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Special ed director said to siphon $10m

State alleges unwarranted pay, perks at regional agency

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By Michael Rezendes
Globe Staff / June 22, 2011

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The former director of the Merrimack Special Education Collaborative is facing allegations that he fleeced the publicly funded organization, set up to provide education services to special needs children, of more than $10 million while paying himself, a former girlfriend, and a handful of top staff extravagant salaries and bonuses.

In letters mailed Monday, Gregory W. Sullivan, the state’s inspector general, said that John B. Barranco also racked up more than $50,000 in personal expenses on a credit card issued by a related nonprofit organization, including tickets to the Kentucky Derby, improvements to vacation homes in New Hampshire and Florida, Christmas gifts for a daughter, luxury clothes, and nearly $16,000 in gasoline, purchased from 2003 through 2010.

“This is one of the most outrageous abuses this office has ever seen,’’ Sullivan told the Globe. “Both of these entities were created to help educate children with special needs. Instead, top officials have been helping themselves to high salaries, inflated pensions, lavish parties, and personal expenses, all on the taxpayer’s dime.’’

In addition, Sullivan said Barranco used deception to increase his teacher’s pension to $157,000 while collecting an inflated salary and bonuses from the nonprofit. Barranco’s total compensation from the nonprofit exceeded $500,000 in 2009.

To help pay for the exorbitant salaries, Barranco siphoned tax dollars from the 10 school districts in northern Massachusetts that belonged to the collaborative through the related nonprofit organization under his control, the Merrimack Education Center, which charged the collaborative inflated prices for office space and other administrative services.

Sullivan has recommended that the collaborative sever its financial ties with the nonprofit and demand $11.5 million in repayment. In addition, he has told the Teachers Retirement System that he does not believe Barranco is entitled to the pension he is receiving.

The retirement system has moved to reduce Barranco’s pension, and Barranco has appealed the action.

Barranco did not respond to numerous calls for comment, but a public relations firm defended the quality of the services provided by the nonprofit.

Attorney General Martha Coakley, who has jurisdiction over public corruption cases and nonprofit organizations, is reviewing Sullivan’s findings and has the authority to launch a criminal investigation.

“Our office takes allegations of the misappropriation of funds very seriously,’’ said Brad Puffer, Coakley’s spokesman.

In addition, Sullivan’s findings could prompt action by federal authorities, including the Internal Revenue Service, which also has jurisdiction over tax-exempt organizations.

Sullivan’s investigation has provoked a strong political reaction. Monday, Sullivan said that Barranco arranged for lobbyist Richard W. McDonough to get a no-show job at the collaborative in order to qualify for medical benefits and a pension he was not entitled to receive.

McDonough was recently convicted with Salvatore F. DiMasi, former House speaker, on federal corruption charges stemming from contracts between the state and software company Cognos.

“While we’re spending months trying to find a way to pay for needy programs — to see this kind of abuse is discouraging. It’s outrageous,’’ fumed Senator Stephen Brewer, chairman of the Senate Ways and Means Committee.

The Merrimack collaborative, a governmental educational agency, was established to allow school districts in the Merrimack Valley to pool resources and lower the cost of educating “students with severe physical and mental disabilities as well as those with behavioral and medical challenges,’’ Sullivan said.

The 10 member school districts appoint the collaborative’s board to oversee how the money they pay into the agency is spent.

Sullivan and his office spent more than a year investigating the collaborative and its relationship with the education center, which has an exclusive contract to provide office space, building maintenance, personnel, and other services to the collaborative.

For years, Barranco ran the Education Center while his former live-in girlfriend ran the collaborative, one of many conflicts of interest the inspector general discovered.

The two co-executive directors who now formally run the collaborative did not return calls seeking comment.

But Gary Garmon, chairman of the nonprofit’s board, defended the arrangement between the collaborative and the center. “I think it will turn out that all the salaries and bonuses were properly voted on by the board in the past,’’ said Garmon, who stressed that he had not seen Sullivan’s findings.

Nancy Sterling, a spokeswoman for ML Strategies, which is representing the center, said, “The inspector general has not yet provided a copy of the report to MEC, so it is difficult for us to comment on the report. MEC has been providing crucial services to special education collaboratives and their students for many years; the quality and level of those services are outstanding, and MEC is proud of its record.’’

Sullivan’s letters, which were sent to the collaborative and its member school districts, as well as to board members of the nonprofit education center, said that the center wrongly billed the collaborative for $11.5 million in services, such as office space provided at inflated rates, salaries, and information technology.

He said the contracts between the collaborative and the center violate state law because the collaborative did not seek other bids for the services.

“The office of the inspector general recommends that the Merrimack Special Education Collaborative immediately cease paying [the] Merrimack Education Center and demand that MEC return a minimum of $11.5 million to the MSEC,’’ Sullivan said.

The inflated salaries and bonuses paid to Barranco’s former girlfriend, Mary Clisbee, began shortly after she started working for the collaborative, in 1997, Sullivan said.

About a year later, after Barranco moved in with Clisbee, she was promoted to senior associate director of special education and awarded a 21 percent raise, boosting her salary to $100,000.

Annual salary increases and bonuses continued until 2006, when her total compensation topped $300,000, including a $164,000 salary paid by the collaborative and a bonus of nearly $140,000 paid by the center. In 2007, after Clisbee and Barranco ended their relationship, Clisbee left the organization and Barranco replaced her with two individuals whose combined salaries were less than half what Clisbee had been paid, Sullivan said.

In 2005, Barranco officially retired as executive director of the collaborative. From then on, he collected his annual six-figure teachers pension while continuing to oversee both organizations from his position as the center’s full-time executive director, where his salary and benefits were eventually boosted to more than $500,000, according to Sullivan.

Oversight of Barranco’s activities by board members at the collaborative and the center may have been compromised by Barranco’s habit of appointing them to high-paying positions, Sullivan said.

One member of the center’s board was appointed a center staff member in 2006 at a salary of more than $110,000 a year, according to Sullivan.

While detailing Barranco’s use of the center’s credit card for personal expenses, Sullivan also said Barranco purchased three hotel and ticket packages for the 2005 Kentucky Derby, for himself and two of the center’s board members.

Sullivan said the rooms were part of a block associated with Cognos, the computer software company at the center of the political corruption case that resulted in the convictions of DiMasi and McDonough.

At the time, the center had purchased $250,000 in software from Cognos and had hired McDonough as a lobbyist.

Sullivan learned of Barranco’s association with Cognos with the help of Joseph P. Lally Jr., a Cognos salesman who cooperated with federal prosecutors during their corruption investigation. Lally told Sullivan Cognos covered most of Barranco’s expenses at the 2005 and 2004 Kentucky Derbys, a time when Barranco was still the collaborative’s executive director and a public employee.

In detailing Barranco’s use of the credit card issued by the nonprofit, Sullivan said Barranco also used it to pay for more than $300,000 in expenses at lavish annual parties held at the Boston Harbor Hotel over a seven-year period, including hotel rooms, meals, liquor, concerts, and harbor cruises.

In his letter to center board members, Sullivan said the center, on its federal tax forms, lists its purpose as “support for public school systems.’’

The center, Sullivan said, “under Mr. Barranco’s direction, has strayed from that mission.’’

Andrea Estes of the Globe staff contributed to this report. Michael Rezendes can be reached at rezendes@globe.com.