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US Attorney for Maryland Robert Hur talks about the effort by many people in the case against former Mayor of Baltimore Catherine Pugh.

When the scandal involving then-Baltimore Mayor Catherine Pugh’s self-published children’s books broke last spring, she was adamant she had done nothing wrong. Any issues concerning her little-known side business selling the clumsily edited “Healthy Holly” series could be explained by sloppiness, not corruption, she argued.

Why hadn’t she fully disclosed her business dealings? An aide must have messed up her ethics forms, she said. Why hadn’t she printed thousands of the books as ordered? A different associate had taken ill, she explained. Why were so many books missing? The Baltimore school system must be to blame for losing them, she insisted.

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“I never intended to do anything that could not stand up to scrutiny," the Democrat said at a City Hall news conference at the height of the scandal. “I do hope that we find out from the school system where the rest of those books are.”

To some supporters, this line of argument made sense. Pugh was busy running a city of more than 600,000 people. You could understand her making some honest mistakes in her sideline, they said.

But Thursday’s hearing in U.S. District Court in Baltimore made clear Pugh’s business failings were no honest mistakes. She pleaded guilty to four federal felonies. And over the course of a nearly two-hour hearing, prosecutors laid out in detail how Pugh had pressured prominent local organizations and businesses to pay her roughly $800,000 for her children’s books.

She never printed many of them and double-sold others, using the money to benefit herself, including by orchestrating illegal straw donations to her campaign for mayor. Then she created bogus documents to cover her trail, lying to the IRS and paying just a small portion of the taxes she owed.

City Councilman John Bullock said he was taken aback by the “calculated nature” of the former mayor’s scheme. “The double-counting of books. The falsifying of documents. The willful nature of it was shocking.”

Bullock, who lives in the same West Baltimore district as Pugh, called the scandal “a real black eye for the city.”

He added, "It’s unfortunate for her life journey to end this way.”

Pugh, 69, a Democrat, pleaded guilty to four counts of tax evasion and conspiracy to commit fraud, publicly acknowledging wrongdoing involving her book deals for the first time since The Baltimore Sun began exposing them in March.

“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,” said her attorney, Steven Silverman.

Under a plea deal, prosecutors will drop seven other counts. But the charges to which Pugh pleaded guilty include the sweeping allegations 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.

Pugh sold books to some of the most prominent organizations in Baltimore, all of whom do business with either city or state governments, 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.

“When people are of a certain stature, people tend to trust them,” said state Sen. Jill P. Carter, a Baltimore Democrat whose legislation to reform contracting practices at the medical system helped prompt The Sun’s investigation. "Many people may not question, ‘Is this right?’ ”

Maryland U.S. Attorney Robert K. Hur said that based on the guidelines agreed to in the plea deal, the suggested sentence for Pugh is around five years in prison. Her sentencing is scheduled for Feb. 27. The judge is not bound to follow the sentencing recommendation.

The conviction means Pugh will lose her state pension under regulations saying that lawmakers convicted of a felony committed during their time in the General Assembly are no longer eligible for retirement pay from the taxpayers. Pugh’s pension is at least $1,123 a month from her 11 years serving as a state delegate and senator from 2005 to 2016.

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In addition to Pugh, federal prosecutors 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.

In the indictment, prosecutors said Pugh and Brown conspired to inflate her campaign finance account through illegal means by using money from the book sales. The two believed that if the voters learned that Pugh had put her own money into the campaign, “she would appear desperate,” so they made contributions in other people’s names in violation of Maryland election law.

When state prosecutors convicted Brown of violating state election laws in 2017, Pugh kept him on at a job in City Hall, praising him as a “good employee.” Answering questions from reporters at the time, Pugh said she didn’t know where the money he donated to her campaign came from and hadn’t looked into it.

Baltimore Mayor Bernard Young and Council President Brandon Scott comment on news of the federal indictment of former mayor Catherine Pugh at City Hall.

Ralph Moore, a longtime Baltimore activist, says he thinks Pugh’s cheating helped her win a close election for mayor in 2016. Pugh defeated former mayor Sheila Dixon by less than 2 percentage points in the Democratic primary.

In addition to the straw donations from Brown, state prosecutors fined a political slate funded by former Baltimore County Executive James T. Smith Jr. $3,000 for making an unlawful $100,000 loan to Pugh in the final days of the primary.

"Anybody can win if you don’t play fair. It was wrong. It was illegitimate,” Moore said.

Moore, who supported Dixon, said what really irks him is how Pugh attacked Dixon, who was forced from office in 2010 after being found guilty of embezzling gift cards intended for the needy and was seeking a comeback in 2016. A political action committee backing Pugh circulated a flyer with a doctored photo of Dixon that made it look like a police mug shot, contrasted with a picture of Pugh wearing pearls.

“She said some pretty vicious things about Sheila, including that doctored mug shot,” Moore said. “While you’re out doing your crooked thing, you’re accusing somebody else?”

Pugh’s guilty plea also makes clear she repeatedly made false statements to reporters about her book sales.

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She claimed in March that the medical system approached her about buying the books, but admitted Thursday that she had first raised the issue. She initially told The Sun she had no other large buyers of the books apart from the hospital network. And she claimed she had paid all her taxes.

In a March press conference at City Hall, where she displayed a line of Healthy Holly baby clothing, Pugh insisted any issues with her side business were “unintended.” By May, amid the continued uproar, she had resigned as mayor.

Outside the courthouse Thursday, Hur described Pugh’s book business as a “complex and sophisticated fraud scheme."

“Law enforcement will continue to be vigilant for evidence of fraud and corruption,” he warned.

Baltimore officials are now wondering how they can best move forward as a city.

Carter, who is running for Congress, says the ordeal underscores the need to move away from the private financing of campaigns. She noted the revelations have already prompted widespread change, but said more needs to be done.

The medical system accepted the resignations of CEO Robert A. Chrencik and four other executives when it came out that they paid Pugh $500,000 for the children’s books but never checked on whether they were printed or delivered. The General Assembly passed sweeping legislation that demanded the resignation of the hospital network’s entire board of directors.

But the case also underscores how the country needs to move away from a “pay-to-play” political system in which politicians and powerful donors do each other favors, Carter said.

Del. Robbyn Lewis, a Democrat who represents Southeast Baltimore, said there’s also a lesson for voters, lawmakers and business people: If something feels wrong, speak out.

“We must choose ethical, competent leaders,” Lewis said in an interview after Pugh’s conviction. “We have to expect more because we deserve more. I think we can have better leadership, but we have to demand it.”

Lewis said the city has been reeling since the unrest of 2015 when Freddie Gray died of injuries suffered in police custody and the murder rate shot up to over 300 killings a year, followed by the convictions of former Police Commissioner Darryl De Sousa for tax fraud and now Pugh.

“We have to be more quick to call things out and demand an explanation,” Lewis said. “We can’t sit back and wait for the feds. We must continue to ratchet up our expectations and call out bad acts as soon as we sniff them out.”

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