Lack Of Oversight Led To $6.7M Embezzlement From County: Report

ROCKVILLE, MD — An agreement between Montgomery County and the Maryland Economic Development Corporation allowed a government official to embezzle nearly $7 million in county money, an audit report by the Montgomery County inspector general revealed.

The county's chief operating officer, Byung Il Bang, pleaded guilty on Nov. 16 to embezzling more than $6.7 million in county money and making false statements on his tax returns. Bang, who led the Department of Economic Development from 2010 to 2016, could face up to 20 years in prison.

The inspector general, who released the 158-page report Monday, said the 2006 agreement between the county and MEDCO enabled Bang to make major financial decisions with little oversight or authorization from the county.

"The 2006 agreement specified that the DED director could make decisions or authorize actions
without additional consent or approval from the county, and could designate such authority to
other individuals," the report said.

The report added: the agreement, "either through intentional design or unintended consequence, ultimately ensured that all financial transactions and information related to the Incubator Program, although available to other entities within the county, would pass through the DED COO."

The inspector general said this agreement allowed Bang to escape oversight and establish a standing reserve fund. The fund's availability, according to the report, makes it easier for officials to make improper financial transactions.

Within Bang's first year as department head, Montgomery County and South Korea agreed to create an incubator fund called Chungbuk Incubator Fund LLC. Federal officials said Bang opened four bank accounts under the company's name and listed his home address as the business' address. Bang was then able to embezzle millions of taxpayer dollars, prosecutors said.

"This arrangement circumvented management controls established by the county government, avoided transparency and oversight by elected county officials, and created a standing reserve fund for use by the DED Director," the report said.

The report also said that management did not segregate key roles within the department. Segregating essential duties, according to the inspector general, lowers the risk of error, misuse, and fraud.

"Management divides or segregates key duties and responsibilities among different people to reduce the risk of error, misuse, or fraud. This includes separating the responsibilities for authorizing transactions, processing and recording them, reviewing the transactions, and handling any related assets so that no one individual controls all key aspects of a transaction or event," the report said.

In the report, the inspector general provided three sets of recommendations. They are:

• Management should strengthen controls over financial transactions and payments, consistent with and complementary to recommendations contained in reports issued by auditors engaged by the county;
• Management should ensure that it divides or segregates key duties and responsibilities among different people; and
• Management should ensure that there is an annual comparison of budgets to actual expenditures which includes an explanation of how any variance relates to actual program accomplishments.

The Montgomery County Council, the inspector general, staff from County Executive Marc Elrich's office, staff from the Office of the County Attorney, and the Department of Finance will meet on Tuesday, Jan. 15, at 2:30 p.m. At the meeting, they will conduct a review of the report's findings and recommendations, the County Council said in a statement.

Council president Nancy Navarro said the councilmembers were "shocked" and "outraged" by Bang's actions.

"The Council takes these crimes extremely seriously and we wholeheartedly support the work of Inspector General Blansitt and his team to help prevent this type of crime from happening in the future," Navarro said.

Image via Shutterstock