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Former Baltimore Mayor Indicted on 11 Counts of Fraud, Tax Evasion

Federal prosecutors have charged former Baltimore Mayor Catherine Pugh with 11 counts of fraud, tax evasion and conspiracy in what they allege was a corrupt scheme involving her sales of a self-published children’s book series.

In a grand jury indictment made public Wednesday, prosecutors allege Pugh defrauded area businesses and nonprofit organizations with nearly $800,000 in sales of her “Healthy Holly” books to unlawfully enrich herself, promote her political career and illegally fund her campaign for mayor.

100,000 copies of the book were ordered, but the indictment says Pugh failed to print thousands of copies, double-sold others and took some to use for self-promotion. Pugh used the profits to buy a house, pay down debt, and make illegal straw donations to her campaign, prosecutors allege.

Prosecutors said she also was evading taxes. In 2016, when she was a state senator and ran for mayor, she told the Internal Revenue Service she had made just $31,000. In fact, her income was more than $322,000 that year ― meaning she shorted the federal government of about $100,000 in taxes, according to the U.S. attorney’s office.

Pugh faces potential sentences totaling 175 years in prison. Prosecutors are seeking to seize $769,688 of her profits, along with her current home in Ashburton, which they allege she bought and renovated with fraudulently obtained funds. The former Democratic mayor is expected to turn herself in to U.S. marshals and appear Thursday in U.S. District Court in downtown Baltimore.

Longtime aide to Pugh Brown Jr., 38, pleaded guilty earlier this month to four counts: one for conspiracy to commit wire fraud, one for filing a false tax return, and two for conspiring to defraud the United States. Of the latter two charges, one is related to his work with Pugh, while the other is related to his work with Roslyn Wedington, the director of the nonprofit job training center for which Pugh served as board chairwoman and championed.

Roslyn Wedington, 50, pleaded guilty in September to one count of conspiracy to defraud the United States and five counts of filing false tax returns. According to her plea deal, she “knowingly filed false tax returns” each year from 2013 to 2017, with Brown’s help.

Brandon Mead, Wedington’s attorney, said she regrets her actions.

“She unfortunately got put in a situation that many Americans face today, where she was behind on student loans, behind on health care debt, and she unfortunately made some wrong decisions,” he said.

Pugh collected $500,000 over several years selling the books in a no-bid deal with the University of Maryland Medical System, where she was on the board of directors. She later resigned from the board and as mayor amid multiple investigations into her finances and the book sales, including to other entities doing business with the city.

These books had grammatical and spelling errors, such as a main character’s name being spelled two different ways and the word “vegetable” appearing as “vegetale”.  Pugh says she sold books to the medical system to distribute to city schoolchildren. School officials, however, said they hadn’t asked for the books, never used them for instruction, and had thousands sitting unread in a warehouse.

She was accused of self-dealing by city and state government, Pugh was unrepentant — and called inquiries into her deals a “witch hunt.” It later evolved that the medical system paid her more than she had initially acknowledged. She later said she hadn’t produced thousands of the ordered books and gave back $100,000 to the hospital network.

But her side of the story evolved ― despite Pugh saying she had sold only to UMMS ― she’d collected at least another $300,000 from other entities, including health insurer Kaiser Permanente and Associated Black Charities. They bought roughly 30,000 copies of the books, paying her nearly $200,000. In 2017 Pugh voted to approve a $48 million contract for Kaiser Permanente to provide insurance to city employees. Deals were also made with Associated Black Charities, and Grant Capital Management. The Columbia businessman J.P. Grant – whose company has long done business with the city said after cutting a check for $100,000, received a sample copy of a book, but no documentation of how his money would be used.

The indictment states Pugh’s scheme began in December 2010 when she persuaded the medical system to pay her $100,000 to purchase 20,000 copies of her first Healthy Holly book to donate to Baltimore’s schools. Because the book contained “various grammatical and spelling errors,” a school system staffer copy edited the books, and then-CEO Andres Alonso ultimately decided they couldn’t be used for instruction, but would be donated to students.

Then a state senator, Pugh had about 20,000 copies of the books delivered to the school system, and those copies were stored in a warehouse. However, Pugh and Brown, who worked as her legislative aide, arranged for thousands of the books to be removed for their “personal use and benefit,” prosecutors say.

Pugh later re-upped the sales to the hospital network four more times, but never told medical officials she had not used the books as intended, according to prosecutors. Instead, the mayor stored thousands of copies of the books at her house, the mayor’s office at City Hall, her legislative offices, the War Memorial Building, a public storage locker used by Pugh’s mayoral campaign, her and Brown’s vehicles and the vehicles of other aides.

Pugh became the second Baltimore mayor in a decade to quit in connection with a criminal investigation; Democratic Mayor Sheila Dixon resigned in 2010.