Robert K. Hur, United States Attorney, announced the indictment of former Baltimore Mayor Catherine Pugh.
The newly unsealed federal indictment of former Baltimore Mayor Catherine Pugh pieces together some answers to lingering questions people have grappled with since the Democrat resigned from office in May amid questions over her business dealings.
Federal prosecutors charged Pugh with 11 counts of fraud, tax evasion and conspiracy in what they allege was a corrupt scheme involving sales of her self-published children’s book series, “Healthy Holly.”
Prosecutors say Pugh did it to unlawfully enrich herself, promote her political career and illegally fund her mayoral run. She is expected to turn herself in to U.S. Marshals and appear Thursday in U.S. District Court in downtown Baltimore. Her attorney, Steve Silverman, declined to comment on the charges Wednesday.
Pugh vastly under reported her income to the IRS, prosecutors say. Pugh allegedly evaded taxes as she collected thousands of dollars for books she never delivered. In 2016, for instance, when she was a state senator and ran for mayor, she told the Internal Revenue Service she had made just $31,000. In fact, her income was more than $322,000 that year ― meaning she shorted the federal government of about $100,000 in taxes, according to the U.S. Attorney’s office.
Baltimore schools decided not to use the books after copy editing them. The scheme began in December 2010, according to federal prosecutors. That was when she allegedly persuaded the University of Maryland Medical System to pay her $100,000 to purchase 20,000 copies of her first “Healthy Holly” book to donate to Baltimore’s schools. Because the book contained “various grammatical and spelling errors," a school system staffer copy edited the books. Then schools CEO Andres Alonso decided the books couldn’t be used for instruction, but would be donated to students, prosecutors said. Many of the books donated to the school system ended up stored in a city warehouse.
Books were allegedly stashed in several locations, including government offices, and reused to fill new orders. Pugh and Brown would return to that city warehouse over the years to take the books out in order to use them to fulfill different sales, according to court documents. They would store the books in Pugh’s legislative offices, her mayoral office, the War Memorial building, a public storage locker and the cars of Pugh and her aides, the indictment states.
UMMS would go on to give Pugh $500,000 for five orders of books, including for shipments that were never printed.
Book proceeds were used to illegally boost Pugh’s mayoral campaign, prosecutors say. During her mayoral campaign, Pugh and Brown decided to inflate her campaign finance report through illegal means by using money from the books, prosecutors allege. They “secretly” donated book-sale money to the campaign, believing “that if the voters learned that Pugh had injected her own money into the campaign, she would appear desperate." They decided to make “contributions to her campaign in other people’s names, i.e., to use straw donors, which is a violation of Maryland’s election laws,” according to the indictment. Healthy Holly funds paid for about $35,800 of such straw donations, according to the documents
Pugh allegedly used Healthy Holly funds to purchase a new house. After winning the mayoral primary, according to the indictment, she told a campaign donor in October 2016 that she wanted to buy a larger house so she could entertain more people as mayor. The unnamed donor asked how he could help. According to the indictment, Pugh said he could write a $100,000 check to Healthy Holly. The man “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,” according to the indictment. Pugh also used part of a $100,000 payment from UMMS to pay for the house she bought in Ashburton on Dec. 13 of that year, a week after her inauguration as mayor.
Pugh’s charges carry potential significant prison time, and her profits and property may be seized. The 11 charges Pugh faces carry potential sentences totaling 175 years in prison. Prosecutors, however, routinely agree to a reduced prison term if defendants cooperate and plead guilty. Prosecutors also are seeking to seize $769,688 of her profits, along with the Ashburton home they allege she bought with Healthy Holly profits.