Ex-Baltimore Mayor Catherine Pugh faces fraud, tax charges

BALTIMORE — The disgraced former mayor of Baltimore was charged Wednesday with fraud and tax evasion involving sales of her self-published children's books.

An 11-count federal indictment accuses Catherine Pugh of using her "Healthy Holly" books to enrich herself, promote her political career and fund her run for mayor.

Federal authorities say Pugh and two city employees double-sold her self-published children's books or failed to deliver them to institutions they were purchased for, including the Baltimore City Public Schools.

Pugh then allegedly used the proceeds to fund straw donations to her mayoral campaign and to renovate a house.

The grand jury indicted Pugh on federal charges of conspiracy to commit wire fraud, seven counts of wire fraud, conspiracy to defraud the United States, and two counts of tax evasion. She's expected to surrender to U.S. Marshals before an initial appearance and arraignment Thursday before U.S. District Judge Deborah K. Chasanow in Baltimore.

Also unsealed Wednesday were the guilty pleas of former Baltimore City employees Gary Brown Jr. and Roslyn Wedington. Both pleaded guilty to conspiracy and tax fraud.

TAX EVASION BY THE RICH AND POWERFUL: AN IN-DEPTH LOOK WITH FBN'S CHARLES PAYNE

"Corrupt public employees rip off the taxpayers and undermine everyone's faith in government," United States Attorney Robert K. Hur said in an announcement of the charges. "Our elected officials must place the interests of the citizens above their own."

Steven Silverman, Pugh's attorney, didn't immediately respond to a phone message and email seeking comment.

Pugh, 69, resigned in May after authorities began probing whether she arranged bulk sales of "Healthy Holly" books to disguise hundreds of thousands of dollars in kickbacks.

FBI and IRS agents raided her offices, homes and other locations in late April and seized several items, including money transfer receipts, a laptop, compact discs and a $100,000 check from the University of Maryland Medical System to Pugh's "Healthy Holly" company.

GET FOX BUSINESS ON THE GO BY CLICKING HERE

If convicted, Pugh faces up to 20 years in prison on each wire fraud count, and five years for each tax evasion count. The indictment also said that the federal government would seek to seize a house owned by Pugh and $770,000 as part of any sentence.

The indictment also provides details of the alleged tax evasion. It accuses her, for example, of claiming taxable income in 2016 of $31,020, with $4,168 tax due, "when in fact, Pugh's taxable income was $322,365, with an income tax due of approximately $102,444."

The first-term Democrat, who became mayor in late 2016, has been in seclusion since early April, when she took a leave from the mayor's office due to what her lawyer described as poor health following a bout of pneumonia. Attorney Steven Silverman said then that Pugh was so fragile physically and mentally that she was unable to make "major decisions."

MICHAEL COHEN OWES $1.9M TO IRS: REPORT

Federal, state and local probes have been looking into questionable financial arraignments that over the years netted Pugh roughly $800,000 for her hard-to-find books. The books were meant to be provided to schools and day care centers, but it's unclear where tens of thousands of copies ended up.

Pugh's books included such titles as "Healthy Holly: Exercising is Fun" and "Healthy Holly: Fruits Come in Colors like the Rainbow." Most were not sold at bookstores or through wholesalers. Instead, they were sold directly to nonprofits and foundations that did business — or attempted to do business — with the state or the city of Baltimore, according to the indictment.

Brown had been an aide to Pugh during her time in the state Senate and during her 2016 campaign for mayor. He helped hawk the Healthy Holly books to nonprofits and foundations, often calling himself Healthy Holly's CEO even though he was never an employee.

Pugh became mayor in late 2016 after having served in the state legislature since 2005. As a state senator, she once sat on a committee that funded the University of Maryland Medical System, one of the state's largest private employers.

The hospital network — on whose board she sat starting in 2001 and until the scandal over the illustrated paperbacks erupted in March — was Pugh's biggest book customer.

CLICK HERE TO READ MORE ON FOX BUSINESS

The system paid Pugh $500,000 for 100,000 copies. There was no contract behind the deal and the medical system described some of the purchases as "grants" in federal filings. She returned her most recent $100,000 payment and described the deal as a "regrettable mistake" during a news conference days before she retreated from public view.

Health care provider Kaiser Permanente also disclosed that it paid Pugh's Healthy Holly LLC about $114,000 between 2015 and 2018 for roughly 20,000 copies of the books. She oversaw Baltimore's spending board in 2017, when the city awarded a $48 million contract to the Kaiser Foundation Health Plan of the Mid-Atlantic States Inc.

Pugh became the second mayor of Baltimore in less than a decade to step down because of a scandal. Former Mayor Sheila Dixon left office in 2010 as part of a plea deal for misappropriating about $500 in gift cards meant for needy families.

A longtime city council member, Bernard "Jack" Young, took over the role of mayor after Pugh resigned. He inherited a city with failing schools, a thriving illegal drug market and one of the nation's highest rates of violent crime.