Former Baltimore Mayor Catherine E. Pugh, who resigned in May amid allegations of self-dealing relating to her self-published children’s books, was federally charged Wednesday with 11 counts of fraud, tax evasion and conspiracy.
Federal prosecutors allege she defrauded area businesses and nonprofit organizations with nearly $800,000 in sales of her “Healthy Holly” children’s books, many of which they say were never actually printed and distributed to schoolchildren, to unlawfully enrich herself, promote her political career and illegally fund her campaign for mayor. Pugh’s attorney, Steve Silverman, declined to comment Wednesday on the charges.
The scandal became public when The Baltimore Sun reported in mid-March that Pugh sold $500,000 worth of the books to the University of Maryland Medical System, on whose board she served while a public official, and didn’t properly disclose her “Healthy Holly” business in ethics forms. Purchasers of the books included the hospital system she helped oversee and a health insurer that does business with the city.
Pugh resigned from the UMMS board on March 18, then resigned as mayor after a leave of absence on May 2. In the interim, the FBI and IRS raided her home, City Hall and other locations tied to her.
Here’s a timeline of how the scandal unfolded:
» Pugh, then a city councilwoman, joined the board of the University of Maryland Medical System.
» Pugh was appointed to the House of Delegates by then-Gov. Robert Ehrlich following the death of the late Del. Tony E. Fulton.
» Pugh was elected to represent District 40 in the Maryland State Senate.
» In December, Pugh persuaded the medical system to agree to pay her $100,000 to purchase 20,000 copies of her first “Healthy Holly” book to donate to Baltimore’s schools and area day cares, according to a federal indictment.
» Because the book contained “various grammatical and spelling errors," a school system staffer copy edited the books, and then-CEO Andres Alonso ultimately decided they couldn’t be used for instruction, but would be donated to students, prosecutors said.
» Pugh incorporated “Healthy Holly LLC” in January.
» UMMS first purchased 20,000 “Healthy Holly” books written by Pugh. The health care system later donated the books to Baltimore schools and to area day cares.
» Pugh paid a printing company $13,480 to print and deliver 22,110 copies. Of those, 20,020 copies went to a city schools warehouse; 2,090 copies went to Pugh’s legislative office, according to prosecutors.
» A Pugh donor who owns a Maryland-based financing company purchased 2,000 books for $14,000, according to prosecutors. The donor is identified in the court documents as “Purchaser G," and his transactions with Pugh mostly align with those acknowledged by J.P. Grant, the Columbia-based financier who frequently does business with the city. It’s unclear whether these books were printed or delivered. Grant did not respond Wednesday to a request for comment.
» In October, CareFirst BlueCross BlueShield agreed to buy $7,000 worth of Healthy Holly books. To fill the order, court documents state, Pugh took 1,000 copies that the medical system had already paid for and resold them to CareFirst.
» Pugh used $6,000 from the CareFirst sale to pay down a line of credit on her Ashburton home in Northwest Baltimore, according to federal charging documents.
» In August, UMMS ordered another $100,000 worth of “Healthy Holly” books. Instead of having them all sent to the school system, Pugh had 1,400 of the books delivered to her legislative office, according to prosecutors.
» In the same month, the Maryland Automobile Insurance Fund — a quasi-public entity meant to aid hard-to-insure drivers — bought $7,500 worth of the books.
» CareFirst BlueCross BlueShield agreed to pay $7,500 for 1,000 copies; the Maryland Automobile Insurance Fund agreed to make a $5,000 “charitable donation” for 556 copies; and Ariel, a Chicago investment firm, agreed to pay $3,860 for 400 copies, through Associated Black Charities, according to prosecutors.
» In February, CareFirst bought $7,500 worth of books through Associated Black Charities, which kept $1,000 of the payment and sent the rest to Pugh, who deposited it in the Healthy Holly bank account in March. The books were delivered to the charity, which delivered most of them to youth-related organizations, prosecutors said.
» In March, UMMS ordered another $100,000 worth of “Healthy Holly” books, according to prosecutors. Pugh paid a printing company $15,275 to print and deliver 21,000 copies — 19,500 of which went to schools and the other 1,500 of which were delivered to Pugh’s legislative office in Northwest Baltimore, prosecutors said.
» In September, Pugh announced her run for mayor.
» In November, Healthy Holly LLC gave a $5,000 check to Pugh’s campaign for mayor of Baltimore, campaign finance records show.
» In January, Pugh and aide Gary Brown Jr., who was also federally charged in the scandal, decided to “secretly” donate $35,800 in book-sale money to her mayoral campaign campaign, according to prosecutors. They opted to make the contributions "in other people’s names, i.e., to use straw donors, which is a violation of Maryland’s election laws,” according to the indictment.
» To hide the source of the straw donations, prosecutors allege, Pugh urged Brown to create bogus invoices and backdate them. In total, Brown and Pugh cashed out approximately $62,100 in Healthy Holly money during the year, all of which went to straw donors or Pugh, prosecutors say.
