Former Chelsea housing chief Michael E. McLaughlin appears to have diverted millions in federal money from construction projects for low-income family and elderly housing, records show, freeing up an enormous slush fund that benefited himself, his family, and his friends, while leaving tenants to make do in dreary apartments that have not been updated in 50 years or more.
A Globe review of almost $9 million in federal funding paid to McLaughlin’s agency since 2002 found that more than $3.5 million of it was slated for projects that were not done, despite written promises to use the money to pay for new kitchen cabinets, baseboard heating, boilers, elevators, waterproofing, and other capital improvements.
Instead money went to lavish salaries and travel, to poorly documented everyday expenditures such as $530,000 paid to the city of Chelsea for trash pickup, and more unusual expenses such as the $165,000 the authority paid a social service agency that hired McLaughlin’s son Matthew to oversee maintenance work at the authority.
Today, investigators from the US Department of Housing and Urban Development are expected to descend on Chelsea Housing Authority headquarters, trying to account for all the federal money and requiring Chelsea to repay any money that was misused.
Chagrined HUD officials are urging the authority’s new leadership to admit past wrongdoing, rather than wait for the HUD investigators to find it.
“If any of these grant funds were used for any [unapproved] purpose . . . now is the time to make this disclosure,” Dwight D. Hebert, a HUD housing specialist, wrote to the Chelsea Housing Authority in an e-mail informing them of the new investigation.
The authority’s current leadership, which took over earlier this year after Governor Deval Patrick forced McLaughlin and his entire board of commissioners to resign in a scandal over McLaughlin’s outsized $360,000 paycheck, say they have nothing to hide.
McLaughlin, however, may be another story, the new board chairman said.
“It’s very difficult to determine where the money went and what was done and not done,” said chairman Thomas Standish. “The facts demand an exhaustive review of all spending. . . . It’s outrageous what went on and equally so that it wasn’t detected.”
Thomas Hoopes, a lawyer representing McLaughlin, declined to comment.
Several state and federal agencies are already investigating McLaughlin and his inner circle. But the HUD investigation that starts today focuses for the first time on the way low-income renters living in authority housing were victimized.
“Nothing works right,” said Jaileen Rivera, 24, a mother of two small children, standing in her living room in the 105-unit Scrivano development Sunday. “The heat makes loud noises and scares the kids. You can barely open the windows. There’s been nothing done to the kitchen whatsoever.”
Rosa Carrion, 58, has lived in Scrivano over the 12 years McLaughlin led the authority. In all that time, she has witnessed no upgrades. “Never,” she said, pointing to battered kitchen cabinets and counter.
But nobody seems to have complained, not tenants, most of whom never knew of the planned but undone projects, and not HUD, which provided the taxpayer funding for the phantom projects.
“Where was HUD?” asked one Chelsea Housing Authority employee who asked not to be named out of fear of retaliation. “They should have been looking. There was a complete collapse of controls and oversight.”
McLaughlin, with the cooperation of several top lieutenants, made outside scrutiny challenging. He obscured the lack of construction spending by moving money back and forth between construction and operations accounts and between federal and state accounts, according to records and interviews.
The Chelsea Housing Authority’s staff accountant, Vitus Shum, retired this year, and the staff senior accountant, James McNichols, a McLaughlin family friend, was forced to resign.
Over time, McLaughlin provided fewer details about how he planned to spend the federal money. In 2002 to 2006, he named specific projects, such as replacing kitchen cabinets at the 95-unit Mace development. In later years, McLaughlin and James Fitzpatrick, the capital project director, relied on general categories, such as “management improvements,” which HUD approved nevertheless.
Yet, a close inspection of paperwork McLaughlin filed with HUD, reveals that approved projects dating to 2002 were not done.
In 2011, buried in one paragraph of a 50-page document, McLaughlin promised “new baseboard heating” at the Scrivano project. But McLaughlin had been making the same promises at Scrivano year after year, word-for-word. Continued...