Embezzlement Scandal Raises Questions about Montgomery County Financial Management

By Mark Uncapher

In the days right after the November election, prosecutors made the shocking revelation that a senior Montgomery County official had embezzled over $6.7 million during a six-year period.  The thefts were made by Byung Il “Peter” Bang, the second-in-command at Montgomery County’s Economic Development Department. He had been diverting economic development funds to a sham company that he had created.[i]

Especially disturbing is the failure of the Montgomery County government’s internal financial controls to uncover a fraud which stretched over so many years. Instead of catching the crime itself, it was uncovered by the IRS after they were notified by casinos of suspicious cash transactions.  While Bang had presented casinos with cashier’s checks that ranged in size from $35,000 to $200,000, he declined to tell the casinos the source of the funds. This triggered the investigation which tracked copies of the checks back to the bank accounts created by Bang and to the county government.

According to the stipulated facts released by prosecutors, facts that Bang admits to, within a single four-month period he succeeded in having the county make three funds transfers for a total of just under $1.2 million to an LLC that Bang had created, which used his home as its mailing address. [2]  

That Montgomery County’s financial processes were unable to detect the fraud reflects a breakdown in its internal controls.  No one person should be able to authorize such a sizeable transaction without far more vigorous scrutiny to verify the underlying documentation. Such lax systems should be a red flag to the possibility that the county government has been allowing still other fraudulent or inappropriate payments to be made.

The news also sheds new light on the county’s economic development failures.  Between 2011 and 2016, Montgomery County netted an increase of only six additional businesses, compared with the growth of nearly 6,300 businesses in the entire state of Maryland. Between 2006 and 2016, Montgomery County added only 210 jobs, while jobs in nearby Fairfax County, Virginia grew by 6,030.

Curiously as well, is the fact that Bang’s former boss Holly Sullivan moved on to a new job in April 2016 as Amazon’s point person for the selection of its new HQ2.  (Jeff Bezos or others at Amazon may want to ask questions about whether due diligence is one of Sullivan’s strong suits.)

In another shoe to drop right after the election, the County Office of Legislative Oversight revealed that personnel expenses are growing faster than revenues.  The office estimates that revenues are expected to grow by 2.7% annually through 2024, which is insufficient to cover the projected average annual growth rate for compensation costs of 3.8%.They further forecast a $200 million budget shortfall in 2024.  The report says that because of spending increases, the county would be facing a budget shortfall of more than $100 million in the current fiscal year, if not for the property tax rate increase passed by the County Council in 2016.

Incoming County Executive Marc Elrich faces significant financial challenges.  Not the least of these is the need for a top to bottom review of the county’s broken financial management systems.

[i]https://www.baltimoresun.com/news/maryland/bs-md-montgomery-county-embezzlement-1117-story.html; https://www.washingtonpost.com/local/md-politics/montgomery-official-embezzled-67-million-from-county-federal-prosecutors-say/2018/11/16/5378861c-e85a-11e8-bbdb-72fdbf9d4fed_story.html?utm_term=.7e9556de33ca

[2]http://apps.washingtonpost.com/g/documents/local/stipulated-facts-united-states-vs-byung-bang/3314/