Appearing in US District Court in Baltimore, Pugh, 69, pleaded guilty to one count of conspiracy to commit wire fraud, one count of conspiracy to defraud the United States and two counts of tax evasion. She pleaded not guilty to seven counts of wire fraud.
The plea is a dramatic development in a months-long scandal over Pugh’s self-published “Healthy Holly” books, which prosecutors allege she fraudulently sold to local non-profit organizations in order to fund her campaign and enrich herself. The scandal led to the former mayor’s resignation in May after the Baltimore city council called on her to step down, and it adds to a lengthy list of corruption scandals tied to the Maryland city, where wrongdoing by public officials has long been a part of the political landscape.
The plea comes one day after federal prosecutors unsealed the 11-count indictment against Pugh that detailed an elaborate scheme that prosecutors say she and her former aide, Gary Brown, steered “in order to enrich themselves, promote Ms. Pugh’s political career, and fund her campaign for mayor.”
It’s expected that the government will drop the remaining charges at sentencing, which is scheduled for February 27. The US Attorney’s Office said Wednesday that Pugh faces a maximum sentence of 20 years in federal prison for the wire fraud conspiracy and for each of the seven counts of wire fraud; five years in federal prison for conspiracy to defraud the United States; and five years in federal prison for each of the two counts of tax evasion.
The indictment alleges that Pugh and her associate solicited non-profit organizations and foundations — chief among them, the University of Maryland Medical Center — to buy her books, which promote healthy living among children. But prosecutors said that in some cases, the books were never delivered, while in others, the pair delivered the books and then converted them to their own use without the buyer’s knowledge, or double-sold books, profiting from the purchases.
For example, Robert Hur, the US Attorney for the District of Maryland, said at a press conference on Wednesday that Pugh arranged for books that were donated to Baltimore City Schools to be delivered to her own office and that way she was able to secure “free inventory” of books she and Brown would use for their own purposes.
The proceeds of the books were used to fund straw donations to her mayoral election campaign and also to fund the purchase and renovation of a home in Baltimore, Hur alleges.
In April, federal authorities executed search warrants at several locations tied to Pugh, including her home, as part of their investigation into whether she improperly profited from the deal while serving on the hospital’s board.
Last spring, CNN reported that UMMS spent $500,000 to fund the purchase of some 100,000 books from Pugh’s company, Healthy Holly LLC. The former mayor also received about $114,000 from health care provider Kaiser Permanente for some 20,000 books from 2015 to 2018 and an additional $80,000 from the public foundation Associated Black Charities, which said it bought some 10,000 copies of Pugh’s between 2011 and 2016.
The prosecutor also said Wednesday that Pugh created a fake business relationship with Brown so he could make invoices for services he didn’t actually provide her. The former aide has already pleaded guilty to wire fraud and tax charges related to his conduct with Pugh, Hur said.
Additionally, Pugh is accused of filing false income tax returns in 2015 and 2016 and underreporting her income.
Hur said the indictment alleges that the former mayor’s “taxable income was 10 times what she reported to the IRS for that year and she owed over 20 times in taxes than she actually paid” in 2016.
Pugh, who apologized in March for doing something to “upset the people,” was elected mayor of Baltimore in 2016. Her predecessor, Stephanie Rawlings-Blake, first came into the role when the former mayor, Sheila Dixon, resigned in 2010 after being convicted of embezzlement.
In that case, prosecutors alleged that Dixon improperly used gift cards intended for the needy.