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11271 Ventura Blvd. #612 Studio City, CA 91604 Inside This Issue pg 1 ∙ Your Word Is Your Bond
pg 2 ∙ Food for Thought pg 3 ∙ pg 4 ∙ Member Spotlight pg 5 ∙
From the Practice Corner
Tax Resolution Success Summit 2020
Shout Outs!
pg 7 ∙ pg 8 ∙
IRS Terror Tale of the Month
The titles of city mayor and children’s book author paint the picture of a highly respectable citizen. However, as the story of disgraced former Baltimore mayor Catherine Pugh shows, titles aren’t everything. In November 2019, Pugh, who resigned as mayor of Baltimore, Maryland, last May, plead guilty to the federal charges of conspiracy to commit wire fraud, conspiracy to defraud the United States, and two counts of tax evasion. The charges came after a long scandal, during which Pugh was accused of defrauding the citizens of Baltimore through a scheme involving her self-published“Healthy Holly”children’s book series. The scheme began in 2011 when Pugh served in the Maryland State Senate and was a member of the Senate health committee. Pugh persuaded the University of Maryland Medical System (UMMS), where she was a member of the board, to purchase 20,000 copies of each of her first three“Healthy Holly”books. UMMS paid Pugh $300,000 for the books, intending for the books to be donated to the Baltimore City Public School system (BCPS). However, due to“various grammatical and spelling errors,”the school systemdecided not to use the books for the curriculum, and the“Healthy Holly”books were stored in a warehouse. IRS Terror Tale of the Month Former Baltimore Mayor Charged With Evading Taxes in Children’s Book Scheme
Thousands of copies were later removed by Pugh and her aide, Gary Brown Jr., and used for Pugh’s personal benefit. For years after this, Pugh would double-sell copies of“Healthy Holly”books to various nonprofit organizations and foundations. Many of these organizations did business or attempted to do business with the Maryland
and Baltimore City governments. Pugh used the profits from these sales to secretly fund her mayoral election campaign with straw donations in 2016, violating Maryland’s campaign finance law. All the while, Pugh was evading taxes. In 2016, when Pugh was running for mayor, she told the IRS that she’d earned just $31,000. In reality, Pughmade over $322,000 that year. According to the U.S. attorney’s office, in 2016 alone, Pugh shorted the federal government of around $100,000 in taxes. Pugh and Brown also defrauded the IRS by representing “Healthy Holly”checks to Brown as payments for services, treating these checks as deductible business expenses. These fake expenses included“labor costs”for nonexistent employees. Pugh faces a maximum sentence of 20 years in federal prison for the wire fraud conspiracy, five years in federal prison for conspiracy to defraud the United States, and 10 years in federal prison for the two counts of tax evasion. Despite writing books about being healthy, Pugh didn’t seem to realize that lying to the IRS is never part of a healthy lifestyle.
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