clearly establishes the deliberateness with which she pursued financial and political gain without a second thought about how it was harming the public’s trust,” wrote Assistant U.S. Attorneys Martin J. Clarke and Leo J. Wise.
“It was not rash behavior,” they wrote. “Rather, it was a recurring pattern of well-executed steps that built on each other, becoming more audacious and complex leading up to the mayoral election.”
Pugh, 69, was elected mayor in 2016. The Democrat resigned in May after federal agents raided her City Hall office and her houses.
She reached a plea agreement in November with prosecutors and is scheduled to be sentenced Feb. 27 by U.S. District Judge Deborah K. Chasanow in Baltimore.
Prosecutors told the judge that Pugh knowingly sought to defraud purchasers of her Healthy Holly books, reap financial and political benefits, and pay little or no taxes. They accused her of compounding an array of problems already facing the city and of feigning an interest in addressing childhood obesity with the books on healthy lifestyles for kids.
At one point they referred to her as a “scammer,” and said the children’s books were intended to woo voters and bolster her campaign coffers. Purchasers told investigators they felt the books advanced the goals of their community outreach programs.
Yet, “many of the purchasers acknowledged that they probably would not have purchased the books if Pugh had not been the author,” prosecutors said.
Steven Silverman, one of Pugh’s attorneys, said his team filed its own sentencing memorandum. It was not available Thursday through the court.
“Ms. Pugh’s defense team strongly disagrees with the government’s sentencing recommendation,” he said. “Our position as to a fair and appropriate sentence will be laid out in a sentencing memorandum which will be made public, pending order of the court.”
With the assistance of longtime legislative aide Gary Brown, prosecutors wrote, Pugh “methodically expanded her illegal scheme and managed to conceal it from state and federal authorities and, most important, the citizens she served.”
When Brown was charged in an earlier case with campaign finance violations, prosecutors said in the new memo, she hired an attorney for him and lied in public statements about what she knew about his charges. Brown pleaded guilty in 2017 in state court to funneling campaign donations to Pugh through relatives.
Brown pleaded guilty in the latest case to fraud, conspiracy and tax charges. His attorney, Barry J. Pollack, said Thursday: “We are confident that the court will treat everyone involved fairly and will take great care in determining an appropriate sentence.”
The statement of facts accompanying Pugh’s plea in November described how Pugh defrauded businesses and nonprofit organizations out of nearly $800,000.
Prosecutors said Thursday that Pugh’s “personal inventory” of Healthy Holly books never exceeded 8,216 copies. But through a “three-dimensional” scheme, they say, she was able to resell 132,116 copies for a total of $859,960. She gave another 34,846 copies away.
“Corporate book purchasers with an interest in obtaining or maintaining a government contract represented 93.6% of all Healthy Holly books or $805,000,” prosecutors said.
Prosecutors also noted Pugh did not disclose her financial interests while in the Senate before becoming mayor, as required by Maryland law. After The Baltimore Sun reported in March that Pugh did not disclose her $500,000 business relationship with the University of Maryland Medical System while on its volunteer board, she amended seven years of reports to the state ethics commission.
Pugh also sold books to big city contract holders, including Kaiser Permanente and Associated Black Charities, the Sun revealed.
The book sales were used to bolster the financial health of Pugh’s campaign, prosecutors say, but there were other payments that had nothing to do with Healthy Holly.
The document outlines how Pugh illegally solicited a campaign contribution from city contractor J.P. Grant, which prosecutors said was “laundered” through the consignment shop Pugh owned with Pratt, a fellow Democrat. Prosecutors said Grant wrote out a $20,000 check to Pugh, which he had his wife sign in the hope that doing so would draw less attention than signing it himself, and Pugh deposited it into the shop’s bank account.
Grant, who could not be reached Thursday for comment, holds a master lease with the city in which he profits from financing major city purchases. He has not been charged with a crime.
Pugh used the money to make illegal “straw donations” to her campaign, and used the balance to cover the 2 Chic Boutique’s expenses, prosecutors say. In turn, authorities say, 2 Chic filed a false 2016 tax return that made no mention of receiving those funds.
“The deposit was by far the largest in the small company’s history, and the company would have only survived a few more months without the benefit of that deposit,” prosecutors said. “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.”
Along with Pugh and Pratt, the shop was co-owned by Afra Vance-White, Pugh’s director of external relations at City Hall, and another woman with ties to city government. Then-acting Mayor Bernard C. “Jack” Young, also a Democrat, fired Vance-White in April.
Pratt, who also owns an accounting firm, confirmed Thursday in an interview that she filed the boutique’s tax returns, but said they were based on information she received from Vance-White. 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.
“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.
Neither Grant nor Vance-White — whom then-acting Mayor Bernard C. “Jack” Young fired in April — responded to multiple requests for comment.
Vance-White, Pugh’s legislative aide Gary Brown and Roslyn Wedington, the director of a Pugh nonprofit, have faced federal charges. No other charges have been filed.
Vance-White also was listed as a board member of the Maryland Center for Adult Training in Baltimore, a nonprofit where Pugh was a member of the board of directors, and for which Pugh helped win public grants in recent years to train people as certified nursing assistants and medical technicians.
About the same time Pugh and Brown were implicated in the Healthy Holly case, Roslyn Wedington, the training center’s executive director, pleaded guilty to conspiracy to defraud the United States and filing false tax returns. According to her plea deal, she “knowingly filed false tax returns” each year from 2013 to 2017, with the help of Brown.
Pugh defeated former Mayor Sheila Dixon in 2016 in the Democratic primary for mayor and again in the general election after Dixon mounted a write-in campaign.
Prosecutors wrote that “the significant resources generated by the Healthy Holly scheme leading up to the contested election unquestionably provided a huge financial advantage for Pugh.”
Dixon is running again for mayor in an April 28 primary. Dixon, who left the office of mayor herself in 2010 after being found guilty of embezzling gift cards meant for poor people, expressed empathy Thursday for Pugh.
“I’m praying for Catherine, her family and our city, who are each having to experience a very difficult period in time,” Dixon said. “I’m also encouraged by the measures passed by members of the current City Council and look forward to introducing more bills as mayor to strengthen government accountability, transparency and oversight.”
Included in the sentencing memorandum is a scene from an April raid on Pugh’s home. FBI agents came to seize, among other items, her personal cellphone. Prosecutors say Pugh handed over a red, city-issued iPhone, but investigators said they wanted her personal phone, a Samsung. She told them she had left it with her sister in Philadelphia.
An agent then called the Samsung phone. “Almost immediately, the agents heard a vibrating noise emanating from her bed. Pugh became emotional, went to the bed and began frantically searching through the blankets at the head of the bed. As she did so, agents [started] yelling for her to stop and show her hands,” prosecutors wrote.
Pugh had grabbed the phone from underneath her pillow, and the agents took it from her.
“Pugh’s lie and futile attempt to silence the phone to prevent its seizure is indicative of her lack of respect for the law and, more broadly, her past efforts to hide longstanding criminal misconduct,” prosecutors wrote.