BOU­TIQUE

Baltimore Sun - - FROM PAGE ONE -

false tax re­turn for 2016 that made no men­tion of re­ceiv­ing the funds.

Pratt, who also runs her own ac­count­ing firm, con­firmed that she filed the bou­tique’s tax re­turns.

Pratt said in her most re­cent city fi­nan­cial dis­clo­sure last month that she had owned a 22% stake in the store. Dis­clo­sure forms from 2018 showed Pugh own­ing 60% of the business and then-city Di­rec­tor of Ex­ter­nal Af­fairs Afra Vance-White 15%. The sentencing memo does not name them — nor a fourth part­ner prose­cu­tors say has ties to city gov­ern­ment — in ref­er­ence to the false tax re­turn fil­ing.

The comptrolle­r said in an in­ter­view Thurs­day that the bou­tique’s 2016 tax re­turn was based on fi­nan­cial in­for­ma­tion she re­ceived from Vance-White, whom Pratt iden­ti­fied as the 2 Chic book­keeper.

Pratt said she had “ab­so­lutely no knowl­edge at the time of the tax re­turn” of the $20,000 check from the Grants. Pratt said she be­lieved at the time that the money was a loan from Pugh to sus­tain the business.

“If bills needed to be paid and there was no money in the bank and I was told Pugh made a cap­i­tal con­tri­bu­tion, why should I ques­tion that?” she said. “The bills were be­ing paid.”

Grant’s Columbia-based cap­i­tal man­age­ment firm holds a “master lease” with the city, in which it pro­vides up­front cash for ma­jor projects. Con­tracts ap­proved via the master lease are of­ten not com­pet­i­tively bid, and the more the city uti­lizes it, the more Grant earns.

In ad­di­tion to the $20,000 check to 2 Chic, Grant also pur­chased tens of thou­sands of dol­lars worth of Pugh’s self­pub­lished “Healthy Holly” chil­dren’s books. The for­mer Demo­cratic mayor has since pleaded guilty to con­spir­acy and tax eva­sion af­ter sell­ing the books to sev­eral com­pa­nies that do business with the city.

Nei­ther Grant nor Vance-White — whom then-act­ing Mayor Bernard C. “Jack” Young fired in April — re­sponded to mul­ti­ple re­quests for comment. Nei­ther has been charged with a crime.

Pratt is facing a chal­lenger in the April 28 Demo­cratic pri­mary, City Coun­cil­man Bill Henry. He said in a state­ment Thurs­day that in­for­ma­tion in the sentencing memo raises “se­ri­ous con­cerns about Comptrolle­r Pratt’s knowl­edge of 2 Chic Bou­tique’s ac­count­ing and tax fil­ings.”

He said he is “call­ing on Comptrolle­r Pratt to se­ri­ously con­sider whether or not she can con­tinue to serve as our city’s fi­nan­cial watch­dog.”

Pratt also came un­der fire last week, when the city In­spec­tor Gen­eral’s of­fice found that she voted in 2017 to sell city prop­erty to the church where she wor­ships. The in­spec­tor gen­eral called it a con­flict of in­ter­est on Pratt’s part that stemmed from “ad­min­is­tra­tive over­sights” in her of­fice;

Pratt said she told a staff mem­ber that she wanted to ab­stain from the vote, but that per­son didn’t prop­erly note the ab­sten­tion.

Re­gard­ing the 2016 tax re­turn, prose­cu­tors wrote it was “un­likely that the fail­ure to de­clare the re­ceipt and use of that money was an over­sight, be­cause it rep­re­sented al­most 80% of the com­pany’s re­ceipts for that year.” The business had only $961.78 in its bank ac­count when Grant’s check was de­posited. The money was used to pay rent, as well as elec­tric and ca­ble bills.

The to­tal in­come re­ported on the 2016 tax re­turn was $3,777. Against that, the business de­ducted the ex­penses it paid with Grant’s money. Prose­cu­tors say that gave it “an or­di­nary business loss of $15,538, which the part­ners shared, re­sult­ing in a pos­si­ble re­duc­tion of tax­able in­come on each of their in­di­vid­ual tax re­turns.”

If the $20,000 check had been re­ported as rev­enue, they would have in­stead seen a business gain of $4,462.

“This would have been the first and only year that 2 Chic made a profit, and it would have been dis­trib­uted to the part­ners,” the memo states. “In short, Pugh and her part­ners re­ported the ex­penses paid with the $20,000 de­posit be­cause it low­ered their tax li­a­bil­ity, but chose not to report the re­ceipt of the $20,000 be­cause it would have in­creased their tax li­a­bil­ity.”

Pratt said she and Pugh “never talked about the business,” its fi­nan­cial strug­gles or how exactly it was stay­ing afloat.

Ac­cord­ing to a 2014 ar­ti­cle in The Bal­ti­more Sun, Pratt and Pugh opened the bou­tique in 2013 with friends af­ter hear­ing about de­mand for a con­sign­ment shop and dress store from a com­mu­nity sur­vey. The shop spe­cial­ized in high-end, sec­ond­hand cloth­ing.

It sold pro­mo­tional gift cer­tifi­cates through Groupon and Liv­ing So­cial as re­cently as last spring. Last year, Pratt told the Sun that the shop closed in De­cem­ber 2018. Ear­lier, she had said the store was open by ap­point­ment only.

Ar­ti­cles of Dis­so­lu­tion for the business were filed April 24 — the day be­fore FBI agents raided City Hall and Pugh’s houses, walk­ing out with boxes of Healthy Holly books.

KARL MER­TON FER­RON/BAL­TI­MORE SUN

Then-Bal­ti­more Mayor Cather­ine Pugh, right, talks with City Comptrolle­r Joan Pratt in Jan­uary 2019 at City Hall.

AMY DAVIS/BAL­TI­MORE SUN

A sentencing mem­o­ran­dum filed in fed­eral court says Pugh used 2 Chic Bou­tique, coowned with Pratt and two oth­ers, as a con­duit for il­le­gal cam­paign con­tri­bu­tions.

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