Fake invoices and gambling debts: How a county bureaucrat stole $6.7 million

Peter Bang was shaking.

The 20-year Montgomery County employee sat before the county attorney and his deputy in a conference room in Rockville, staring at the piece of paper in front of him. He was being placed on leave without pay for stealing more than $6.7 million in public funds over six years, by far the largest embezzlement scheme in the affluent suburb’s history.

Bang “was trembling; he was shaking the whole time,” Deputy County Attorney John Markovs said. “He lowered his head and seemed resigned to the fact he had been caught.”

Byung Il “Peter” Bang, a numbers and budget guy, was also an embezzler and a gambler, according to court filings — bringing hundreds of thousands of dollars to casinos across the country even as he wagered he would get away with stealing millions from Montgomery County coffers...

...“Neither the people below him or above him seemed to be able to answer questions about the department’s finances,” said Jacob Sesker, then the County Council’s economic development analyst.

Bang’s appearance added to the effect.

“He was always the best-dressed man in the room,” said Sesker, now a senior legislative analyst with the county. “It’s not that often you’re in a room full of people both in the public and private sector, and the best-dressed person is a bureaucrat.”..

...Bang then directed money from the county toward a false company that seemed to be created for the scam, with a name evoking the province: Chungbuk Incubator Fund LLC. He approved the LLC’s fake invoices, directing the county to hold the checks for him to pick up. The money went to bank accounts associated with Bang’s home address in Germantown.

The scheme ended after Montgomery privatized its economic development functions in 2016, doing away with Bang’s department — and his ability to direct funds with apparent impunity. Bang was transferred to the county’s finance department.

And there he might have stayed if the Internal Revenue Service hadn’t knocked on the county attorney’s door with a summons in April 2017...

https://www.washingtonpost.com/local/md-politics/fake-invoices-and-gambling-debts-how-a-county-bureaucrat-stole-67-million/2019/02/21/7c35e6a6-2641-11e9-90cd-dedb0c92dc17_story.html?fbclid=IwAR2F5aZfDW1piTiTJkZ9pUig_4vCHdWp4-e5aaV6WqyC2kGlDrTaKj7FQt0&utm_term=.1db97007b2bd

After Election, Report on Embezzlement of County Funds Finally Released. It was just a "misapproriation."

Later that same day, the Consultant/BHI CEO e-mails the DED COO “Houston…We have a problem!” Page 93. 

and

" ... top-level DED management oversight was extremely weak." Page i

and

"Former DED Directors used a 2006 agreement with a public entity to escape oversight by County government and create a standing reserve fund for use by the DED Director. The fund's availability increased the risk of improper financial transactions. Essential segregation of duties was absent within DED, and top-level DED management oversight was extremely weak. Over an eleven year period, the DED COO took advantage of control weaknesses to divert at least $7.2 million from the County's Incubator Program without apparent detection or impact on program operations. In implementing the BioScience initiative, DED management used public entities to fund the development and operations of a BioHealth intermediary without executing a formal Memorandum of Understanding (MOU) or Contract. " Page 5

The IG Report:   https://www.montgomerycountymd.gov/OIG/Resources/Files/PDF/IGActivity/FY2019/mcded_mismanagement_final_report_19_nov_2018.pdf

The report states on Page 5: 
Four individuals served in the position of Director of the Department of Economic Development between 1995 and 2016:
• DED Director 1 served from 1995 until 2006 during the creation of the Incubator Program2 , and subsequently served as Maryland Secretary of Business & Economic Development, as a Senior and Executive Vice President with different banks, and currently with Scheer Partners Management, Inc. (Scheer), a commercial office real estate firm and a sub-contractor to DED with whom he has served as a Senior Vice President since 2011. Former DED Director 1 was replaced as department director during the government transition that followed the election of County Executive Isiah Leggett.  [That would appear to be Henry Bernstein] 

• DED Director 2 succeeded DED Director 1, and served until 2009,
• The Former DED Director served between 2009 and 2015,
[That would appear to be Steve Silverman] 
and
• A person we will refer to as the Former Acting DED Director, who had served previously as the Director of the Rockville Economic Development Inc. (REDI) and as the former Deputy Director of DED, served as Acting DED Director from January 2015 until the DED was dissolved and replaced in 2016 by a non-profit, public-private partnership, the Montgomery County Economic Development Corporation (MCEDC) created with the recommendation of the County Executive and vote of the Council.
[ That would appear to be Sally Sternbach ]

References to "former DED Director" in IG Report:

Page 8:
In a voluntary interview during August 2018, the Former DED Director described his management of DED as “Hands Off”. Other evidence we located indicates that the Former DED Director was not engaged in daily DED operations. In a June 2009 e-mail, the DED managers were advised to go through the Former DED Director’s calendar and send him “a BRIEF e-mail updating him on any issue(s) that may be discussed during his meetings for that week.” The purpose of the “bulleted” e-mails was to be sure that the Former DED Director was aware of what the staff reported they were doing in a concise fashion. This change followed an earlier message in which the DED COO had been directed to reduce the Director's weekly meeting with the department managers from one hour to one half-hour. Politically appointed Directors are often short-tenured, focused on executing the policy objectives of an administration, and may not be either willing or qualified to manage career staff in a governmental organization...

Page 9:
The Former DED Director acknowledged that he had provided his password to the DED COO and possibly to other staff members, although he could not specifically remember with which other staff members he might have shared his password. Access to the shared password would have given the DED COO the ability to log on to the County information technology system as the Former DED Director and conduct transactions, such as sending e-mails, under the Former DED Director’s name.

