BALTIMORE (WJZ) — Former Baltimore Mayor Catherine Pugh was federally indicted on 11 counts of wire fraud and tax evasion on Nov. 14 in connection to the Healthy Holly scandal. The indictment was unsealed Wednesday.
Two former city employees, Gary Brown, Jr. and Roslyn Wedington also entered guilty pleas on conspiracy and tax charges.
The indictment alleges that between November 2011 until March 2019, Pugh conspired with Brown to defraud purchasers of Healthy Holly books in order to enrich themselves, promote Pugh’s political career and fund her campaign for mayor.
- Catherine Pugh Pleads Guilty To Some Federal Charges In ‘Healthy Holly’ Scandal
- Gary Brown, Jr., Roslyn Wedington Plead Guilty In Cases Connected To Catherine Pugh’s Indictment
- City Hall Rattled By News Of Catherine Pugh’s Indictment
- READ: Indictment Against Ex-Baltimore Mayor Catherine Pugh
- TIMELINE: Mayor Catherine Pugh’s ‘Healthy Holly’ Book Scandal
“Unfortunately the allegations in Ms. Pugh’s indictment and the facts laid out in Mr. Brown and Ms. Wedington’s plea agreements indicate a betrayal of the public trust,” said U.S. Attorney Robert Hur.
“I have no comment today and will address this matter in open court tomorrow.”
Pugh, 69, allegedly issued Healthy Holly checks payable to Brown, for the purpose of funding straw donations to the Committee to Elect Catherine Pugh.
How did we get here? TIMELINE: Mayor Catherine Pugh’s ‘Healthy Holly’ Book Scandal
In addition, the indictment alleges that Pugh conspired to evade taxes on the income received from the sales of Healthy Holly books.
The indictment alleges that for tax year 2016 Pugh claimed her taxable income was $31,020 and the tax due was $4,168, when in fact, Pugh’s taxable income was $322,365, with an income tax due of approximately $102,444.
Mayor Pugh indicted: The indictment alleges that for tax year 2016 Pugh claimed her taxable income was $31,020 and the tax due was $4,168, when in fact, Pugh’s taxable income was $322,365, with an income tax due of approximately $102,444. @wjz
— Mike Hellgren (@HellgrenWJZ) November 20, 2019
Investigators claim Pugh concealed from the IRS the fact that she created false business expenses to offset the income she received from the sale of books by issuing Healthy Holly checks to Brown for services and/or products purportedly supplied by his company.
“The indictment alleges that Catherine Pugh betrayed the public’s trust. The FBI will continue to diligently work to detect fraud and corruption and hold those who violate this trust accountable,” said Special Agent in Charge Jennifer Boone of the FBI’s Baltimore Division.
Special Agent in Charge Jennifer Boone of the FBI's Baltimore Division. “The indictment alleges that Catherine Pugh betrayed the public's trust. The FBI will continue to diligently work to detect fraud and corruption and hold those who violate this trust accountable.” @wjz
— Mike Hellgren (@HellgrenWJZ) November 20, 2019
Pugh resigned in May 2019 after federal authorities began looking into where she arranged bulk sales of “Healthy Holly” books to disguise hundreds of thousands of dollars in kickbacks.
The FBI and IRS raided several of her offices and homes — including City Hall — in late April and seized 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.
Pugh could be facing more than 100 years in prison if convicted. 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. She must turn herself in before her first court appearance scheduled for Thursday, Nov. 21.
Pugh hasn’t been seen in public much since the scandal broke. Her attorney Steven Silverman said she was in poor health following a diagnosis of pneumonia. In April, Silverman said then that Pugh was so fragile physically and mentally that she was unable to make “major decisions.”
She allegedly netted roughly $800,000 for her hard-to-find books. The books were meant to be provided to schools and daycare centers, but it’s unclear where tens of thousands of copies ended up.
Pugh, a Democrat, became mayor in 2016 after serving 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.
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, 69, 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.
She is expected to self-surrender to the U.S. Marshal before her scheduled hearing at 1 p.m. on Thursday, Nov. 21.
Pugh’s attorney said, “I have no comment today and will address this matter in open court tomorrow.”
Read the full indictment here:
Stay with WJZ for more on this developing story. Some Associated Press reporting was used in this story.