Ex-mayor allegedly sold children's books for political gain. Now she's facing federal charges

Ryan W. Miller | USA TODAY

Show Caption Hide Caption FBI, IRS search homes, city hall office of Baltimore Mayor Catherine Pugh The FBI and the IRS’s criminal division are searching the homes and the City Hall office of embattled Baltimore Mayor Catherine Pugh. Veuer's Justin Kircher has the story.

The former Baltimore mayor who resigned after revelations that she made roughly $800,000 from self-authored children's books sold to organizations tied to the city has been indicted on 11 federal wire fraud and tax-related charges.

Catherine Pugh, 69, resigned under pressure in May after it was revealed that her "Healthy Holly" books were sold to various nonprofits and foundations, including the University of Maryland Medical System, with which the city and Maryland did business.

The indictment unsealed Wednesday alleges that Pugh along with another former city employee conspired to "defraud purchasers of 'Healthy Holly' books in order to enrich themselves, promote Pugh’s political career, and fund her campaign for mayor," prosecutors said in a news release.

Many of the books were double sold or never delivered, according to the indictment. Pugh and her associates also allegedly used the books and their profits for her mayoral campaign and to renovate a Baltimore home.

Pugh, a Democrat and former state senator, became mayor in 2016. She took a medical leave of absence from office soon after the Baltimore Sun first published stories in March on the book deals.

"The people of Maryland expect elected officials to make decisions based on the public's best interests, not to abuse their office for personal gain," Special Agent in Charge Jennifer Boone of the FBI's Baltimore division said in a statement Wednesday.

Pugh resigns: Baltimore Mayor Catherine Pugh resigns after scandal over sales of her children's books

Pugh is expected to surrender to U.S. Marshals before an initial court hearing Thursday. She faces up to 20 years in prison for each wire fraud count, and five years for each tax evasion count. Also unsealed Wednesday were guilty pleas of former Baltimore City employees who aided in the scheme.

At the heart of the scheme were sales of the "Healthy Holly" books to the University of Maryland Medical System, where Pugh was a member of the volunteer board of directors until the scandal broke. She had also once sat on a state Senate committee that funded the system.

The hospital system paid Pugh $500,000 for 100,000 copies of the book. According to the Baltimore Sun, Pugh said the books, which featured grammatical and spelling errors, were intended for school children. However, school officials said they didn't ask for them and they were never used, the newspaper reported.

Health insurer Kaiser Permanente also bought books – when the city spending board Pugh controlled awarded the company a $48 million contract to provide health insurance to city employees, the Sun reported.

Pugh apologized for "the harm that I have caused to the image of the city of Baltimore and the credibility of the office of the mayor," she said at the time of her resignation. She was the city's second Democratic mayor in the past decade to resign amid allegations of corruption.

Bernard "Jack" Young took over as Pugh's interim replacement amid her medical leave and became the permanent mayor after she did not return to office.

Federal, state and local authorities had been investigating Pugh's book deals. While she was on leave, federal agents raided her office, two homes and a nonprofit group linked to her.

According to the indictment, Pugh and her aides' scheme dates back nearly a decade. Pugh allegedly sold the books and would either never provide them to purchasers, provide them but later use them for her own use without the purchaser knowing, or provide books that had already been sold.

Pugh and Gary Brown Jr., 38, who pleaded guilty to various fraud and tax charges, allegedly stored the books at her offices and homes in Baltimore and Annapolis, the indictment says. Prosecutors also allege that the pair would give out the fraudulently obtained books at government and campaign events.

Some of the sales of the books were also used to fund Pugh's campaign, the indictment says, and Pugh allegedly wrote checks to Brown, who would later use untraceable cash for straw donations to Pugh's campaign.

The indictment also says that Pugh evaded taxes by creating false business expenses that she would pay to Brown for purported services to conceal the income earned from the books.

For example, prosecutors say that in 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."

Four "Healthy Holly" books were published under Pugh's name from 2011 to 2017, including "Healthy Holly: Exercising is Fun" and "Healthy Holly: Fruits Come in Colors Like the Rainbow." The books were never sold in stores or through wholesalers.

Contributing; Jorge L. Ortiz and John Bacon, USA TODAY; The Associated Press