Baltimore Comptroller Joan M. Pratt said today she “absolutely had no knowledge, nope” of a $20,000 check that former Mayor Catherine Pugh used to launder money from businessman J.P. Grant.
Grant’s check – made out to 2 Chic Boutique, the clothing consignment shop Pratt co-owned with Pugh – was revealed today in a sentencing memorandum in which U.S. prosecutors called for the ex-mayor to serve a 57-month prison sentence.
Sentencing will take place on February 27 in U.S. District Court downtown.
Today’s memorandum expressed skepticism that the boutique’s failure to declare the check as income on federal tax returns was a mistake.
“It is unlikely that the failure to declare the receipt and use of that money was an oversight,” the memo said, “because it represented almost 80% of the company’s receipts for that year.”
“I knew nothing”
The comptroller, a CPA who runs her own accounting firm and did the boutique’s 2016 tax returns, said the $20,000 payment was not declared “because I knew nothing about it.”
“I reported what was reported to me by the bookkeeper,” she told The Brew, “and it was never reported to me $20,000 of sales in any one year.”
Pratt identified the bookkeeper as Afra Vance White, who owned a 15% stake in the boutique and served as a top Pugh aide until she was dismissed last year by incoming mayor, Bernard C. “Jack” Young.
In her ethics disclosure form, Pratt says she had a 22% interest in the boutique, as compared to a 60% share reported by Pugh.
Despite her ownership share, “I never had discussions with Pugh about the financial position of the company,” she told The Brew this evening.
Nor did she have authority to sign the boutique’s checks or to deposit money in the company’s bank account, she said.
Despite her ownership share, “I never had discussions with Pugh about the financial position of the company,” says Pratt.
Asked if she would publicly disclose the boutique’s tax returns, Pratt said, “I am not the majority owner. We’d have to check with the majority owner,” which would be the soon-to-be-sentenced ex-mayor.
Concealing the Cash
The two started the appointment-only boutique on Washington Boulevard in 2013 when Pugh was a state senator and Pratt was city comptroller.
Three years later, Pugh “directly solicited illegal campaign contributions” from J.P. Grant (who had already maxed out on his legal contributions to Pugh), the sentencing memo said.
Meeting Pugh at a restaurant a few blocks from the boutique in January 2016, Grant agreed to hand over the $20,000 “knowing it was a violation of state election laws,” according to prosecutors.
Various steps were subsequently taken to hide the funds.
For example, Pugh asked that the check be made payable to “2 Chic Boutique” and, to further evade detection, Grant decided to draw the check from his wife’s account because it would draw less scrutiny coming from a woman.
“Grant presented the check to his wife, Judy Grant, and she signed it without knowing its purpose,” the memo said.
The businessman personally delivered the check to Pugh’s senate office in Annapolis.
Laundering at the Local Bank
Similar to how she used funds from the sale of her “Healthy Holly” children’s books, Pugh laundered Grant’s $20,000 through the 2 Chic’s checking account at the Harbor Bank’s branch at UM’s BioPark.
(Pugh used the same branch to launder tens of thousands of dollars of checks made out to “Healthy Holly” as well as money transferred in and out of her mayoral campaign account, according to her indictment and state campaign records.)
Asked today if she would publicly disclose the boutique’s tax returns, Pratt said, “I am not the majority owner. We’d have to check with the majority owner,” which would be the soon-to-be-sentenced ex-mayor.
Three weeks after depositing Grant’s check, Gary Brown, a Pugh aide who has since been convicted of conspiracy and tax evasion, went to the bank to obtain $6,500 from the 2 Chic account.
An envelope full of cash was then handed over to Pugh “with the understanding that Pugh herself would find a straw donor to make [an illegal] campaign contribution using the untraceable cash.”
Operating at a Loss
That transaction left more than $13,000 in the account from Grant. Pratt stated tonight that she “absolutely had no knowledge of this money” described by the memo as being spent “on various business expenses.”
All she knew, she said, was that Pugh periodically loaned money to the boutique to keep it afloat.
“In order to sustain the business, Afra told me that Pugh made capital contributions or loans to the business,” Pratt said. “The business operated at a loss, so the only way the business would have been sustained is through a capital contribution or a loan.”
Afra White’s phone number has been disconnected.
Lower Tax Liability
By not declaring the Grant check as income, the boutique’s 2016 tax return reported only $6,412 in gross receipts, prosecutors said.
But on the other side of the ledger, the business expenses paid for with the Grant check were deducted. As a result, the partnership reported an ordinary business loss of $19,315, which the partners shared.
As a result, each partner’s tax liability for 2016 was lowered, prosecutors said, while if they had properly reported the income, “it would have increased their tax liability.”
Referring to the ex-mayor, the memo said, “Given the history of Pugh’s tax evasion, the solicitation and expenditure of Grant’s campaign donation is another example of her deceit and indifference to the law when it serves her financial and political ends.”
In terms of the tens of millions of dollars of lease-financing agreements that Grant Capital Management has with the city – approved by the Board of Estimates that Pratt sits on – the comptroller said she would “revisit” the contracts only if there was evidence of impropriety.
“He won those leasing agreements fairly. He was vetted by the law department, by finance,” she said.
In January 2016 – the same month he agreed to pay Pugh the $20,000 check – he made a $6,000 campaign contribution to Pratt through Grant Capital Management.
Two years later, his wife Judy contributed another $6,000 to the comptroller’s war chest.
Pratt has said she has known Grant since they were teenagers and considers him a friend.
Thus far, the Columbia businessman has not been charged with any state campaign law violations, and it appears he was given partial or full federal immunity in return for providing information about Pugh’s Healthy Holly activities.
Recent Brew Coverage of Scandal:
• J.P. Grant in line to get another big city contract (12/10/19)
• Pugh’s bagman operated with impunity in Baltimore’s political culture (11/23/19)
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