Baltimore’s Ex-Mayor Pugh Indicted on Tax Crimes, Fraud

Baltimore Mayor Catherine Pugh gives a thumbs-up to supporters after her inauguration ceremony inside the War Memorial Building in Baltimore on Dec. 6, 2016. The disgraced former mayor of Baltimore was charged Wednesday with fraud and tax evasion involving sales of her self-published children’s books. An 11-count federal indictment accuses Pugh of using her “Healthy Holly” children’s books to enrich herself, promote her political career and fund her run for mayor. (AP Photo/Patrick Semansky, File)

BALTIMORE, Md. (CN) — Months after investigations into children’s book sales and campaign financing forced the resignation of Baltimore Mayor Catherine Pugh, federal prosecutors charged the longtime politician Wednesday with wire fraud and tax evasion.

The 11-count indictment unsealed in Baltimore depicts a dizzying shell game in which tens of thousands of Pugh’s “Healthy Holly” books were purchased by charities and delivered to the school system, then removed from the city warehouse and resold to other companies, while Pugh collected thousands of dollars at every step. The final round of books were sold in 2017 for $100,000 but never printed, with Pugh simply pocketing the cash.

All told, Pugh earned nearly $800,000 for her “Healthy Holly” series over seven years. Before her mayoral win in December 2016, she had been a city councilwoman, state delegate and state senator. Prosecutors say she used some of the money to buy and renovate a house, as well as some to pay down debt. Meanwhile a campaign aide has since admitted to channeling another portion of the funds illegally by through straw donors to bulk up Pugh’s 2016 campaign coffers.

Along with Pugh’s indictment, the government today unsealed guilty pleas from former Pugh campaign and legislative aide Gary Brown, 38, and Roslyn Wedington, 50, the executive director of a charity through which some of the book money passed. 

“Our elected officials must place the interests of the citizens above their own,” U.s. Attorney Robert Hur told reporters this morning. “Corrupt public employees rip off the taxpayers and undermine everyone’s faith in government.”

Maryland U.S. Attorney Robert Hur announces an 11-count indictment against former Baltimore Mayor Catherine Pugh at a news conference in Baltimore on Wednesday. The disgraced former mayor has been charged with fraud and tax evasion involving sales of her self-published children’s books. (AP Photo/Brian Witte)

Pugh, 69, is scheduled to appear in court Thursday afternoon. A conviction on all counts could put the former mayor in prison for more than 170 years. Prosecutors are also seeking forfeiture of her home and $769,688.  

The indictment alleges larcenies both petty and grand, as Pugh would sell tranches of 20,000 copies of “Healthy Holly” but skim 1,500 books off the top. “Let’s make that 18500 [for the] school and 1500 [for] Me,” Pugh emailed her printer in 2012. Prosecutors quoted this message in the indictment after describing a deal where the University of Maryland Medical System agreed to pay $5 apiece for 20,000 copies of Pugh’s second book, “Healthy Holly: a Healthy Start for Herbie.” Printing ran about 70 cents per copy.  

The Medical System paid $100,000 for Pugh’s first book in 2011, but prosecutors say Pugh had thousands of copies removed from a city warehouse for her own benefit.

“Sometimes Brown enlisted the help of Baltimore City employees to remove and transport the books,” the indictment states, going on to describe how “Pugh and Brown arranged for the books to be delivered to various locations … including Pugh’s residence in Baltimore City, Pugh’s state legislative offices in Annapolis and Baltimore City, Pugh’s mayoral office at City Hall,” a public storage locker used by her campaign, and even her city-issued vehicle and those used by her staff.  

Pugh is accused of then reselling those same books over and over to businesses with interests in the state and city, including Kaiser Permanente. Prosecutors say the books also were used to promote Pugh’s campaigns for office, some ending up in “swag bags” at political functions. 

Federal investigators began looking into Pugh in 2016 after news reports noted multiple $6,000 donations to her campaign by people who didn’t have money and, in some cases, had no idea they had been listed as donors.

Brown pleaded guilty to state campaign-finance charges at the time, scuttling his planned appointment to a seat in the state legislature. 

According to the indictment, after Brown was charged by state prosecutors, Pugh’s campaign issued five checks in the names of three of the straw donors as “returned contributions” but returned none of the money to contributors (who had of course never donated it). Instead, Pugh told Brown to use the cash for his legal defense. Brown refused to cooperate with the state prosecutor, who was not able to link the “Healthy Holly” scheme to the campaign. Brown in turn served on Pugh’s mayoral staff. 

Pugh is also accused of failing to report her “Healthy Holly” income to the IRS, instead creating a bogus consulting agreement with Brown and funneling money to him before getting it back as “untraceable cash.”  

Pugh had been defiant last spring when the Baltimore Sun began publishing details of her children’s books sales and asking questions about where the books and money went. 

“I don’t know what witch hunt y’all are on, but it’s done,” Pugh said during a press conference. “I’ve got 1099s and I pay my taxes and everything is filed.” 

According to the indictment, Pugh falsely characterized at least one $100,000 book payment as a “loan,” told her tax preparer that another $45,000 check for books was a “loan repayment,” and claimed her 2016 taxable income was $31,020 when it was actually $322,365, underpaying that years taxes by $98,000.

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