» In January, Kaiser Permanente bought $25,000 worth of the books as part of its community outreach program, according to prosecutors. To fill the order, Pugh re-sold 7,500 copies from the 2015 shipment to the school system, prosecutors said.
» A month before the Democratic primary, Pugh told “Purchaser G" that she needed to raise more money for her campaign and asked for his help. She told him she had been making money by selling the “Healthy Holly” books and asked for $50,000, with the understanding that “the balance of the money [would go] toward her mayoral campaign,” prosecutors said, a violation of Maryland election law. Pugh did not use any of the money to print any books, prosecutors said.
» Kaiser paid another $25,000 for 5,000 books in September, according to prosecutors. To fill the orders, Pugh and Brown resold books that had already been purchased by UMMS and delivered to school system’s warehouse to Kaiser, prosecutors said.
» In October, Pugh told Purchaser G she wanted to buy a larger house so she could entertain people when she became mayor, took him to see it and told him he could help her buy it by writing a $100,000 check to “Healthy Holly,” prosecutors said. The donor wrote a check from his company’s account, prosecutors said.
» 14 hospitals, including the the University of Maryland Medical Center and the Midtown Campus, strike a $60 million, decade-long agreement with the city help pay for public safety and other city services.
» In November, UMMS paid for $100,000 worth of “Healthy Holly” books. The books were never delivered, prosecutors said.
» In December, Pugh became mayor of Baltimore. Around the time she was sworn in, she used the October and November $100,000 payments from Purchaser G and UMMS, respectively, to purchase a new house, prosecutors said.
» The same month, the Frederick Frank Family Trust Foundation gave $50,000 to Associated Black Charities to buy 5,000 copies. To fill the order, Pugh re-sold 5,000 copies that had already been delivered to the city schools warehouse from a 2015 UMMS order, according to prosecutors.
» Pugh told the IRS she had made just $31,000 in 2016, when her income was more than $322,000 that year ― meaning she shorted the federal government of about $100,000 in taxes, the U.S. attorney’s office alleged in the indictment.
» Brown was found guilty of violating state election laws for funneling cash to Pugh’s campaign through relatives, but Pugh kept Brown employed at City Hall after his conviction. Instead of returning the money illegally donated to her campaign, federal prosecutors say, Pugh sent it to Brown to pay for his legal defense.
» In November, Kaiser paid Pugh $14,000 for 2,000 copies of the books, according to prosecutors. The books were never delivered, prosecutors said.
» Healthy Holly LLC gave $1,000 through ticket purchases to Baltimore County Executive Johnny Olszewski Jr.’s campaign in August, as well as $1,000 to state Sen. Jill Carter’s election committee in June.
» In November, UMMS ordered another $100,000 worth of “Healthy Holly” books, prosecutors said. The books were never delivered, prosecutors said.
» In the same month, Kaiser paid Pugh $25,000 for 4,000 copies of “Healthy Holly” books, prosecutors said. The books were never delivered, prosecutors said.
» In March, Carter, a Baltimore Democrat, sponsored a bill that would make it illegal for board members to profit from contracts with the hospitals they govern.
» The Baltimore Sun published its first story on the scandal, revealing that about a third of appointed members of the UMMS board, including Pugh, had business deals worth hundreds of thousands of dollars each with the medical system.
» Pugh resigned from the UMMS board of directors after coming under fire for failing to fully disclose the $500,000 business relationship she had with the system.
» Two other board members, John W. Dillon and Robert L. Pevenstein, resigned and four more took a leave of absence.
» Pugh called inquiries into her deals with the University of Maryland Medical System a “witch hunt.” She also said she returned the most recent $100,000 she received from the medical system amid questions about the deal.
» Pugh announced she would take a leave of absence. City Council President Bernard C. “Jack” Young became acting mayor in her absence.
» Pugh’s lawyer confirmed that the Office of the State Prosecutor had opened an investigation into her book sales.
» Former state Sen. Francis X. Kelly and two of his sons took voluntary leaves of absence from six boards affiliated with the University of Maryland Medical System amid the controversy over the network’s operations.
» The Maryland General Assembly passed legislation to reform the University of Maryland Medical System’s board.
» The Federal Bureau of Investigation and Internal Revenue Service raided Pugh’s home, Baltimore City Hall and several other locations on April 25 as the investigation into the mayor’s business dealings widened. The University of Maryland Medical System also received a subpoena for documents in the federal investigation.
» Pugh announced her resignation from office on May 2, effective immediately.
» Four top executives resigned amid investigations into accusations of self-dealing among the hospital network’s board members, the system announced. The move followed the resignation of UMMS CEO Robert Chrencik.
» Pugh sold her house on Dennyln Road to Boaz Alternative Energy and Technologies LLC for $75,000 on July 31.
» Pugh was federally charged with 11 counts of fraud, tax evasion and conspiracy. Brown, her aide, pleaded guilty to four criminal counts: one for conspiracy to commit wire fraud, one for filing a false tax return, and two for conspiring to defraud the United States.
Baltimore Sun reporters Luke Broadwater, Kevin Rector and Talia Richman contributed to this article.