In response to a damning report released today by the Inspector General, the Board of Estimates appears prepared to terminate its master lease contracts with Grant Capital Management – and perhaps ban its owner, J.P. Grant, from future business with the city.

In further fallout from the report, The Brew learned that Stephen M. Kraus was fired yesterday as Baltimore’s deputy director of finance for allegedly providing confidential information to Grant.

While not identified by name, Kraus “lacked candor” during two interviews with the IG and stated that he “hadn’t really dealt with” Grant since 2014, when, in fact, he had been exchanging text messages with the financier until a few months ago.

Grant himself revealed that the two men had been exchanging text messages on Kraus’ personal phone about Bank of America, a potential competitor, as late as July.

“There appears to be no legitimate reason for the deputy finance director to disclose information to Grant related to the city’s negotiation with BOA [Bank of America], especially considering it was not part of a public bid,” says the report.

Third Employee Fired

Kraus was hired by the O’Malley administration in 2003, the same year that Grant secured his first master lease.

For years, Kraus ran the city’s treasury bureau and has served as the point man for determining Tax Increment (TIF) and other financial packages for developers, including Michael Beatty’s Harbor Point and Kevin Plank’s Port Covington.

He was a key person this summer shepherding the $105 million Perkins Homes TIF (along with Michael Braverman, who was removed last month as head of the Department of Housing and Community Development). The Perkins project has yet to go before the City Council.

Kraus is the third senior staffer at Finance who’s been called out for inappropriate relations with a vendor.

Kraus, who made $177,662 last year as the Finance Department’s No. 2 administrator, is the third senior staffer who’s been called out by the Inspector General for inappropriate relations with a vendor.

Late last year, Douglas S. Kerr, head of the Office of Risk Management, and his deputy were fired for giving proprietary information to Kerr’s “bestie,” an employee of a private risk company.

In addition, Erin Sher Smyth, Finance’s purchasing agent, was removed from her position last February for intentionally holding up a police towing contract in an effort to add a vendor to the list of authorized companies. Smyth has since left the department.

Henry J. Raymond, director of Finance and a member of the Board of Estimates that approved the Grant master leases, did not respond in writing to today’s IG report.

He did not answer questions by The Brew about his staff’s ethical standards.

Cash for Contracts

Based on Grant’s admission to federal prosecutors that he funneled $170,000 to former Baltimore Mayor Catherine Pugh during her 2016 campaign, the IG said the businessman failed to report the money in State Board of Elections disclosure reports required for those doing business with public entities.

Grant’s cash to Pugh came while the former mayor was hawking her “Healthy Holly” children’s books. Grant initially claimed in a newspaper interview that his largest $100,000 payment was to help Pugh print and distribute the books to public school students.

But he subsequently admitted to U.S. prosecutors that Pugh had used the money to make illegal “straw” donations to her campaign and partially pay for a new house in Ashburton, which he also helped Pugh to renovate.

GCM should not have been considered for the award because Grant had failed to disclose campaign contributions as a company doing business with the city  – Baltimore OIG.

Within a year of his contributions, Pugh was privately discussing a new master leasing contract for his small Columbia-based company. Initially, the contract had a second bidder, but the company was disqualified. “I think we’re going to move forward. . . sit tight and see,” Pugh told Grant, according to today’s report.

“The OIG investigation found that GCM should not have been considered” for the award because Grant had filed an affidavit that failed to disclose campaign contributions as a company doing business with the city.

In fact, Grant, his wife and his business associates made large campaign contributions not only to Pugh, but to then-City Council President Bernard C. “Jack” Young and Comptroller Joan Pratt, who also sat on the spending board.

Yet another leasing contract for Grant was being prepared by the finance department in April 2019.

But by then the Healthy Holly book scandal was unraveling in real time and “the city put the negotiation of the MLA’s [master lease agreement’s] final terms on hold,” noted the IG report.

From Insider to Pariah

With Pugh now in federal prison, a spending board that had lavished Grant with contracts since 2003 now indicates it will take steps to separate itself from the financier.

As early as next week, according to Acting City Solicitor Dana Moore, the board is expected to initiate “debarment” proceedings against Grant Capital Management, the first step in a potentially lengthy process of removing the company from current and perhaps future city business.

In a memo released as part of the IG report, Moore said that Young (who became mayor when Pugh resigned) and City Council President Brandon Scott believe that Grant’s actions “give the appearance of impropriety and might call into question the integrity of the city’s procurement process.”

As a result, the board will consider revoking the MLA that the Inspector General said was tainted because Grant did not disclose his financial contributions to Pugh.

Also on the table: deciding whether to institute “proceedings to determine whether the company and/or its executive leadership should be barred from doing business with the City of Baltimore,” Moore wrote.

The response taken by Young and Scott appears far more definitive than other board actions taken in the wake of a critical IG report.

While a city bureaucrat or two may be removed from their jobs, contractors and vendors are rarely punished. A recent exemption involves Holabird Fleet Services, which is now fighting debarment for allegedly inflating bills for city vehicle repairs.

Investigation Started by Scott

The IG investigation was started last December at the request of Scott, Baltimore’s presumptive next mayor after he defeated Young and other candidates in the June Democratic primary.

Scott’s action came after Pugh had pleaded guilty to federal tax evasion and conspiracy charges last November, where Grant’s payments to the former mayor were first publicly revealed.

Despite the IG investigation, Mayor Young went ahead last December 11 and awarded Grant Capital an $18 million master lease contract. The Brew described how that decision was choreographed that day ahead of the board’s public hearing:

Before the pre-meeting got underway, [then] City Solicitor Andre Davis and [then] Public Works Director Rudy Chow were summoned into the mayor’s private quarters, together with Finance Director Henry Raymond.

Minutes later, the three men reappeared, accompanied by the mayor.

Scott wanted to defer the Grant contract because of the businessman’s connection with the Healthy Holly scandal of former Mayor Catherine Pugh. But Young quickly steered the conversation away from ethical concerns about the politically-connected businessman.

Instead, the importance of new Motorola radio equipment, to be purchased for the police department through the Grant contract, became the focus of discussion.

Throughout the exchange, the words “Grant,” “J.P.” or “Grant Capital Management” were never uttered.

Asked by Young if the police need the radios, Davis exclaimed, “Yes, they desperately need the radios!”

“This is a public safety issue,” Raymond chimed in.

Throughout the exchange, the words “Grant,” “J.P.” or “Grant Capital Management” were never uttered.

Young pushed through the contract, while Scott and Pratt politely abstained.

Cool and Composed

As it looks now, that could be the last contract that Grant ever gets from Baltimore City. Or maybe not.

Based on today’s report by IG Isabel Mercedes Cumming, the Baltimore-born, Harvard-educated businessman maintained his cool when grilled by city investigators.

With his attorney present, Grant declined to answer questions related to his payments to Pugh, “citing ongoing legal issues.”

But he was adamant that his financial interactions with Pugh were not intended “to influence an outcome related to business that Grant or GCM had, or desired to have, with the city.”

Asked if he had filed the required reports with the elections board, which would have disclosed his payment to the former mayor, Grant replied, “I don’t remember doing that.”

Nevertheless, Grant Capital Management submitted an affidavit to the city attesting to its full compliance with Maryland Election Law.

• To reach this reporter: reuttermark@yahoo.com