“Today, the United States’ Attorney for Maryland and the Montgomery County State’s Attorney announced tax evasion and theft and public corruption charges against a former County employee, Peter Bang. Mr. Bang has entered a guilty plea to these charges.
“The County has cooperated fully with the Internal Revenue Service, the United States’ Attorney, and the State’s Attorney in their investigations. We also have worked closely on the matter with the County’s independent Inspector General, and the County has retained two independent auditing firms to review the County’s system of management and control as well as past transactions in which Mr. Bang had been involved.
In April 2017, the 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. Because of the ongoing federal and state investigations we were required to remain silent – until now.
“Stealing money from County taxpayers is one of the worst things that any public employee can engage in. That’s exactly what this individual has done.
“Peter Bang’s employment with the County was terminated on June 12, 2017.
“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. He established a dummy corporation under his control, submitted fraudulent invoices payable to that entity, and then withdrew funds from that corporation.
“Bang took advantage of the fact that Economic Development funds are exempt – under County policy - from the County’s usual procurement oversight procedures, an exemption designed to give the former Department of Economic Development more flexibility in creating and attracting new jobs and investment. That put more responsibility on the Department of Economic Development itself for oversight. Mr. Bang was able to exploit his past reputation as a highly effective employee and his knowledge of established County procedures.
“Investigations to date have indicated that Mr. Bang acted alone in perpetrating these crimes. 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.
“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.
“This robust program includes the following actions already taken:
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. “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."
