The disgraced former mayor of Baltimore, who resigned amid investigations into deals to sell her self-published children’s books, has been charged with fraud and tax evasion.
An 11-count federal indictment unsealed Wednesday accuses Catherine Pugh, 69, of abusing her office for personal gain.
Pugh resigned in early May after authorities began probing whether she arranged bulk sales of her “Healthy Holly” books to disguise hundreds of thousands of dollars in kickbacks for her 2016 mayoral campaign and renovations for her Baltimore City home.
The federal grand jury indictment includes charges of conspiracy to commit wire fraud, seven counts of wire fraud, conspiracy to defraud the United States and two counts of tax evasion.
‘Last thing our city needs’
Federal prosecutors said Pugh filed bogus tax documents to evade paying taxes on some of the payments she received from the sale of the books, saying in one year, she underreported her taxable income by hundreds of thousands of dollars.
“This a tragedy and the last thing our city needs,” Robert K. Hur, U.S. Attorney for Maryland, said during a news conference Wednesday morning announcing the indictment.
Two former Baltimore City employees and Pugh associates — 38-year-old Gary Brown Jr. and 50-year-old Roslyn Wedington — have pleaded guilty on related charges.
“There are many victims in this case,” Hur said. “The victims are all of us: the taxpayers and the people of Baltimore who expect and deserve integrity from their public officials. The people of Baltimore expect, and they should expect, that elected officials place the interests of their citizens above their own.”
Pugh owned Healthy Holly LLC, a company used to publish and sell children’s books she had written, according to the 11-count indictment. Beginning in 2011, Pugh marketed and sold the books to nonprofits and other organizations, many of which did business with state and city government officials, according to authorities.
Prosecutors said Pugh conspired with Brown to defraud those who bought Healthy Holly books in order to promote Pugh’s career and fund her campaign for mayor.
Books were sold but never delivered; some books were provided to those who bought them, but then used at campaign events and government functions, and some books that were purchased were resold and donated to Baltimore City Public Schools.
The indictment also said Pugh stashed some of the books in her home, her state legislative offices, her mayoral office at City Hall and a public storage locker used by her mayoral campaign.
Maryland governor, House speaker react
Besides serving as mayor of Baltimore, Pugh had served as a Maryland state senator in Annapolis.
Maryland House Speaker Adrienne Jones issued a statement on Pugh’s indictment, saying, “Baltimoreans are resilient and, once again, we will pick ourselves up and keep moving forward. But, make no mistake, this was an abuse of public trust at a time when the city needs leaders to be bold and transparent.”
Jones added, “As leaders, we must hold ourselves to a higher standard — putting the needs of the public above our own.”
Maryland Gov. Larry Hogan issued a statement of his own on Pugh’s indictment, saying, “The people of Baltimore, and all Marylanders, should be able to have confidence in the honesty and character of the people they elect to office.”
“It is completely unacceptable anytime a public official violates the public trust,” Hogan said.
He added, “We will continue to fight hard to root out corruption and wrongdoing, wherever it takes place.”
Where the money went
Prosecutors said Pugh used the money of the fraudulent sales to fund her campaign, and to buy and renovate a house in Baltimore City.
According to the indictment, Pugh also issued checks from Healthy Holly payable to Gary Brown to fund straw donations to her mayoral election committee. Brown then would cash the checks and used the money to fund about $35,800 in the names of straw donors.
In January 2017, Brown was charged and later convicted of funneling $18,000 of the donations to Pugh’s campaign. Pugh’s election committee issued five checks as “returned contribution” in the names of three of the straw donors, but Brown used the money to pay for his legal defense at Pugh’s direction.
Brown pleaded guilty to conspiracy to commit wire fraud, two counts of conspiracy to defraud the U.S. and to filing a false tax return.
Prosecutors also said Pugh conspired with Brown to try to evade taxes on payments she received from the sale of the Healthy Holly books. She funneled payments to Brown, claiming they were business expenses so she could lower her tax burden, even filing fake tax documents and invoices “to make this ruse stronger,” Hur said.
According to the indictment, in the 2016 tax year, Pugh claimed her taxable income was $31,020, and the tax due was $4,168. In fact, her taxable income was $322,365, with an approximate income of $102,444 — more than 20 times the amount she actually paid.
Pugh is scheduled to appear in U.S. District Court in Baltimore on Thursday.
Contacted by WTOP, Pugh’s attorney, Steve Silverman, said he had no comment and would address the matter in open court Thursday.
Pugh faces up to 20 years in federal prison for wire fraud conspiracy and for each of the seven counts of wire fraud, five years for conspiracy to defraud the U.S., and five years for each of the two counts of tax evasion.
In a separate but related case, Pugh’s associate, Brown, admitted to authorities that he helped arrange off-the-books payments to Roslyn Wedington, an official with a Baltimore workforce development center.
Wedington pleaded guilty to conspiracy to defraud the U.S. and to five counts of filing a false tax return.
In 2013, when Wedington was the executive director of the Maryland Center for Adult Training (MCAT), her salary was garnished because of outstanding student loan debt and medical bills. A wage garnishment is a court-issued withholding of a certain amount of someone’s paycheck in order to send that amount directly to the institution to which money is owed.
Wedington asked Brown, then the chairman of the MCAT board of directors, to take her “off payroll,” according to court documents. Brown agreed, and arranged to make electronic deposits into his personal account.
Brown then wrote checks or gave cash to Wedington in amounts larger than her annual salary.
Brown faces up to 20 years in federal prison for the wire fraud conspiracy. Brown and Wedington each face up to five years in federal prison for each count of conspiracy to defraud the U.S. and three years in prison for each count of filing a false tax return.
A scheduled sentencing date is pending.
WTOP’s Kate Ryan and The Associated Press contributed to this report.