Official Pleads Guilty to Embezzling More Than $6.7 Million
A former Montgomery County economic development official pleaded guilty Friday in federal and county courts to embezzling more than $6.7 million over six years from the county.
Byung Il Bang pleaded guilty in federal court to wire fraud and making false statements on his tax returns, according to the U.S. Attorney’s Office.
Bang, also known as Peter Bang, pleaded guilty in Montgomery County Circuit Court for a count of theft in excess of $100,000 and a count of misconduct in office, State’s Attorney John McCarthy said at a news conference in the Circuit Court building.
U.S. District Judge Paula Xinis has scheduled sentencing in the federal case for Feb. 22. Circuit Court Judge Cheryl McCally has scheduled sentencing in the county case for March 7.
Byung (Peter) Bang | Montgomery County State’s Attorney’s Office
Bang could be in jail for as long as 20 years for the county case. He could face 20 years for the federal case, too, although the sentencing guidelines call for 63 months to 78 months. McCarthy said the sentences could run consecutively, meaning he doesn’t start serving one sentence until the other is completed.
Restitution of the $6,789,037.41 will be part of both sentences, McCarthy said. Prosecutors, however, believe Bang gambled the money away.
That view isn’t shared by Montgomery County Executive Ike Leggett.
“I’m a strong believer that he didn’t gamble away all this money. I don’t believe that,” Leggett said by telephone. “I think he has sacked away some of that money.”
The embezzlement started in 2010 and lasted through July 2016, prosecutors said. During that time, Bang was the chief operating officer of the Department of Economic Development.
The department started business incubators and innovation centers focusing on different areas, such as computer technology and biotech. The efforts provided small businesses by offering below-market rent or grouping them with other small businesses.
As the department’s COO, Bang oversaw budgets disbursed county funds, prosecutors said.
In 2010, Montgomery County and the Chungcheongbuk-Do province of South Korea entered into an agreement to develop an incubator fund. On July 20, 2010, Bang incorporated a company called Chungbuk Incubator Fund LLC and opened four bank accounts in the name of the company, listing his home address as the address of the LLC. Bang used this entity and the bank accounts to facilitate his fraud, prosecutors said.
The IRS investigator uncovered fake entities, fraudulent invoices and several bank accounts Bang opened to conceal the fraud, said Special Agent in Charge Kelly R. Jackson of the Internal Revenue Service.
Prosecutors believe Bang acted alone.
Leggett said he learned of the investigation about a year and a half ago. In May 2017, Bang was fired, Leggett said.
“This case represents an egregious violation of the public trust,” First Assistant U.S. Attorney Jonathan Lenzner said at the news conference.
Leggett said the county has put into place a number of safeguards to prevent similar cases, including:
- Strengthened segregation of duties within each department by requiring that separate persons authorize the transaction, receive the services, and process the invoice.
- Ensured that all agreements “exempt” from the procurement regulations will be subject to a new review process by representatives of the County Attorney and the Department of Finance.
- Requiring, for exempt transactions, sufficient information supporting the basis for procurement exemption, and that sufficient additional documentation supporting payments previously subject only to departmental review now be subject to centralized scrutiny.
- Centralized and improved controls and restricted systems over the held check process to require department director level authorization to pick up checks.
- Curtailed the practice of accepting vendor information directly from departments and implemented additional controls and authorizations to register vendors on an exception basis.
- Increased oversight over payment processing.
- Implemented automated forensic review of disbursements prior to payments being issued as a means to detect questionable payments.
- Establishing a new “Compliance Unit” within the Department of Finance to review and approve department requests to enter into procurement exempt transactions, ensure that those direct purchase orders have appropriate support, expand and enhance post-payment audits to ensure payments were properly supported and authorized, and analyze tests run by forensic software designed to detect irregular payment transactions.
- Trained all County managers concerning their responsibilities to ensure effective internal controls and management oversight of financial transactions, including the importance of appropriate segregation of duties, identification of potential “red flags” of employee fraud and misappropriation of funds, and what to do if such allegations or issues are identified or brought forward as allegations by other employees.
- Strengthening its oversight and management of the business incubator program by contracting through procurement with a contractor with industry expertise to perform property and portfolio management of the Silver Spring Innovation Center and will have a property management contract in place by December 1, 2018 for the Rockville and Germantown Innovation Centers while directly overseeing the financial operations of the Rockville and Germantown Innovation Centers.
Question is why when sufficient evidence to fire him in May of 2017 are we just learning about this?
All kinds of confusing new regulations being put in place; sadly, no discussion about failures of internal audit organization to find this.
Will be interesting to find how many political campaigns he helped finance.
With the one-party rule in Montgomery County, we really have no checks and balances as to what is being done behind the scene. The new regulations are sham as this malfeasance should have been uncovered by Montgomery County’s Office of Inspector General which was asleep at the wheel. Ike Leggett appointed the first IG and it is evident that the IG failed in detecting waste, fraud, and abuse. Apparently, not enough independent audits were conducted or perhaps they were ‘pushed off the ball’ when they attempted to conduct such audits.