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Baltimore could end contract with Pugh-connected financier after IG details failure to disclose donations to her

Baltimore’s top lawyer will recommend the city consider cutting business ties with Grant Capital Management after the inspector general found troubling omissions in the company’s bid for a lucrative contract regarding founder J.P. Grant’s donations to ex-Mayor Catherine Pugh. Grant is shown in a 2012 photo.
Baltimore’s top lawyer will recommend the city consider cutting business ties with Grant Capital Management after the inspector general found troubling omissions in the company’s bid for a lucrative contract regarding founder J.P. Grant’s donations to ex-Mayor Catherine Pugh. Grant is shown in a 2012 photo. (Robert K. Hamilton / Baltimore Sun)

Baltimore’s top lawyer will recommend the city consider ending its contract with Grant Capital Management after the city’s inspector general found troubling omissions in the company’s bid for a lucrative contract regarding founder J.P. Grant’s donations to ex-Mayor Catherine Pugh.

The investigation was spurred by revelations last year about Grant’s role in Pugh’s “Healthy Holly” children’s book scandal. Grant wrote the former Democratic mayor checks for $170,000, according to federal prosecutors, despite knowing that she was illegally funneling the funds into her political campaign and toward buying a bigger house.

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Pugh is serving a three-year prison sentence for her fraud scheme, in which she sold her self-published books to organizations and individuals with business before the state and the city while serving as a state senator and then as mayor. Grant has not been charged with a crime.

Grant Capital Management has since 2003 held an agreement with the city, dubbed the “master lease,” to help city agencies pay for large contracts. The company quickly provides money upfront to pay for capital projects, with the city paying it back with interest over time. As of December, officials said the city had financed roughly $135 million in purchases via the master lease with the company.

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Inspector General Isabel Cumming’s report, released Tuesday, found Grant Capital Management should not have been considered for a renewed master lease in 2018. The company failed to comply with the terms of the city’s solicitation, according to the report, because it submitted a false affidavit along with its bid.

Inspector general's report

In its 2018 solicitation for a renewed master lease agreement, Baltimore required a signed affidavit attesting that the company was in compliance with state election law. A Grant Capital Management official signed the form under penalty of perjury, according to the report.

In reality, the inspector general wrote, Grant Capital Management officials did not file the campaign finance disclosure forms required of people who do business with the city. Cumming asked Grant and his attorney to provide any forms filed by the firm, “but none were ever produced.”

Cumming wrote that, given Grant’s position as a city contractor, his payments to Pugh “appear to have been made with the intent to buy political influence and/or in direct exchange for political influence.” City business must be approved by the Board of Estimates, which the mayor effectively controls.

Grant rejected that idea in an interview with Cumming, according to the report.

“During his OIG interview, Grant, with his attorney present, declined to answer questions related to his payments to Pugh, citing ongoing legal issues,” it states. “However, Grant did state that the payments he made to Pugh were atypical and maintained that he has never made illegal payments or provided illegal benefits to any other city elected official or employee.”

Neither Grant nor a representative of Grant Capital Management in Columbia responded Tuesday to phone calls seeking comment.

While Grant held the master lease, he wrote checks to Pugh, which she used to funnel illegal straw donations to her mayoral campaign and to buy a larger house.

Grant first acknowledged his involvement in the Healthy Holly operation to a Baltimore Sun reporter in April 2019. He said he cut a check for $100,000 to Healthy Holly LLC and received a copy of one of the books. According to federal prosecutors, he knew Pugh would use at least some of the money to purchase her new home rather than give children books.

Prosecutors later revealed additional payments. Pugh worked with Grant, for example, to launder a $20,000 through a consignment shop she co-owned. At the time he gave her that amount, he had already donated the maximum amount allowed by law to Pugh’s campaign. To conceal the transaction, prosecutors said, Grant wrote the check from his wife’s account.

Since Pugh and two of her aides were criminally charged in fall 2019, there’s been no indication that other charges related to the scandal are forthcoming. The U.S. attorney’s office declined to comment Tuesday.

The inspector general’s report also outlines questionable exchanges between Grant and members of city government regarding his contract.

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In 2018, the city opened up a new solicitation for a master lease agreement. Two companies submitted bids: Grant Capital Management and Banc of America Public Capital Corp. Inc. Grant believed the award process was taking longer than usual, according to the report, and he asked the mayor about the status of the contract.

“Grant said that after Pugh checked on the status of the award, she told him, ‘I think we’re going to move forward ... but sit tight and see,'" the report states.

Grant said he then got a call from the city’s deputy finance director, who said the city would award the agreement to his company.

The deputy finance director continued to keep Grant abreast of developments with the master lease, according to the report, including telling him that the city had ultimately reached a deal with Banc of America this year.

Cumming wrote that there “appears to be no legitimate reason” for the deputy finance director to provide information to Grant about a competing company’s bid.

While the report does not identify him, the city’s deputy finance director at the time was Steve Kraus. A city spokesman, James Bentley, confirmed Tuesday that it was Kraus' last day as a city employee. He was paid more than $177,000 in salary for the fiscal year that ended June 30, according to a city database. Kraus could not be reached Tuesday.

“We don’t discuss personnel decisions,” Bentley said when asked for more information.

City solictor's response

In response to the investigation’s finding, City Solicitor Dana Moore said she would recommend that Grant Capital Management’s contract be revoked.

She also will ask the Board of Estimates to consider proceedings to evaluate whether to block the company from future business with the city.

Moore plans to present her recommendation to the five-member panel at next week’s meeting.

It’s unclear how the members, who include Democratic Mayor Bernard C. “Jack" Young and Democratic City Council President Brandon Scott, will proceed.

Scott, who called for the inspector general’s investigation, said in a statement Tuesday that the case is a reminder of “how much work we have to do toward restoring public trust in city government.”

A Scott spokeswoman said he intends to follow the law department’s advice, and wants to hear more about the implications of any course of action the spending panel is presented with.

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Young did not respond to a request for comment. He controls two other votes on the board, that of Moore and the city public works director.

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Democratic Comptroller Joan Pratt, the fifth member of the board, did not return a voicemail request Tuesday for comment. She co-owned the boutique through which Pugh laundered Grant’s money, but has said she knew nothing of the impropriety.

If the city does end its relationship with Grant Capital Management, it has the Banc of America master lease agreement to fall back on. It was approved in July.

Baltimore Sun reporter Justin Fenton contributed to this article.

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