Posted on 02/13/20
| News Source: WBAL
Federal prosecutors are recommending nearly five years in prison for former Baltimore Mayor Catherine Pugh.
The sentencing memorandum was filed Thursday ahead of Pugh's Feb. 27 sentencing. Pugh, who resigned last May, reached a plea deal with federal prosecutors on charges related to sales of her "Healthy Holly" children's books. The recommended sentence of 57 months is the harshest allowed under federal guidelines.
Read the sentencing memorandum filed Thursday.
"The facts establish that Pugh deliberately engaged in a broad range of criminal acts while serving as Maryland State Senator and Mayor of Baltimore City," prosecutors wrote. "She used the stature of those elected offices to solicit fraudulent book sales that generated substantial revenue for her publishing business, part of which she used to influence her 2016 mayoral election campaign in violation of state election laws."
Longtime aide Gary Brown helped her expand her scheme and conceal it from authorities and the public, exploiting her public office for private gain, prosecutors argue.
Brown, in his own plea agreement, said they conned buyers of "Healthy Holly" books by selling the books and not delivering them, by providing books to purchasers and later converting them to their own use in campaign events and government functions and by reselling books that had previously been purchased and donated to city schools.
Pugh printed 2,110 copies of the first "Healthy Holly" book, "Exercising is Fun," for herself and sold the remaining 20,000 copies to the University of Maryland Medical System, on whose board she sat, on behalf of city schools. On June 10, 2011, her copies were delivered to her Senate office in Baltimore. Four months later, nearly all of those books were sold to Grant Capital Management, but witnesses told investigators those books were delivered to Associated Black Charities. At that point, Pugh had no copies of that first book left.
The next day, however, she sold 1,000 copies to CareFirst and made subsequent, smaller sales to entities including Kaiser Permanente, but never made another print run. Instead, she used 2,350 copies that belonged to city schools to fill those orders, pocketing $15,070, prosecutors said. She also gave copies away at campaign events, government functions and school visits. Witnesses told investigators that she demanded that her offices and government vehicles be stocked with copies. Ultimately, virtually all of the copies of the first book that were supposed to go to city schools were distributed in this manner. Federal agents found no copies in a city warehouse, but 1,742 copies turned up in locations associated with Pugh, many of them in the custody of a moving company that took them from her Senate office.
Prosecutors outline similar behavior in her distribution of the second and third "Healthy Holly" books. She didn't print copies that had been paid for by UMMS, exploiting the fact that the medical system had to rely on her promise to ship the books to schools. However, Kaiser Permanente had its own distribution center, which meant she had to order the copies ordered by the health insurer and make sure they were delivered to Kaiser's distribution center.
She didn't divulge her relationships with CareFirst or Kaiser even while voting on multi-year city contracts with them as a member of the Board of Estimates. UMMS and related entities have also been recipients of city funding. Prosecutors said that while there is no evidence Pugh tried to solicit bribes, they see a pattern of Pugh leveraging her power to solicit money from entities that might ask her for her help as mayor. Companies with an interest in obtaining or maintaining a government contract represented 93.6% of all "Healthy Holly" books. However, none of the purchasers said they felt pushed into buying the books. Rather, they said they felt the books supported the goals of their outreach efforts while conceding that agreeing to buy books from someone like Pugh was a good business decision.
In February 2016, Pugh used her now-defunct shop, 2 Chic Boutique, to launder an illegal campaign contribution from J.P. Grant, the owner and CEO of Grant Capital Management. The two met to discuss the contribution. Grant wrote the check from his wife's account and his wife signed it without knowing its purpose. In March 2016, Pugh solicited Grant for a $50,000 check, but she made it sound like a philanthropic request, prosecutors said. Grant wrote a personal check to Healthy Holly LLC. Brown picked up the check and Pugh funneled the money into her campaign.
She solicited Grant once more in October 2016, just prior to the general election. Anticipating her victory, she asked Grant to help her buy a larger house. She suggested that Grant help her by making another book donation, which Grant understood to mean that Pugh would use the profits from the books to pay for the house. She didn't tell him that she never used any of the funds from his $50,000 check to print or ship books for city schoolchildren. He made out the check to Healthy Holly LLC. That December, she bought a second home in Ashburton.
"Whatever sincere beliefs Pugh may have had about improving children’s health, one thing is clear: she deliberately capitalized on this theme for years to mislead organizations about the true purpose behind buying and 'donating' her books to the cause," prosecutors wrote. "Based on conversations with Pugh about how the books could help reduce childhood obesity and to whom she planned to distribute them, some book purchasers were led to believe that Healthy Holly was a non-profit enterprise that had aligned itself with BCPS. Nothing Pugh told them remotely suggested that she was personally profiting from the sale and donations of the books, a material fact that would have prompted them to question their participation in the venture."
In addition to filing false tax documents, Pugh persuaded Brown not to assist state officials investigating a straw donor scheme in 2017. When Brown was subsequently charged by the state prosecutor's office, Pugh's campaign decided to return the donations. Those straw donors cashed the returned checks and gave the money to Brown, who tried to give the money back to Pugh's campaign. Instead, Pugh urged him to hire an attorney with that money. Brown pleaded guilty and did not tell authorities anything about Pugh's role.
Prosecutors said she continued to lie to the public and even to investigators. Read more at WBAL