The Healthy Holly scandal consuming Baltimore Mayor Catherine Pugh has so many strands that it has become difficult to keep track of them all. Here’s a brief primer on the major questions surrounding the children’s books Ms. Pugh wrote and sold, along with the answers The Sun has uncovered and those that are still mysteries.
What are the basics?
In the late 2000s, then-state Sen. Catherine Pugh began developing a children’s book about a character named Healthy Holly designed to teach lessons about exercise and nutrition. She says she was inspired by a conference on childhood obesity.
In 2010 or 2011, she says, she showed a prototype of the first book, “Healthy Holly: Exercising Is Fun,” to officials at the University of Maryland Medical System, on whose board she had served since 2001.
UMMS agreed to pay her $100,000 for 20,000 copies of the book, to be distributed in the city schools. Over the subsequent several years, UMMS paid her an additional $400,000 for a combined 80,000 copies of the next four books in what was to be a five-book series.
Other entities bought Healthy Holly books as well. Kaiser Permanente confirmed that it bought about 20,000 copies of Healthy Holly books from 2015 to 2018. Associated Black Charities disclosed that it raised nearly $90,000 from various entities to purchase books, about $80,000 of which went to Ms. Pugh. And politically active businessman J.P. Grant said that he paid $100,000 to Healthy Holly LLC to support the distribution of an unknown number of books.
Since the story initially broke in The Sun last month, Mayor Pugh has stepped down from the UMMS board and taken a leave of absence from her office, which she attributed to her recent hospitalization for pneumonia. Prior to stepping down, she publicly apologized for the UMMS deal, calling it a “regrettable mistake,” but did not mention her sales to other entities. Several state elected officials and 14 members of the City Council have called on her to resign, and her activities are now subject to criminal and ethics investigations.
The Sun’s Christina Tkacik has a helpful timeline.
What do the searches on Mayor Pugh’s house and other locations mean?
The raids by the FBI and IRS agents on Mayor Pugh’s homes, the Maryland Center for Adult Training, City Hall and other locations mean that federal authorities are investigating Mayor Pugh and that they presented a judge with an affidavit showing probable cause that evidence of a crime could exist at those locations. It does not mean she is guilty of anything or even that she will necessarily be charged with a crime. But it does tell us a few things:
» Investigators are looking into a job training non-profit Ms. Pugh once led and on whose board three Pugh aides in City Hall (all of whom were recently fired by Ex-Officio Mayor Bernard C. “Jack” Young) serve or served. The Sun has found no link between the Healthy Holly sales and MCAT.
» Whether Ms. Pugh paid taxes on her Healthy Holly profits may be an issue. Ms. Pugh said she did but declined to release her personal or business tax returns, and the presence of IRS agents in the search raises questions about the matter.
» The raid on the offices of Mayor Pugh’s attorney, Steven Silverman, is highly unusual. Because of the privileged nature of attorney-client communications, the Department of Justice has strict rules governing such searches. According to DOJ regulations, such a warrant can only be issued if the attorney is considered a subject of an investigation (which can mean he has the fruits of a crime in his possession) or if officials have reason to believe that evidence could be jeopardized if investigators used less intrusive means to obtain it, like a subpoena.
More detail on the implications of the raids is available here.
How much money did Mayor Pugh make?
The Sun has confirmed that her Healthy Holly LLC was paid about $800,000 for the books — $500,000 from UMMS, $114,000 from Kaiser, about $80,000 from Associated Black Charities and $100,000 from Mr. Grant. Ms. Pugh said last month that she returned the final $100,000 from UMMS because she had not yet finished writing the fifth Healthy Holly Book.
Shortly after the story broke, Ms. Pugh said her profit from the UMMS deal was $100,000, or $1 per copy, with the rest of the $5 she charged for each going to printing and shipping costs, layout, design, etc.
However, the printer for the first three sets of books said the printing and shipping costs amounted to about $43,000 total, or less than 75 cents per copy. The illustrator of the books said he worked pro bono on them but that other members of his “team” were paid. How much, he would not say. Publishing experts have told The Sun that $15,000 per book would be a generous estimate for those expenses. That leaves hundreds of thousands of dollars unaccounted for on the UMMS deal alone. Given her sales to Kaiser, Associated Black Charities and Mr. Grant, those profits could be substantially higher.
Ms. Pugh has declined The Sun’s requests to review her personal and business tax returns, and she has not provided any documentation of her expenses related to the books.
The Sun’s Kevin Rector and Talia Richman have more detail here.
What happened to the books?
City schools officials have confirmed receiving a large batch of the first book sometime in the 2011-2013 period, some of which were distributed to students.
Shipping records show that 18,600 copies of the second book, “Healthy Holly: A Healthy Start for Herbie,” were delivered to a school system loading dock, but what happened to them is unknown. Shipping records show that 19,500 copies of the third book, “Healthy Holly: Fruits Come in Colors Like the Rainbow,” were sent to the school system headquarters, 8,700 of which were found last month in a warehouse.
