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Fake Business and Casino Checks: Ex-Montgomery Official Pleads Guilty to $6.7 Million Embezzlement Scheme

With a fake business entity complete with a starburst logo, a Montgomery County economic development official embezzled more than $6.7 million in seven years.

Byung Il Bang, the former chief operating officer of the Montgomery County Department of Economic Development, who also went by the name Peter Bang, pleaded guilty Friday in U.S. District Court to wire fraud and making false statements on an income tax return. In Montgomery County Circuit Court on Friday, Bang pleaded guilty to a felony theft scheme and misconduct in office.

According to the plea agreements filed in the cases, Bang’s scheme was uncovered after he spent large amounts of cash at casinos in Delaware, Las Vegas and West Virginia.

Court documents show that Bang created a fake company to draw payments — hundreds of thousands of dollars at a time — from the Department of Economic Development and county business partners.

Bang exploited an economic development agreement between Montgomery County and the Chungcheongbuk-Do province, or Chungbuk province, of South Korea to cover the scheme.

After Montgomery County and the province created an incubator fund in 2010, Bang created a company called Chungbuk Incubator Fund LLC. In his position of chief operating officer, Bang oversaw the budgets for all of Montgomery County’s business incubators and was able to process payments without any significant supervisory oversight or approval, according to the court documents.

Between 2010 and 2016, the Department of Economic Development received 14 invoices from the Chungbuk Incubator Fund LLC requesting payment for expenses; the county issued eight checks and made four direct deposits to the company totaling $5,529,464.23.

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.

Bang’s schemes were discovered through a routine Internal Revenue Service investigation of Currency Transaction Reports, a document that is filed when any business entity receives more than $10,000 in cash. Bang regularly visited several casinos with large amounts of money and generally declined to tell the casinos the source of the cash. An investigation revealed that Bang brought cashier’s checks ranging from $35,000 to $200,000 to various casinos.

The federal charges stem from a wire transfer that traveled through a server outside of Maryland and Bang’s failure to state his total income on tax forms.

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 due to the IRS, federal prosecutors said.

Bang signed an asset forfeiture agreement in federal court for $6,705,669.37, though Montgomery County State’s Attorney John McCarthy (D) said there’s no evidence Bang has the money to make the payments.

In federal court, Bang faces a maximum sentence of 20 years in federal prison for wire fraud, and three years in prison for making false statements on his tax returns. He is scheduled to be sentenced in federal court on Feb. 22.

In Circuit Court, Bang faces a maximum sentence of 20 years in prison for the felony theft scheme charge; there is no set penalty in Maryland law for misconduct in office. He is scheduled to be sentenced in state court on March 7.

Montgomery County Executive Isiah Leggett (D) released a statement on Friday afternoon addressing the charges. Leggett said the county has implemented several changes to safeguard public funds since the embezzlement was discovered and has hired two independent auditing firms to review the county’s system of management and control as well as past transactions in which Bang had been involved.

A county investigation started in April 2017, after the IRS alerted local officials that Bang may have embezzled county funds. He was fired on June 12, 2017; he had worked for the county since February 1997.

Leggett’s statement said that Bang took advantage of a county policy that allowed Economic Development funds to be exempt from the county’s usual procurement procedures, which was designed to give the department more flexibility in creating and attracting new jobs and investment.

“Investigations to date have indicated that Mr. Bang acted alone in perpetrating these crimes,” Leggett’s statement said. “As a result of this theft, I initiated a process to fully address the factors that allowed the individual to evade the normal controls and processes that exist to prevent fraud and abuse in County programs and to strengthen those controls and processes.”

The county will try to recover the stolen money. Loss insurance will cover some of the amount. The county is also “aggressively” looking for any other bank account balances or properties in Bang’s name, the statement concluded.

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Fake Business and Casino Checks: Ex-Montgomery Official Pleads Guilty to $6.7 Million Embezzlement Scheme