PUGH

Baltimore Sun - - FROM PAGE ONE -

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.

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