At the outset, U.S. District Judge Deborah K. Chasanow asked the former mayor how she was feeling.
“Anxious,” answered Pugh, her voice muffled as she sat between her lawyers.
“I’m not surprised,” the judge responded.
Outside the courthouse, Maryland U.S. Attorney Robert K. Hur said that “the city of Baltimore faces many pressing issues. We need dedication and professionalism from our leaders, not fraud and corruption, if we have any hope of fixing these problems.”
Pugh’s attorney Steven D. Silverman said in a statement that the former mayor had decided to forgo a trial that would “drain essential government resources and cause further distraction from the serious issues our region faces.”
“Ms. Pugh sincerely apologizes to all of those that she let down, most especially the citizens of Baltimore whom she had the honor to serve in multiple capacities for decades,” he said.
Authorities in April searched Baltimore City Hall, Pugh’s homes and a nonprofit organization tied to her, seeking financial documents and other information related to almost $800,000 she allegedly was paid for her self-published books.
Following the searches, Pugh, a Democrat elected in 2016, took an indefinite leave as mayor and never returned to her job at City Hall. She resigned in May, with longtime City Council President Bernard C. “Jack” Young elevated to acting mayor.
Pugh admitted Thursday to running a sham business dating to 2011 that she used to sell her books in schemes that involved skimming part of customers’ paid orders for her own promotions and also churning sales by reselling books that already had been purchased but not delivered or that were being held in storage.
The conspiracy Pugh acknowledged includes using $35,800 from book sales as illegal straw donations to her mayoral campaign. She also spent some of the money to buy and renovate a house in Baltimore. The two tax-evasion counts include underreporting thousands of dollars Pugh owed in 2015 and 2016 on sales of her “Healthy Holly” series about an African American girl, Holly, as she follows a healthy lifestyle.
Most of the books in Pugh’s transactions were marketed and sold directly to nonprofit organizations and foundations, many of which did business or tried to get business with the state and city of Baltimore. Among the books diverted and resold were thousands purchased and donated for use by Baltimore public school students.
In all, court records show, Pugh took purchase orders for roughly 124,000 books but had printers produce only 63,210.
Two former Baltimore employees, Gary Brown Jr., 38, a longtime Pugh aide who worked at City Hall, and Roslyn Wedington, 50, who ran a nonprofit group linked to the case, have pleaded guilty to conspiracy to defraud the United States and to filing false tax returns, court papers show in cases also unsealed Wednesday.
Pugh’s hearing surfaced new details about at least one book purchaser, who Pugh said in her plea agreement was aware his payments were being diverted to aid Pugh personally.
In the lead-up to the 2016 mayoral primary, J.P. Grant, the owner of Grant Capital Management — a financing company in Columbia, Md., that did business with the city — wrote a $50,000 check to Healthy Holly LLC, court filings show.
Grant understood, according to Pugh’s agreement, that the money was intended to produce books for Baltimore students, with the balance going to her campaign.
One month after the general election, Pugh told Grant she “wanted to buy a larger house so she could entertain people when she became mayor” and she took Grant to see the property, according to the agreement she signed.
Pugh suggested that Grant write another check to Healthy Holly LLC, this time for $100,000, with the understanding that some money would help her buy the home. None of the money went to print or deliver books to school students, the agreement says.
Grant did not return phone or email messages seeking comment Thursday.
The revelations about the book deals first became public in March, when the Baltimore Sun reported that Pugh had received $500,000 from the University of Maryland Medical System for a total of 100,000 books when she served on a state Senate committee that partially funded the private hospital network — and on its board.
The relationship between Pugh and Brown dates to 2011, when Brown was Pugh’s legislative aide in the state Senate. When Pugh was elected mayor the next year, Brown was tapped to fill a vacancy in the House of Delegates. The morning Brown was scheduled to be sworn in, state prosecutors charged him with campaign finance violations tied to Pugh that — Brown admitted in his plea unsealed Wednesday — were funneled through “Healthy Holly” sales. Brown’s swearing-in was canceled, and he pleaded guilty.
After he got in trouble, Pugh directed Brown to cash five checks totaling $18,000 to pay his legal fees at a law firm Pugh picked because she said that “the attorney there would take care of him,” according to Pugh’s indictment, which did not name the lawyer.
The pair remained close and as mayor Pugh kept Brown on staff at City Hall, where his office was on the same floor as hers.
Pugh’s plea deal also provides new details about the former mayor’s relationships with Kaiser Foundation Health Plan, the nonprofit health-care foundation, and the books the company sought to purchase.
In 2017, Kaiser’s director of community health talked to Pugh about getting books to distribute at events. On that same day, Pugh’s staff sent an email to the director discussing how the company could obtain books and Kaiser’s request to have Pugh attend the company’s upcoming community events to sign her books and conduct a reading.
Kaiser sent Pugh a check for $14,000 for 2,000 books, Pugh’s plea shows. The books were never delivered. A year later, Brown sent Kaiser a new invoice, for $25,000, for the next book in the series. Not realizing that the earlier books had not been delivered, Kaiser sent Pugh $25,000 for 4,000 new books, which also were never delivered, according to Pugh’s agreement.
The Sun also first reported that Kaiser paid Pugh more than $100,000 at the same time it was seeking a $48 million contract from a city board controlled by the mayor.
In a statement to The Washington Post on Thursday, Keith Montgomery, Kaiser’s interim director for public relations, did not reply to a question about whether the company was trying to curry favor with Pugh. He said that “we continue to cooperate with the ongoing investigation.”
After Pugh’s court hearing Thursday, a few residents expressed frustration with the corruption in the city. After Hur, the U.S. attorney, gave a statement to the news media outside the courthouse and opened the floor to questions, a member of the public interjected: “Are you going after other appropriate officials here in Baltimore City, because Mayor Pugh ain’t the only one who committed crimes here?”
Hur responded that he and federal officials “share your concern. We share the commitment to public integrity.”