established for voiding receipts that include approval from a
supervisor.

Start-Up Businesses Should Monitor Accounting Closely

For any start-up businesses, it is critical to give careful attention to all aspects of accounting.
While I realize that leather furniture and ambient lighting all make for a comfy waiting
room, I would rather know that my money and my assets were protected by solid
accounting procedures and fraud deterrents. Relying on family or friends to help set up
office accounting procedures can be a mistake. When it comes to the books and the
money, seek qualified and experienced professionals.
In addition, plan for growth. As in Dr. Steever’s case, the rapid increase in patients was
surprising for both him and his staff, and he was not well positioned for expansion. Chaotic
cash-handling led to destruction of insurance billing documents. The loss was not just the
cash copayment. The entire documentation of the office visit was destroyed. Equip small
businesses with up-to-date software programs to prepare for growth.

Suzanne Coggins, CFE, is the owner of Lindsey Consulting in Fort Mill, South Carolina.
She provides proactive fraud consultation to small start-up companies. Ms. Coggins
holds an associate’s degree in industrial health and safety and a BS from Liberty
University. She has 30 years of experience in worker’s compensation fraud and fraud
education, prevention, and detection.