by Holly Matkin and Christopher Berg
Baltimore, MD – Former Baltimore Mayor Catherine Pugh pleaded guilty on Thursday to federal charges relating to a corruption scandal involving the sales her her children's books.
Pugh, a 69-year-old Democrat, was charged with conspiracy to defraud the United States, conspiracy to commit wire fraud, two counts of tax evasion, and seven counts of wire fraud on Nov. 13, WBAL reported.
One day after the charges were made public, Pugh pleaded guilty to four of the charges as part of a plea deal to get the other charges dropped, according to The New York Times.
The charges Pugh pleaded guilty to include one count of wire fraud conspiracy, conspiracy to defraud the government, and two counts of tax evasion. She faces up to a maximum of 35 years in prison.
"She lied to the IRS in order to pay less in taxes," U.S. Attorney Robert Hur said, according to WBAL. "She violated Maryland state election law which prohibits someone from making a campaign contribution in someone else's name."
Hur said that the disgraced former mayor’s actions victimized Baltimore’s taxpayers.
“The victims are all of us, the taxpayers and the people of Baltimore who expect and deserve integrity from their public officials,” he said. “The people of Baltimore expect – and they should expect – that elected officials place the interests of their citizens above their own.”
Pugh also allegedly defrauded the Baltimore public school system and health care companies by failing to deliver books they paid for, according to The New York Times.
In some cases, she accepted payment for thousands of books that were never even printed, prosecutors said.
According to the indictment, Pugh received nearly $800,000 for her books, both before and after she was elected as mayor, The Washington Post reported.
“Corrupt public employees rip off the taxpayers and undermine everyone’s faith in government,” Hur said, according to The New York Times.
Pugh is expected to surrender herself to the U.S. Marshals prior to her initial appearance in U.S. District Court in Baltimore on Thursday, WBAL reported.
She faces up to 175 years in prison if she is convicted of the charges against her, according to The Baltimore Sun.
Investigators began looking into Pugh’s Healthy Holly LLC book deals while she was still a member of the board of directors at the University of Maryland Medical System, WBAL reported.
The Internal Revenue Service (IRS) and the Federal Bureau of Investigation (FBI) executed search warrants at then-Mayor Pugh’s residences and multiple other locations in April.
Pugh took a month of medical leave during the same timeframe, and ultimately resigned from her mayoral position in May.
Meanwhile, Pugh’s former aide, Gary Brown, pleaded guilty to filing a false tax return, conspiracy to commit wire fraud, and two counts of conspiring to defraud the United States in connection with the now-former mayor’s alleged scheme, The Baltimore Sun reported.
“From November 2011 until March 2019, Ms. Pugh conspired with Gary Brown to defraud purchases of Healthy Holly books in order to enrich themselves, promote Ms. Pugh's political career and fund her campaign for mayor," Hur said, according to WBAL. "Mr. Brown helped Ms. Pugh solicit nonprofit organizations and foundations to buy the Healthy Holly books."
In some instances, the duo took in payments for the books but failed to deliver them, prosecutors said.
In other cases, they delivered the purchased books, but then converted the same books for their own use without the purchasers’ knowledge. They have also been accused of double-selling books without the consent of the purchasers, WBAL reported.
"Ms. Pugh allegedly stored quantities of fraudulently obtained Healthy Holly books at various locations, including her residence, her state legislative offices in Annapolis and Baltimore City, her mayoral office at City Hall in Baltimore, the War Memorial building in Baltimore and a public storage locker used by her mayoral campaign," Hur explained.
Hur told reporters that Pugh used the proceeds from the “fraudulently-obtained ‘Healthy Holly’ books” to fund “straw donations” to her mayoral campaign, as well as to purchase an renovate her Baltimore home, WBAL reported.
In order to evade having to pay taxes on income the books generated, Pugh and Brown “created the pretense of an ongoing business relationship” between the book LLC and Brown’s own business, he said.
“Ms. Pugh wrote checks to Mr. Brown for tens of thousands of dollars from Healthy Holly's bank account. Ms. Pugh allegedly told her tax preparer that the payments to Mr. Brown's business were for business services that he provided,” Hur said, according to WBAL.
“She then instructed the tax preparer to deduct those payments as business expenses in order to lower her tax liability. However, these payments from Healthy Holly LLC to Mr. Brown's business were not for business services,” he noted. “In reality, Mr. Brown's business provided no services or products at all to Healthy Holly LLC. This was a ruse, according to the indictment."
According to Hur, Pugh significantly underreported her taxable income in 2015 and 2016.
“Her taxable income was more than 10 times what she reported to the IRS for  and she owed more than 20 times more in taxes than she actually paid for that year,” he said.
Pugh also formerly headed a nonprofit group, the Maryland Center for Adult Training, with executive director Roslyn Wedington, who has also pleaded guilty to filing false tax returns and defrauding the government, The New York Times reported.
Prosecutors said that Wedington knowingly filed false tax returns that Brown had prepared.
“This is a tragedy and the last thing that our city needs,” Hur said, according to The Washington Post.
He noted that the former mayor’s scheme was a “betrayal of the public trust.”