Baltimore Board of Ethics to investigate ‘Healthy Holly’ sales; groups that donated to buy books revealed

April 03-- Apr. 3--The Baltimore Board of Ethics voted unanimously Wednesday to open an investigation into whether Democratic Mayor Catherine Pugh's sale of her "Healthy Holly" children's books violated city ethics rules.

The five-member board voted after receiving a letter March 28 from Associated Black Charities, which described five groups that donated a total of about $87,000 to the organization to purchase 10,000 copies of the books.

Ethics board chairwoman Linda Pierson said Pugh's book sales have been "very concerning" and asked the panel to order that "the ethics board staff investigate whether any of those alleged acts would potentially violate the Baltimore city ethics code."

The board approved Pierson's motion just after members agreed to publicly release the Associated Black Charities' letter that detailed six transactions between 2011 and 2016.

Coverage of University of Maryland Medical System board deals and Mayor Pugh's 'Healthy Holly' books »

The Baltimore nonprofit also filed the letter with the state ethics commission. Nonprofits are not required to disclose any information to city and state ethics officials but provided the information "in an effort to provide transparency and affirmative disclosure," according to a statement.

In its disclosure to the city ethics board, Associated Black Charities stated that it paid $77,628 of the donations to Healthy Holly LLC and retained $9,552 -- an amount the nonprofit said it would return to donors or contribute to another group. It said Pugh, as a state senator, had been working with the charity to distribute the book as part of an initiative to address "racial health disparities, including high rates of obesity among African-American children."

The charity's initial letter to the ethics board said that "at no time did Associated Black Charities solicit donors for this book initiative." But a second letter sent April 2 to the city and state ethics boards stated that the nonprofit had "solicited funds from at least one donor," but it did not say which one.

Since Pugh's book deals were first reported by The Baltimore Sun last month, the nonprofit's board quickly reviewed its purchases and changed its policies. The charity's board announced that officials there are are now prohibited "from entering into any business arrangements with any elected officials or any politically appointed persons, regardless of the person's product and its relationship with ABC's core mission and agenda," according to a statement.

The Office of the State Prosecutor is also investigating Pugh's sales of her self-published series, her lawyer has confirmed.

Pugh last month amended several years of ethics disclosure forms filed with the state to report that she owns Healthy Holly LLC and that she sold 100,000 books to the University of Maryland Medical System over the past eight years for $500,000, while she was on the medical system's board of directors. Her city ethics forms do not disclose her board seat in either 2016 or 2017. She only disclosed Healthy Holly LLC as a source of income in 2017, not in the previous year.

The only donation to Associated Black Charities that took place while she was mayor came in 2016, two weeks after she was sworn in on Dec. 6, 2016. The Frederick Frank Family Trust Foundation on Dec. 22 donated $50,000 to Associated Black Charities, which paid $45,000 to Healthy Holly LLC for 500 books, according to the charity's letter. It is unclear if the payment to Pugh's company transpired in 2016 or 2017.

City ethics forms require her to report other sources of income.

The mayor's office announced Monday that she was taking a leave of absence to recover from pneumonia.

The Associated Black Charities letter described its purchases between 2011 and 2016, a period when Pugh served as a state senator before becoming mayor in December 2016.

One of the organizations, CareFirst BlueCross BlueShield, confirmed in a statement to The Sun that it gave Associated Black Charities a total of $14,500 in 2011 and 2014 to pay for 2,000 of the Democratic mayor's Healthy Holly books. The charity kept $2,000 and paid the rest to Healthy Holly LLC, according to the nonprofit's letter to the ethics board. The charity's letter shows that the first $7,000 donation for 1,000 books took place on Nov. 17, 2011. A second, $7,500 donation transpired on March 21, 2014.

The four other groups are:

» The Maryland Automobile Insurance Fund, a state-established organization for hard-to-insure drivers. The fund said it gave $7,500 to Pugh's Healthy Holly LLC in 2012 for books. It donated another $5,000 in 2013 to Associated Black Charities when the nonprofit was accepting funds to buy the books to give to African American children. The charity spent nearly all the money on books.

» Frederick Frank Family Trust Foundation, a charity established by the late founder of the Fred Frank Bail Bonds company. It donated $50,000 for 5,000 books on Dec. 22, 2016. The charity kept $5,000 and paid $45,000 to Pugh's company.

