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