Montgomery County, Maryland recently got a painful education in the inherent dangers of creating an environment where bureaucrats at government agencies control the flow of public money into private hands.
In 2010, Montgomery County created a partnership with South Korea’s Chungcheongbuk-Do province to build and run a business incubator space for South Korean businesspeople hoping to do business in America. The county’s Department of Economic Development retained Chungbuk Incubator Fund LLC to help operate the incubator, and for seven years everything seemed to be working well – until the IRS started asking questions.
The ”Chungbuk Incubator Fund” turned out to be a company created by Byung Il “Peter” Bang, the chief operating officer of the county’s Department of Economic Development, to carry out the largest theft of public funds in the county’s history. Eventually, auditors determined that Bang had embezzled $6.7 million, only getting caught when the IRS began investigating why someone with a $175,000 county salary on his tax return was showing up at casinos with five and six-figure cashier’s checks.
In 2019, Bang was led from a courtroom in handcuffs to start serving concurrent sentences of four years on federal charges and 15 years for state offenses. He pled guilty and apologized for his actions, which he said had been driven by his gambling addiction.
An eventual forensic audit found that the head of the county’s Department of Economic Development from 2009 to 2015 had given Bang (and other department employees) his computer password, which potentially allowed Bang to forge approvals of payments to Bang’s fake company. Many other failures of basic oversight principles allowed Bang to continue his theft for seven years, until he was moved to a different role in the county.
In a statement, Montgomery County Executive Ike Leggett said that “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.”
While Bang’s fraud may have been notable for how long it went undetected and how much he stole from Montgomery County taxpayers, the environment in which he did so was hardly unusual. Rather than imposing extra controls given the inherent danger of corruption in big-money interactions between business and government, far too many cities, counties and states exempt economic development agencies from effective transparency and accountability requirements.