My snake of a brother stole $200K from my veterinary practice
A lawyer once said how lucky I was to have my brother overseeing my finances. Guess again.
The author was hissing mad when she realized her devoted brother was embezzling from her practice. (Image: Shutterstock.com)(Editor's note: Names have been changed to protect anonymity.)
My brother stole more than $200,000 from my company. I pondered for weeks what sentence I could write to capture your interest for a story about embezzlement.
So I'm just telling it like it is: My brother, my trusted controller, stole from me over a 2.5-year period. In fact, he stole from me from the time I hired him until his thieving was discovered and halted.
My veterinary business has been very successful. I've enjoyed steady growth in revenue and profits during the six years I've been in business. I have a great team of managers and advisors.
So how did it happen?
8 ways to protect your veterinary practice from embezzlement
Do these now? Don't do them yet. Do them now. Right now.
1. Be the only signatory on your checking accounts. Review your bank statements and credit card statements weekly-or monthly at the least.
2. Review your bank ledger online at least once a day for suspicious expenditures or charges.
3. Look at your P&L statements at least monthly.
4. Employ a system of checks and balances. The person who tallies your deposits shouldn't be the same person who takes your money to the bank.
5. Set a budget and stick to it. Meet with team members to review the budget regularly.
6. Don't let team members manage accounts that issue rewards. This makes it too easy to keep the reward gift cards. Have rewards accounts sent to your home address, if possible. You can dispense them to team members, but maintain control of these cards.
7. Invest in an accountant with a keen eye. Ask him or her lots of questions.
8. Invest in cameras. Remember that James stole stuff from the practice too. As an aside, although it's not embezzlement-related, one week after I learned of James' thefts, I installed cameras around my business. Shortly after, someone fell and claimed they slipped on dog poop. Our lawn is always kept clean. Thanks to the cameras, we saw the owner picked up the dog's poop in a poop bag and then slipped on the bag she dropped.
He was a dedicated and diligent employee
Six years ago, I was a solo practitioner with four employees. Now we proudly employ 13 veterinarians and more than 50 team members at two locations. We enjoy enthusiastic employees and clients. I literally thought I had it all.
Around Christmas 2015, we decided to open our third practice. My advisors suggested reassigning my brother James away from managing the company's accounts payable and focusing him strictly on practice operations.
Besides being my only sibling, James was by all accounts a dedicated and diligent employee. He would work nights, weekends and even during his own child's birthday party. He was always available to help a client or team member in need. James would put out any fire, any time,
My advisors pointed out that his strengths were in daily operations, IT issues and inventory. Anna, another member of my management team, who had 17 years' experience as a controller, was better suited to manage the books. We generated an additional $1 million in sales from 2014 to 2015, and managing the finances was further complicated by adding new practices. It was a simple decision to restructure our management team to most efficiently use our staff. I didn't know it at the time, but this was the luckiest decision I ever made.
The breath was knocked out of me
As instructed, James closed up the books for the year. He wanted to make sure there were no loose ends, so he entered his numbers and ran his reports in January. He even packed everything up for us and moved them to storage for safekeeping. James provided passwords and account information to Anna. The transition seemed to be going smoothly until Anna called me on the phone one day: “I just got an invoice from a supplier that we owe $90,000, and that we haven't made a payment since September.”
The breath was knocked out of me. My first thought was that James was irresponsible and overextended us during our expansion. He likely dug us into a hole he thought he could fix before I noticed.
I went to dinner with him and asked about the past due account. He told me, as I expected, that he was trying to stretch funds for the new equipment and building costs. He assured me that that was the only problem. I reminded him that everything I have financially is on the line for the business. We provide a means of income for more than 60 people. Family income and livelihoods depend on my business-not to mention the care of thousands of beloved pets.
I told James he couldn't hide things from me in the future. He sincerely apologized, acknowledged that he messed up and assured me this wouldn't happen again.
Exposing the Amazon.com nightmare
I immediately had Anna check with every vendor to ensure no other payments were past due. By the end of the week, I learned that my business owed more than $592,000 dollars total to suppliers. No one had been alerted to a problem before this. I also discovered a credit card bill with more than 50 non-business-related items purchased from Amazon.com-everything from shoes to loose jewels. We pulled and reviewed every credit card invoice. There were more than $56,000 in non-business-related Amazon charges. The shipping address was my brother's home.
About a year earlier, my trusted lawyer had told me to keep my eye on the finances at all times. My lawyer also remarked how lucky I was to have James, a trusted family member, helping me run my business. My accountant had asked James about the online shopping, but James told him my husband had used the card for items we needed for the business. Company representatives I spoke with weekly were aware my business owed a lot of money to them. But James ensured them that once the expansion went through we would get caught up. Never once did he mention any of these things to me.
Everyone liked James. He once passed out expensive Oakley sunglasses to my team, claiming we received them as gift rewards from our vendors. It turns out that all of these things were purchased online with the company credit card. We quickly learned that James also pocketed cash, and stole and stockpiled supplies.
I don't believe I'll ever fully know the damage James did to my business. I was surprised after talking with some of my trusted colleagues that many business owners are silent victims of embezzlement. In all likelihood, many of those who will read this article are presently victim or have fallen victim to embezzlement in the past.
It could happen to you
My story might make you think a lot of things: "She obviously doesn't know how to run a business" or "She's ignorant of finances" or "She deserved it for not having better internal controls."
The truth is, I'm an excellent CEO. I'm smart and have grown the company year after year, and no one deserves to be a victim of embezzlement.
But we know reasons veterinarians might be easy victims. Most of us have no formal training in business. Many of us are multi-taskers and often distracted. We tend to be trusting and compassionate. We're busy spouses and parents. And, the truth is, sometimes we see patients full time and run our businesses in our spare time. We stretch ourselves thin and trust that our team members will look out for us. And some of us-like me-put someone we trust and admire in the position of managing our finances.
So don't make my mistakes. (See the sidebar "8 ways to protect your practice from embezzlement" on the first page of this article.) Yes, I believe most people are good. But in the future I will be a smarter business owner. And I hope my story will help you protect yourself too.