A Germantown resident and former Chief Operations Officer of the Montgomery County Department of Economic Development who pleaded guilty to a scheme in which he embezzled more than $6.7 million from the Montgomery County government and failed to report the money as income on his tax returns has been sentenced to four years in prison.
On Friday U.S. District Judge Paula Xinis sentenced Byung Il “Peter” Bang, 59, of the 17800 block of Cormorant Lane in Germantown, to four years in prison, followed by three years of supervised release for federal wire and tax charges. Judge Xinis continued the sentencing hearing concerning restitution and forfeiture until Friday, March 1, 2019, at which time the judgment will be finalized.
“Mr. Bang lied to his colleagues, government officials and the IRS over an extended period of time. The $6.7 million that he embezzled deprived Montgomery County taxpayers of funds that could have been used for schools, libraries, and other expenditures, and harmed the County’s reputation,” said U.S. Attorney Robert K. Hur. “Corrupt public employees undermine everyone’s faith in government.”
“Through strong Federal and County cooperation and investigation we were able to bring Mr. Bang to justice. It is important that people who betray the public trust be held accountable. Today’s sentence is the next step in our effort to close this chapter of greed and corruption in the career and life of Byung Il “Peter” Bang,” said State’s Attorney John McCarthy.
According to his plea agreement and other court documents, from 2010 through July 2016, Bang was the Chief Operating Officer of the Department of Economic Development for Montgomery County, Maryland (MC-DED). In 2016, the MC-DED was privatized and Bang’s position was moved to the Montgomery County Department of Finance, where he was employed until May 2017.
The MC-DED established business incubator and/or innovation centers throughout the County. As COO, Bang oversaw budgets for these incubators and was authorized to request disbursement of County funds to the incubators to further the program. Bang’s position also enabled him to authorize and direct the disbursement of money from County partners, including the MEDCO, and the Maryland Conference & Visitors Bureau, without any significant oversight or approval.
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 caused a company called Chungbuk Incubator Fund LLC to be incorporated in the State of Maryland and opened four bank accounts in the name of the company, listing his home address as the address of the LLC.
Bang admitted that between 2010 and 2016, he fraudulently authorized the disbursement of $6,705,669.37 from the Montgomery County government to the bank accounts of the fraudulent entities that Bang created and controlled. Bang admitted that most of the funds were used to fuel his gambling addiction.
Bang did not report the money he embezzled as income on his individual tax returns. His failure to report those funds as income resulted in $2,335,913 in taxes owed to the IRS.
Bang also lied on his County financial disclosure statements for the years 2012 through 2016, by failing to disclose his interest in the Chungbuk entities, including: property holdings; relationship with an income source; and the type and amount of income received.
Bang previously pleaded guilty to the following charges in the Circuit Court for Montgomery County: theft scheme over $100,000; and misconduct in office. His sentencing on those charges is scheduled for March 7, 2019. Judge Xinis ordered that Bang’s federal sentence will be served concurrent to whatever sentence is imposed on his state charges.
As part of his Circuit Court plea agreement, Bang is required to pay restitution in the full amount of the victims’ losses, and to plead guilty in the Circuit Court for Montgomery County, to the state charges of theft scheme over $100,000, and misconduct in office. In November, then County Executive Ike Leggett said, “As to recovering the stolen monies, the County, working with the federal and state authorities, will use all means at our disposal. Loss insurance held by the County will replace some of the money. We are aggressively looking for the balance in any other accounts or properties held by Mr. Bang."
As a result of this incident the County initiated a process to address the factors that allowed Bang to get conceal his embezzlement to prevent defraud and abuse in County programs. The County implemented policies to strengthen controls and processes.Those steps include;
• 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.
The sentence was announced on Friday by United States Attorney for the District of Maryland Robert K. Hur; Special Agent in Charge Kelly R. Jackson of the Internal Revenue Service - Criminal Investigation, Washington, D.C. Field Office; and Montgomery County State’s Attorney John McCarthy. Hur commended the IRS-CI and the Montgomery County State’s Attorney’s Office for their work in the investigation. Hur thanked Assistant U.S. Attorneys Thomas M. Sullivan and Erin B. Pulice who are prosecuting the case.
Captions: Byung Il “Peter” Bang, 59, of Germantown was sentenced to four years in prison followed by three years of supervised release for federal wire and tax charges. Bang is the former Chief Operations Officer of the Montgomery County Department of Economic Development.
Photos courtesy Montgomery County State’s Attorney’s Office