In a news conference last week, Mayor Pugh disclosed that production of UMMS’ order for the fourth book, “Healthy Holly: Vegetables Are Not Just Green,” had been delayed and that it was just being shipped, though she provided no documentation of when it was ordered, from where or in how many copies.
Ms. Pugh has also not provided any documentation related to the orders paid for by Kaiser, Associated Black Charities or Mr. Grant. Kaiser has distributed an unknown number of the books at health events, and Associated Black Charities officials say they distributed 4,100 of them and gave 5,500 to Ms. Pugh to hand out. Mr. Grant has said he personally received one copy of a Healthy Holly book but does not know how many copies were printed as a result of his $100,000 payment or what happened to them.
Sun reporters have gotten reports suggesting some were distributed by a handful of child care centers and non-profits in the city. The Enoch Pratt Free Library does not have any copies, nor do city schools libraries. A few copies have turned up on Amazon.
Ms. Richman and Liz Bowie have a detailed breakdown here.
Is any of this illegal?
We don’t know.
As a state senator and as mayor, Ms. Pugh has been required to report outside sources of income on financial disclosure forms, under penalty of perjury, and she did not include information about Healthy Holly LLC on her Senate forms. (Since The Sun first reported on Healthy Holly, she filed amended forms.)
Whether her lapses amount to a crime depends on whether she knew or should have known that the Healthy Holly income needed to be disclosed. (Ms. Pugh did disclose other outside sources of income.) The State Prosecutor’s Office, which successfully prosecuted former Baltimore County Superintendent Dallas Dance for perjury in his failure to disclose outside income, is now investigating.
Other sources of potential criminal liability include any failure to properly account for Healthy Holly income on her taxes — Ms. Pugh has declined to provide her personal or business tax returns — or a quid pro quo in which purchases of Healthy Holly books were made in exchange for official action as a senator or mayor.
What is Mayor Pugh's status?
Ms. Pugh announced on April 1 that she was going on an indefinite leave of absence to recover from her recent bout of pneumonia. City Council President Bernard C. “Jack” Young is acting as mayor ex officio in her absence. She could return to office at any time, and a spokesman said on April 6 that she intends to return to office when her health allows. (It was that piece of news that prompted every member of the council other than Mr. Young to call on her to resign.) Meanwhile, she continues to collect her $180,000 salary.
Despite the unanimity among council members that she should not return to office, it is not clear that there is any way for her to be forced out unless she is convicted of a crime. There is no impeachment provision in the city charter, and the state constitution does not directly address the matter.
The Sun’s Yvonne Wenger has more detail here.
Is anyone else in trouble?
Ms. Pugh was hardly the only member of the UMMS board who had contracts with the system. Eight others had deals for themselves or their businesses with the system ranging into the millions of dollars per year. UMMS CEO Robert Chrencik has been placed on a paid leave of absence while an outside firm investigates the system’s contracting practices. Several other board members have resigned or taken leaves of absence.
What is the state doing about this?
How they reconcile the differences is yet to be worked out, but it appears likely that the legislature will bar no-bid contracts between board members and the system, require audits of UMMS contracting practices and perhaps reconstitute the board altogether. Both chambers also call for more transparent financial disclosure by board members. Governor Hogan has also joined the calls for reform, so he is expected to sign whatever the legislature passes. Mr. Hogan also called on the state prosecutor to open a criminal investigation into Mayor Pugh's book deals.
Who is investigating?
Mayor Pugh's personal attorney has confirmed that the State Prosecutor’s Office is investigating (the office does not confirm or deny the existence of investigations), and Baltimore’s Board of Ethics voted on April 3 to investigate the Healthy Holly deals. Other entities that could be investigating include the U.S. Attorney’s Office, the state Ethics Commission and Baltimore’s inspector general, but we do not know whether any of them are.
City Council members Ryan Dorsey and Shannon Sneed have asked the city IG to investigate the mayor’s deal with Kaiser Permanente, which has a contract to provide health insurance for the city. Mr. Young has also ordered a review of pending city contracts. Finally, the Maryland Insurance Administration is looking into payments for the books by insurers — Kaiser, CareFirst and the Maryland Automobile Insurance Fund.
The Sun’s Colin Campbell has more information here.
How did this come to light?
A bill by state Sen. Jill Carter to prohibit business deals between UMMS and its board prompted The Sun’s Luke Broadwater to look into financial disclosure forms members file with Maryland’s Health Services Cost Review Commission. He found that nine members had such deals, about a third of the board. Subsequent reporting by Mr. Broadwater, Ms. Bowie, Ms. Richman, Mr. Rector, Doug Donovan, Ian Duncan and others uncovered the other details.