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Wife of benefits-fraud recruiter is partner in would-be Atlantic City pot dispensary

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The wife of an admitted recruiter in a massive medical insurance fraud scheme is a partner in an application for a licensed pot dispensary in Atlantic City.

Holly Pugh is part of Legal Distribution, a group looking to secure a license to operate a weed facility at 3112 Atlantic Ave.

She also is the wife of Brian Pugh, who is finally headed to federal prison this week for his role in the multimillion-dollar fraud.

But her husband's criminal conviction may not prevent Holly Pugh from getting a license.

Instead, her suitability will be determined by both the language of the cannabis law and an in-depth review of her suitability conducted by investigators for the New Jersey Cannabis Regulatory Commission.

Pugh is listed along with Rashon White of Egg Harbor Township, Jason Lantz of Atlantic City, and Lou Freedman of Margate.

The commission's members have the final say, according to information from its legal director, Christopher J. Riggs.

There's plenty for commissioners to ponder about Pugh — and her husband — especially if his illegal actions and expansive finances bled into her assets and life.

Brian Pugh is a serial entrepreneur who once was a co-owner of the iconic Tony's Baltimore Grill in Atlantic City, where his father worked for nearly 50 years. His many other businesses included a casino bar with a license in his wife’s name.

Assistant U.S. Attorney for New Jersey Christina O. Hud, leader of the Health Care Fraud Unit, said during Brian Pugh's Dec. 12 sentencing that he had directly caused medical insurance benefits administrators to pay more than $1.4 million in fraudulent payments for compounded drug medications prescribed for individuals he had recruited.

He was ordered to pay that back, along with forfeiting $437,604 – the equivalent of his kickback cut from the scheme.

The restitution amount represents his financial take for recruiting bogus patients. The payments came to him from local fraud organizer William Hickman, now a Linwood resident.

The sprawling Ponzi-like scheme Pugh pleaded guilty to involved a total of 50 defendants, records show.

There likely would have been 51 if the notorious Dr. James Kauffman had not hanged himself while jailed in January 2018.

The doctor's suicide came just weeks after the Atlantic County Prosecutor's Office charged him with employing members of the Pagans Motorcycle Club to kill his wife, April Kauffman, a small businesswoman, as well as an advocate for veterans and a radio talk show host.

Fred "Miserable" Augello, a past Pagans' chapter president in Cape May County, was convicted of her murder and underlying drug distribution offenses later in 2018. All but one of Augello's confederates cooperated in return for leniency, although one had his charges dramatically downgraded. Augello's appeal of his conviction was denied.

Kauffman, a stolen valor fraudster who lied about his service as a Vietnam war hero, allegedly participated in the medical fraud scheme, according to the Atlantic County Prosecutor's Office. Their search warrant for medical records at his office and home claimed he scammed Tricare, a federal healthcare insurance for vets.

The med fraud scam, often dubbed "the cream scheme," cost insurance companies for various government entities around $50 million in fraudulent insurance reimbursements for costly — and unnecessary — compounded drugs.

In December, U.S. District Judge Robert B. Kugler sentenced Pugh to just more than three years in prison.

When his prison term ends, he will then have three years of supervised release for his role as a recruiter in the massive and costly medical fraud scheme centered in Atlantic County.

The judge, however, deferred sending him immediately to prison. Instead, Brian Pugh's prison stretch begins Feb. 1, an accommodation allowing follow-up care for a lingering medical issue.

Holly Pugh was in the Camden Federal Court building for the two hours it took Kugler to impose the sentence on her husband.

The scope and sweep of the medical fraud scam Brian Pugh was part of would seem to warrant an intense and public review of his wife's pot license application.

His conviction also raises a critical question requiring vetting by the state's cannabis commission: Are Holly Pugh's assets to fund the pot facility separate and distinct from her husband's?

But there's a huge catch when it comes to answering that question due to how the state's cannabis law is written.

The application by Legal Distribution and Holly Pugh's personal submission as a would-be partner — as well as the commission’s vetting of those documents — are shielded from public scrutiny under the state's cannabis law, which is exempt from New Jersey’s Open Public Records Act.

However, many details concerning her and the company's plans are contained in a land-use application approved last October by the state's Casino Reinvestment Development Authority.

In response to an Open Public Records Act request, the CRDA provided the file for Pugh and her business partnership with three additional applicants to a reporter working for BreakingAC.

Contained in the documents are checks from Holly Pugh’s personal account at an address in Absecon, the home she shares with her husband and their children.

Last May, just months before he entered a guilty plea, Holly Pugh paid Brian Pugh $75,000 to buy out his interest in the 3,500-square-foot residential property. Her low-price buyout raises a red flag. The couple had jointly bought the property on 15th Street for $500,000 in February of 2016.

There are other obvious financial and business crossovers in public documents.

For instance, in April 2018, Holly Pugh was granted a liquor license for a casino bar known as Wet Willies.

Testimony by a bartender who said Brian Pugh recruited him in the scheme indicated her husband owned the bar, but there was no mention of Holly Pugh's name on the liquor license..

Bank of America sued Brian Pugh in 2020, alleging that he — through multiple entities he controlled from an office at 650 New Road in Linwood, plus additional partners — had defaulted on repayment of a $3 million credit line.

The lawsuit alleged Brian improperly transferred his financial interest to Holly in 2017, without approval from Bank of America. She sold her interest to a relative in 2019. The case was eventually settled in 2021.

All of that happened after the Feds have said the massive medical fraud scam began in 2015.

The property Holly Pugh and her partners want to make into a micro cannabis facility would be an entry-level weed dispensary in Atlantic City's specially designated impact zone set aside for cannabis.

Micro licenses, with lower entry costs for licensing, are meant to allow businesses to grow after a year.

The legal weed business in New Jersey should be huge.

One research firm has put the total N.J. market at $1.8 billion within five years. Another firm projects double that size.

The structure they want to make into a dispensary is a three-story stone building at 3112-14 Atlantic Ave. The block is bounded by Chelsea and Montpelier avenues. Three decades ago, Boardwalk retailers Robert and Abraham Schiff owned the building.

The existing structure, three locks from Tony's Baltimore Grill, would be renovated by Legal Distribution, but the size and shape should not change much under the plans.

There currently is a small grab-bag business on the first floor offering services and goods to primarily Spanish-speaking customers. The second floor is vacant. The top floor holds a telephone call center. Ironically, in a stairwell leading to the call center a sign is posted warning against drug use.

There is no on-site parking, meaning customers must use meter parking or public transit. The Chelsea neighborhood is a mix of small businesses and professional offices, especially law offices. Many residents are Latino or Asian.

The legislative office for Second District state Senator Vincent J. Polistina and Assembly members Claire Swift and Don Guardian is across the street. A message was left for them but not returned.

The Atlantic City lawyer for the land use application approved by CRDA for the cannabis facility, Dan Gallagher, said more than a week ago that he would provide a legal contact for the group's cannabis application.

That has not happened.

Monday, April 15, 2024
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