In a “scheme to defraud purchasers of Healthy Holly books,” former Baltimore Mayor Catherine Pugh sold more than 130,000 copies from her self-published children’s series to businesses and nonprofit groups that were mostly unaware she didn’t intend to produce that many, federal prosecutors say.
Pugh took in close to $800,000 beginning in 2011, using the money for her political campaigns and to buy a bigger house, among other things, according to a grand jury indictment made public Wednesday in which prosecutors laid out the findings behind 11 counts of fraud, tax evasion and conspiracy involving sales of the books.
None of the purchasers were named directly in the indictment, rather they were labeled “Purchaser A” through “Purchaser G.” But the businesses have previously acknowledged the donations, and some were named in the related plea deal of Gary Brown Jr., one of Pugh’s top aides.
The University of Maryland Medical System and Kaiser Permanente paid Pugh’s book company directly for the books, while four others gave donations to Associated Black Charities to buy books and two did both.
“As the indictment makes clear, ABC was an unwitting victim of the scheme described in the Indictment," Associated Black Charities said in a statement to The Baltimore Sun. "We have returned to the donors or made grants at their direction of all funds retained by ABC from the Healthy Holly book purchases. ABC cooperated fully in the federal investigation and will continue to do so.”
Prosecutors repeatedly cast the purchasers of Pugh’s books as unknowing victims of her scheme. But in one instance, they paint a different picture.
In early 2016, they write, Pugh contacted a buyer referred to as “Purchaser G, the owner of a Maryland-based financing company that did business with Baltimore City.”
Purchaser G’s transactions mostly align with those acknowledged by J.P. Grant, the Columbia-based financier who frequently does business with the city. Grant did not respond Wednesday to a request for comment.
ABC previously reported Grant donated $14,000 for 2,000 Pugh books in 2011.
Pugh allegedly told Purchaser G that “she needed to raise more money for her campaign,” according to the indictment. She explained that “she had been making money by selling her Healthy Holly books to various organizations that donated the books to” city public school students, and asked the purchaser for $50,000 to purchase more books for students.
In a previously undisclosed donation, the indictment says, “Purchaser G” had “understood that Pugh would use the money to produce and distribute the Healthy Holly books, with the balance of the money going toward her mayoral campaign,” and “knew that providing money to Pugh’s campaign via Pugh’s company was a violation of Maryland’s election laws.”
He wrote a $50,000 check nonetheless, and Pugh deposited the money but never used any of it to print books for kids, prosecutors wrote.
That October, a month before the general election in which Pugh was elected mayor, she went to Purchaser G’s house and told him that “she wanted to buy a larger house so she could entertain people when she became mayor.” She then took the purchaser to see the house she had in mind and told him she needed money to buy it, prosecutors wrote.
When the purchaser asked how he could help, Pugh again suggested he “write a check to Healthy Holly, this time for $100,000,” prosecutors wrote.
Grant previously acknowledged writing this check, with “book donation” in the memo line.
Purchaser G “understood from Pugh’s representations to him 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,” prosecutors wrote.
She took the money, deposited it, and used none of it to print books, prosecutors wrote.
Asked about the findings related to Purchaser G and Pugh, and whether they portended more charges to come or an ongoing investigation, U.S. Attorney Robert K. Hur would say only that “the public should be confident that we are conducting a very, very thorough investigation,” and that prosecutors “are continuing to look at all of the possible criminal charges that can be filed.”
In response to additional inquiries as to the nature of the payments to Pugh, and whether any of them reflected a quid pro quo arrangement, Hur said they were “very interesting questions, but not ones I can answer at this moment.”
Other purchases were made by:
- The University of Maryland Medical System, a private nonprofit system of hospitals, paid $500,000 for 100,000 books, though Pugh returned $100,000;
- Insurer Kaiser Permanente paid $114,000 for 20,000 books;
- Frederick Family Trust Foundation, which paid $50,000 for 5,000 books
- CareFirst BlueCross BlueShield paid $14,000 for 2,000 books;
- The Maryland Auto Insurance Fund, or MAIF, a state-established organization for hard-to-insure drivers, paid $12,500 for 600 books;
- Chicago-based Ariel Investments paid $3,680 for 400 books.
Four of the outfits — CareFirst, MAIF, Ariel and the Frederick Family Trust — purchased books via donations to Associated Black Charities from 2011 to 2016. Grant made the $14,000 payment through the nonprofit.
The ABC donors purchased a total of 10,000 books for a combined $87,180, of which ABC retained $9,552. ABC has said it distributed 4,100 books, discarded 400 because they were water-damaged and left 5,500 books to Pugh’s Healthy Holly LLC to distribute.
The indictment alleges Pugh at times dictated how much of the donations she would receive and how much ABC could keep for expenses, though the purchasers did not agree to those terms.
Among those who purchased books through ABC, CareFirst declined to comment and MAIF, Ariel and the Frederick trust did not respond to request for comment. The University of Maryland Medical System also declined to comment.
Kaiser said in a statement: “We continue to cooperate with the ongoing investigation.”
The indictment says Pugh promised to print and deliver books and took purchasers’ money. But prosecutors allege she either didn’t intend to provide the books or, in some cases, “provided purchasers with books that had already been sold and delivered to a different purchaser.”
Pugh allegedly stored books on city property, including the mayor’s office, a public storage locker used by her campaign and her own property, including her car. The indictment says she paid associates to move them around.
Purchasers were told the books were intended to go to youth groups, day care centers and other child-oriented places, and some did.
The indictment also says Pugh donated thousands of copies of the books to the Baltimore City Public Schools, per an agreement with the University of Maryland Medical System, but officials there never used them in class because they identified grammatical and spelling errors. In some cases, Pugh collected those books for redistribution.
Pugh is expected to turn herself in to U.S. marshals and appear Thursday in U.S. District Court in Baltimore.