» Grant Capital Investment, a real estate financing company headed by J.P. Grant, donated $14,000 on Oct. 27, 2011. Associated Black Charities used the money to buy 2,000 books. The charity kept $2,000 and paid Healthy Holly LLC $12,000.

» Ariel Investments on Oct. 17, 2013 donated $3,680 for 400 books. All of the money went to Healthy Holly LLC. In February 2018, Pugh voted to approve a decision by the city employee retirement system to invest $40 million with Ariel Investments, LLC. The deal also included $272,000 in annual fees, according to Board of Estimates records.

Associated Black Charities states in the letter that it distributed 4,100 of the 10,000 books by packaging them and delivering them to youth organizations and "child care centers," and that 400 copies "were water damaged in 2014 and not delivered." It delivered 500 books to the charity's Eastern Shore office.

The charity said that Healthy Holly LLC was responsible for distributing the remaining 5,500 books -- 600 paid for by the Maryland Automobile Insurance Fund; 400 paid for by Ariel Investments delivered to an African American Executive Leadership conference; and 4,500 from the Frank organization delivered to the Baltimore City Public Schools.

Pierson said the city ethics board would not comment any further on Pugh's purchases since the matter is under investigation.

The Maryland ethics commission's executive director, Michael Lord, would not comment about whether the state panel also received a filing from Associated Black Charities about the Pugh books, but said the state commission's members can use any information they receive as a potential complaint and consider whether to investigate it.

Investigations that have been opened or requested in wake of Baltimore Mayor Pugh's 'Healthy Holly' scandal »

Four of the five donors to the charity have also been big campaign contributors to Pugh between Jan. 8, 2009 and Jan. 6, 2019, according to Maryland Board of Elections campaign finance records.

Columbia financier J.P. Grant, his wife, his son, a company controlled by another son and an executive at his company have given Pugh $29,000 since 2016.

Regarding his Associated Black Charities contributions, Grant said his company gave the charity money several times, but he didn't know his money would be spent to buy the books.

"When I donate, it's not restricted," Grant said.

Grant said his company gave the nonprofit $20,000 in 2007; $14,000 in 2011; and donations of $5,000 in 2012 and 2017. His company also holds contracts with both the city and state government, according to its corporate website.

CareFirst BlueCross donated $11,025 from 2009 through May 2018. The health company has a contract with the city.

M. Kent Krabbe, the former executive director of the Maryland Automobile Insurance Fund, donated nearly $10,000 from 2008 until March 15, 2016.

The auto insurer's contributions were made while Krabbe was its executive director, said Mark McCurdy, MAIF's new director. Krabbe became a paid staffer on Pugh's mayoral campaign in 2016 and served that year as president of her inaugural committee. After Pugh took office as mayor, he started a $107,000-a-year job at the city's department of transportation. He left that post in 2018.

Krabbe could not be reached for comment.

As a state senator from 2007 to 2016, Pugh sponsored legislation praised by MAIF. A 2013 news release on the organization's website about the start of a new kind of insurance plan said Pugh sponsored the legislation "that made this day possible."

"I am excited for this great opportunity for all of those in Maryland who find themselves in need of MAIF and can now get a policy at a reasonable rate," Pugh was quoted in the release as saying. "It makes our seven years of fighting worthwhile for the citizens of Maryland."

Krabbe was quoted thanking Pugh for her work on the bill in another release.

"We thank all of the sponsors of Senate Bill 930. In particular, we would like to thank Senate Finance Committee Chairman, Senator Thomas "Mac" Middleton of Charles County and Senator Catherine Pugh of Baltimore city for their leadership and support of this bill, as well as their advocacy for Maryland drivers in need of a more affordable alternative for their insurance premiums," Krabbe said.

Emails and calls to Ariel Investments and a representative of the Frank Foundation were not immediately returned.

Associated Black Charities has held a contract with the city since March 1, 2016 to help administer some $16 million in federal funding to organizations to provide HIV treatment in Baltimore, according to city records. The organization also won a contract with the city in January 2018 to administer the city's new $12 million youth program fund championed by City Council President Bernard C. Jack Young, who is serving as mayor during Pugh's absence.

Baltimore Sun reporter Ian Duncan contributed to this article.

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