Former Baltimore Mayor Catherine Pugh pleaded guilty to four counts of conspiracy and tax evasion Thursday, publicly acknowledging wrongdoing involving her “Healthy Holly” book deals for the first time since The Baltimore Sun began exposing them in March.
The plea in federal court came one day after prosecutors alleged in an 11-count indictment that Pugh’s self-publishing enterprise amounted to little more than a criminal racket. It comes eight months after The Sun’s revelations, followed by FBI raids on Pugh’s homes and City Hall, torpedoed her political career and forced her from office.
Her acceptance of guilt, though on a narrower set of charges than the indictment laid out, could land Pugh, 69, in prison. Maryland U.S. Attorney Robert K. Hur said that based on the guidelines agreed to in the plea deal, the suggested sentence is around five years in prison for Pugh. The judge hearing the case is not bound to that agreement. Pugh’s sentencing is scheduled for Feb. 27.
Standing before U.S. District Judge Deborah K. Chasanow, Pugh, a Democrat, spoke softly as she confirmed she understood the sweeping allegations against her, and the potential for her to spend years behind bars.
She said only a few words in court, and shook her head to decline to comment as she walked past reporters in leaving the courthouse. Walking with her was Paul Coates, a longtime friend and father of author Ta-Nehisi Coates.
She surrendered her passport, under terms that allowed her to go free pending sentencing.
“This has been a challenging process for former Mayor Pugh,” her lawyer, Steven Silverman, said in a statement after the hearing. “After careful consideration of the charges brought against her, Ms. Pugh has decided to forego a long trial. Such a trial would drain essential government resources and cause further distraction from the serious issues our region faces. Ms. Pugh sincerely apologizes to all of those that she let down, most especially the citizens of Baltimore whom she had the honor to serve in multiple capacities for decades."
Pugh pleaded guilty to conspiracy to commit wire fraud, conspiracy to defraud the United States, and two counts of tax evasion. The counts include the sweeping allegations against Pugh in the initial indictment — that she knowingly sought to defraud purchasers of her books, reap the financial and political benefits, and pay little or no taxes on the windfall. Under the plea deal, prosecutors will not pursue seven counts of wire fraud against Pugh.
After prosecutors read a lengthy list of facts describing Pugh’s guilt, the judge asked her if she agreed they were all true.
After a pause, she said, “I do.”
At one point, Chasanow asked the former mayor how she was feeling. Pugh responded, “Anxious.”
“I’m not surprised at that,” the judge replied.
In addition to Pugh, federal prosecutors also have secured a guilty plea in the “Healthy Holly” case from one of her longtime aides, Gary Brown Jr., who confessed to a range of actions he and Pugh took to illegally profit from her book sales.
Pugh sold books to some of the most prominent organizations in Baltimore, including the University of Maryland Medical System, health care provider Kaiser Permanente, insurer CareFirst BlueCross BlueShield, the nonprofit Associated Black Charities and Columbia businessman J.P. Grant, head of the financial company Grant Capital Management.
After Pugh’s plea, Chasanow instructed Assistant U.S. Attorneys Martin Clarke and Leo Wise to read through the facts pertaining to the four counts.
The statement of facts described how Pugh defrauded area businesses and nonprofit organizations out of nearly $800,000 through sales of her Healthy Holly books to unlawfully enrich herself, promote her political career and illegally fund her campaign for mayor.
Clarke described how Pugh cashed checks meant to buy books for schoolchildren and instead spent that money on herself ― one time walking out of a bank with $40,000 to pay down her credit card debt and other expenses.
When Pugh persuaded organizations to buy her books, she never told them she was double-selling books already promised to others, the prosecutor said. Clarke said Pugh and Brown also made “false promises” to buyers to “induce advance payments.”
“Neither the purchasers nor the charity knew Pugh was reselling the books,” Clarke said.
Prosecutors also said Pugh had not disclosed her financial interests while in the General Assembly as required by Maryland law. After The Sun reported in March that Pugh did not disclose her $500,000 business relationship with the Maryland medical system, the mayor submitted an amendment for seven years of reports filed with the state ethics commission.
“While still in the state Senate, Ms. Pugh knowingly failed to disclose her ownership of Healthy Holly LLC,” Clarke told the judge.
As a condition of her release pending sentencing, Chasanow said Pugh has agreed to pay what she owes the IRS for 2013 through 2017 and to complete a financial assessment outlining all assets of $1,000 or more, including any assets transferred to third parties since 2013. She cannot travel abroad or be in contact with anyone named in the case, the judge said.
Pugh’s political fall began in March when The Sun revealed she had entered into a no-bid deal with the University of Maryland Medical System, where Pugh sat on the board of directors, to buy 100,000 copies of her hastily edited books for $500,000.
When The Sun first began reporting on those deals, Pugh was dismissive of the articles, calling inquiries about the sales a “witch hunt.” She also said she paid all required taxes on those sales, though she has now admitted she did not.
In total, prosecutors allege that Pugh sold at least 125,000 copies of her books, but printed fewer than 65,000.
Before her guilty plea, prosecutors said they were seeking to seize $769,688 of her profits from the illegitimate book sales, as well as her current home in Ashburton, which they alleged she bought and renovated with fraudulently obtained funds.
Chasanow said Thursday the parties have not reached any agreement on what Pugh will have to forfeit, which may still be negotiated or litigated.
Prosecutors said they have been investigating Pugh for years, almost entirely behind the scenes until The Sun’s reporting began and the raids occurred in April.
Pugh’s downfall was the latest blow to a city that has suffered from high rates of violent crime and decades of population loss, and hurt those close to her.
“It’s a very, very sad day for her," said city solicitor Andre Davis, who left his job as a federal appellate judge to come work for Pugh as Baltimore’s top lawyer. “It’s an even sadder day for the city of Baltimore.”
In outlining Pugh’s book sales Thursday, prosecutors said Grant paid Pugh a total of $164,000 over six years to purchase books, knowing that some of the money was "going toward her mayoral campaign” and “that providing money to Pugh’s campaign via Pugh’s company was a violation of Maryland’s election laws.”
Additionally, prosecutors said, Pugh told Grant she "wanted to buy a larger house so she could entertain people when she became mayor,” and he wrote her a check with the understanding that “Pugh would use the money to produce and distribute Healthy Holly books, with the balance of the money going toward the purchase of a new house.”
Clarke said in court Thursday that Pugh never told Grant she had not used any of his money to “print and deliver books to Baltimore City school children.”
Grant has not responded to requests for comment since the indictment.
Hur said his office could not say more about the investigation beyond what was outlined in the indictment, but vowed a complete investigation. The matter is not closed, he said.
Speaking to a phalanx of reporters gathered outside the courthouse, Hur said Pugh “betrayed the trust placed in her" by voters.
“The city of Baltimore faces many pressing issues,” Hur said. “We need dedication and professionalism from our leaders, not fraud and corruption, if we have any hope of fixing these problems.”