Page 14
During his tenure, the Former DED Director was in a position to detect the existence of the shell company.

Page 15
It is somewhat surprising that the Former DED Director never reviewed financial statements of the incubator programs since, as he told us, he had to become personally involved in managing issues related to licensees whose past due rent payments were putting a financial strain on the program.

Timeline of Events Related to Theft Charges Filed Against Mont. Co. Dept. Economic Development County Employee

“Peter Bang was a career County employee. He began working for the County as a merit-protected employee on February 24, 1997 – more than 21 years ago. Beginning in July 2010 until April of 2016, Peter Bang used his position in the County Department of Economic Development, which was privatized in 2016, to divert more than $6.7 million in County monies to his private uses." 11/16/18 Press Release

The fraud was discovered after the Internal Revenue Service reviewed reports of suspicious activity made by several casinos. Bang, who had filed for bankruptcy in 2007, brought cashier’s checks to the gambling sites that ranged in size from $35,000 to $200,000, officials said, but declined to tell the casinos the source of the funds. Investigators obtained copies of the checks and traced the money to fraudulent bank accounts Bang had created, and then to Montgomery County.  Washington Post 11/16/18

During part of that time, the county government had issued procurement freezes to deal with budget shortfalls; Bang created fraudulent Procurement Freeze Exemption Requests that were submitted to the county’s Office of Management and Budget and ultimately approved. Once the money was in one of the four accounts created in the name of the Chungbuk Incubator Fund LLC, Bang used the money for his own benefit, according to the plea agreement.

 In addition to money taken directly from the county, Bang also fraudulently obtained county funds being held by the Maryland Economic Development Corporation and Scheer Partners, a private company that worked as a management agent for the county’s incubators. Between August 2010 and July 2014, MEDCO and Scheer issued nine checks to the incubator fund totaling $1,213,987.63.  In a scheme unrelated to the incubator fund, Bang also stole 21 rent payments from the Conference and Visitors Bureau of Montgomery County, which shared office space with the Department of Economic Development and paid rent to Montgomery County. Between February 2011 and April 2013, Bang directed the bureau to make 21 rent checks payable to Chungbuk Incubator Fund LLC. The payments totaled $45,585.17.  Maryland Matters

November 2008 

• Leggett snags $2M from Korean governor for business project   https://www.washingtonexaminer.com/leggett-snags-2m-from-korean-governor-for-business-project

July 2010

• Beginning in July 2010 until April of 2016, Peter Bang used his position in the County Department of Economic Development...to divert more than $6.7 million in County monies to his private uses." 11/16/18 Press Release

March 2012

• MoCo v. Fairfax, Pr. Geo. Dep'ts. of Economic Development --how are we doing?

http://parentscoalitionmc.blogspot.com/2012/03/moco-v-fairfax-pr-geo-depts-of-economic.html

April 2012

• Sally Sternbach became Deputy Director of DED and then Acting Director in 2015 when Steve Silverman left.

Montgomery County officials are investigating allegations by employees at the Department of Economic Development that acting director Sally Sternbach has fostered a hostile work environment marked by “persistent inappropriate and intimidating behavior.” Washington Post

December 2014

• Steve Silverman leaves as Director of Montgomery County Department of Economic Development (DED).

April 2017

• IRS alerted the County that Mr. Bang may have embezzled County funds.  As a result, the County undertook its own investigation.  Once it became clear that there was probable cause to believe that Mr. Bang had embezzled County funds, the matter was referred to the State’s Attorney. 

June 12, 2017

• Peter Bang’s employment with the County was terminated

November 2017

• The County retained an independent forensic auditing firm on November 28, 2017 to review the transactions engaged in by the former County Department of Economic Development going back 10 years. 

May 2018

• Montgomery County, Maryland Office of the County Executive Office of Internal Audit 

https://www.montgomerycountymd.gov/exec/Resources/Files/Internal_Control_Review_of_Procure_to_Pay_5-9-2018.pdf

July 12, 2018

• Montgomery County Council Audit Committee briefed on recent audits, including:

One report has been released since they were last before the Audit Committee in December 2017: Internal Control Review: Procure to Pay - Specific Functions (MCIA-18-1 ). 

Montgomery County Council Audit Committee is briefed on MCIA 18-1 audit done after embezzlement of DED funds was discovered. But note the word embezzlement is never used. Instead the discussion is about "specific targeted review" - "focused on some activities in the incubator program." At minute 1:13 of the video below watch as Councilmember Nancy Navarro asks vague questions about the incubator audit. Listen to the discussion.

August 29, 2018

• State Tax Lien filed for $ 22,741.87

October 25, 2018

• Stipulated Facts: United States vs. Byung Bang

Note the Stipulated Facts refers to another person involved in this investigation.  That person is referred to as Individual 1.  That person's identity is known.
https://apps.washingtonpost.com/g/documents/local/stipulated-facts-united-states-vs-byung-bang/3314/

November 6, 2018

• Montgomery County General Election

November 16, 2018

• Plea Agreement entered in U.S. District Court 

In separate federal and state court appearances Friday, Bang, 58, the former chief operating officer at the county’s now-defunct Department of Economic Development, pleaded guilty to federal charges of wire fraud and making false statements on a tax return, and to state charges of a theft scheme and misconduct in office.  Washington Post 

Bang pleaded guilty Friday afternoon in Montgomery County Circuit Court to one count of wire fraud and one count of making a false statement on a U.S. income tax return. His sentence hearing was tentatively set for March 7. Bethesda Beat