PRINCIPLES OF FRAUD EXAMINATION

Chapter 2-3: Cash Schemes

Case Study: Shirley

Case Narrative
Dr. David Glabman had always been skeptical about his employees stealing money from
him until he hired Shirley. When his previous receptionist left his practice, Dr. Glabman
and his wife, his office manager at the time, were looking for someone to fill the position.
They found Shirley through a temp agency.

Because of her commitment and hard work, Dr. Glabman decided to hire Shirley as his
new receptionist after only two weeks of observance. Shirley’s main functions as the
receptionist were coding, filing insurance, and recording charges and payments. Mrs.
Glabman occasionally checked Shirley’s work and found no mistakes.

After a few years of working for Dr. Glabman, Shirley was promoted to take over Mrs.
Glabman’s position as office manager. Shirley’s functions expanded to handling
collections, managing contracts, and converting Dr. Glabman’s practice to a new
computer system. Dr. Glabman was very impressed with her devotion to her work. In
fact, Shirley “was so devoted that she never left the office until her work was done, and
rarely took any vacations” (Glabman).

Even though Shirley took over as the new office manager, Mrs. Glabman continued to
check over Shirley’s work for several more weeks. She specifically concentrated on
Shirley’s day sheets. However, when Mrs. Glabman took a four-month fellowship in
another state, Dr. Glabman took over the bookkeeping, “but no one audited the day sheets
[as] Shirley continued to post charges and payments, and prepared the deposits.”
(Glabman)

Mrs. Glabman returned to Dr. Glabman’s practice after a year and decided to check up on
his practice’s finances. She immediately found obvious differences between what the
patients had paid in cash, as recorded in their superbills, and what cash that has been
deposited, as recorded on the deposit slips. Surprised, Mrs. Glabman went into further
investigation by checking the computer records. She found that some of the co-payments
had been adjusted and some had never been posted. Alarmed by the discovery, she
looked back over the day sheets dating back to when Shirley first became the office
manager. She learned that $5 to $10 weekly would be missing at first, growing to
approximately $200 a week. The estimated loss was about $10,000 over the year.

Distraught at this point, Mrs. Glabman called several of their patients who had paid cash
the previous week and requested them to send copies of their superbills and receipts to
Dr. Glabman’s home. She discovered that even though some of these patients were billed
for two different kinds of services, Shirley would only record one of them and pocket the
difference.

Both Dr. Glabman and Mrs. Glabman were “very disappointed to discover that someone
[they] had trusted had violated [their] confidence” (Glabman).
This case study was contributed by Raymond Cheng. It’s based on the March 2004 Advisor Today article
entitled “Avoiding theft” and the March 2004 Medical Economics article entitled “Talented, devoted,
dependable and a thief”.
 PRINCIPLES OF FRAUD EXAMINATION

Chapter 2-3: Cash Schemes

Case Study: Shirley

When Dr. Glabman and his wife hired an attorney to confront Shirley about the ‘missing’
funds, Shirley calmly denied the accusations and claimed that she could not account for
the missing cash. The attorney then terminated Shirley for gross negligence and ordered
her to gather her belongings and leave immediately. Dr. Glabman “met with the staff and
told them [Shirley] wasn’t coming back, apologizing that [he] couldn’t say more.”
(Glabman) He also decided not to report this incident to the police.

That was not the end of the story. After the incident, Shirley hired an attorney to fight for
the $3,000 unpaid vacation and bonus she claimed Dr. Glabman owed her. She even
filed a claim for unemployment insurance.

A few months after the incident, Dr. Glabman realized that his insurance policy covered
reimbursement for embezzlement. He filed and received portions of the $10,000 loss.
However, it wasn’t until Dr. Glabman’s insurer sued Shirley for the reimbursement that
he found out Shirley had declared personal bankruptcy. He also learned that Shirley had
a vast amount of debt due to a rich lifestyle consisting of an expensive car, jewelry and
cosmetic surgery.

Team A: Please analyze & explain the case background and related fraud schemes AND
identify fraud schemes specific to this case.
10-15 mins:
Who is the perpetrator, their duties (their weakness), describe 5 schemes skimming,
larceny and so on, what scheme is most relevant to our case?

Team B: Please explain related prevention and detection measures AND recommend
measures effective in this case.

What are the possible ways to detect any cash schemes

Apply it to the setting as much as possible

- Recommendation to prevent or detect in future: there should be segregation of

duties, when she became an office manager she gained control over everything
which gave her a perceived opportunity to steal
- Someone should record the payments and the other should record the deposits,
bank reconciliation,
- Calculating daily receipts, preparing the deposit, delivering the deposit to the bank, and verifying
the receipted deposit slip are duties that should be performed independently of one another.
balancing of cash
Delivering the deposit
Bank statement reconciliation
Segregation of duties- in the book

This case study was contributed by Raymond Cheng. It’s based on the March 2004 Advisor Today article
entitled “Avoiding theft” and the March 2004 Medical Economics article entitled “Talented, devoted,
dependable and a thief”.
 PRINCIPLES OF FRAUD EXAMINATION

Chapter 2-3: Cash Schemes

Case Study: Shirley

-Look for any adjustments and discounts, is the bank account overstated

-she should have limited access to the computer systems to maintain the integrity of the
data
-send late notices to the insurance companies to claim the receivables and to avoid
fictitious write offs (DR needs to follow up on late payments)

This case study was contributed by Raymond Cheng. It’s based on the March 2004 Advisor Today article
entitled “Avoiding theft” and the March 2004 Medical Economics article entitled “Talented, devoted,
dependable and a thief”.