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Auditor looking at Merrimack case

Says group’s spending may indicate problems in special education system

KEY FIGURE John B. Barranco, executive director of the Merrimack Special Education Collaborative, is accused of spending abuses. KEY FIGURE
John B. Barranco, executive director of the Merrimack Special Education Collaborative, is accused of spending abuses.
By Michael Rezendes and Stephanie Ebbert
Globe Staff / June 23, 2011

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State Auditor Suzanne M. Bump is investigating whether the extravagant salaries, Kentucky Derby trips, and other alleged financial abuses found at the Merrimack Special Education Collaborative are part of a larger problem in the patchwork of agencies that help educate special needs students in Massachusetts.

Bump said her office is in the final stages of auditing the books of the Merrimack collaborative, as well as two other collaboratives, one representing cities and towns on the South Shore and the other in Southeastern Massachusetts.

Bump said this week’s findings about the Billerica-based collaborative by Inspector General Gregory W. Sullivan have identified “some clear criminal wrongdoing, but what we’re endeavoring to do is determine whether we have a total system failure.’’

Bump’s comments were made as other Beacon Hill leaders expressed anger over Sullivan’s findings, detailed in yesterday’s Globe, and as Attorney General Martha Coakley’s office confirmed that the findings are being reviewed by her Public Integrity and Public Charities divisions.

“We are taking this matter extremely seriously,’’ said Brad Puffer, spokesman for Coakley, adding that criminal and civil prosecutors “are both conducting a comprehensive review of these allegations.’’

Earlier this week, Sullivan released the findings of a yearlong investigation of the Merrimack collaborative and a related nonprofit organization, the Merrimack Education Center in Chelmsford.

He found that John B. Barranco, the center’s executive director, had fleeced the collaborative, which is publicly funded, of more than $10 million, in part through two 2006 contracts that Sullivan said are invalid.

According to the inspector general, Barranco paid himself, a former girlfriend, and a handful of top staff members inflated salaries and used a credit card issued by the nonprofit to pay for more than $50,000 in personal expenses, including improvements to vacation homes in New Hampshire and Florida.

Sullivan also said Barranco used deception to increase the six-figure pension he receives as the former executive director of the collaborative.

Governor Deval Patrick said he found Sullivan’s findings “deeply disturbing’’ and called on Coakley to review them.

“First order of business is to see that the attorney general does what I think she will do, which is take appropriate action,’’ he said.

Patrick also said, “When I look at the fact that this is an agency that is supposed to be responsible for special education funding and that there are serious allegations of misappropriation, that just burns me.’’

But Nancy Sterling — a spokeswoman for ML Strategies, which is representing the center — said, “There are numerous inaccuracies in the inspector general’s report, and the amount of the allegation is outrageous. We will address those factual errors in an appropriate forum.’’

Sterling said that she was not authorized to be more specific.

Senate President Therese Murray also expressed outrage over Sullivan’s findings and vowed to take action by filing legislation that would increase oversight of the collaboratives.

“The financial abuses regarding education collaboratives as revealed by the inspector general and Boston Globe highlight serious mismanagement and a void of oversight and accountability,’’ Murray said. “We need to take action now.’’

Specifically, Murray said she would consider legislation requiring the collaboratives to submit regular audits to the Department of Education and to seek reapproval from the state education commissioner every five years.

“Funding for collaboratives should be used specifically for direct services to children with special needs and not for inflated salaries of board members, bonuses, travel or any other unrelated purpose,’’ Murray said.

Thomas Lent, a lawyer representing the collaborative, said the organization has been cooperating with Sullivan and is still reviewing his findings and recommendations.

The board includes representatives from 10 school districts north of Boston.

Lent also said the collaborative has yet to decide whether to adopt Sullivan’s recommendation that it demand the return of $11.5 million that the collaborative paid to the center for services including the provision of office space and salaries.

“That is one of the questions the collaborative will need to answer in the very near future,“ Lent said.

One member of the collaborative’s board, School Superintendent Stacy Scott of Dracut, said the group’s ability to recoup the money will depend on the education center’s willingness to refund it.

“It will really depend upon MEC’s view of the situation and whether it seeks to quickly remedy or creates a longer process and a dialogue around the debated amounts,’’ Scott said.

Bump said she plans to complete her audit of the Merrimack collaborative and the two other collaboratives by the end of the summer.

She also said the results will be considered in conjunction with earlier audits of three other collaboratives by her predecessor, A. Joseph DeNucci, all of which found evidence of mismanagement.

For example, an audit of The Education Cooperative, a special education collaborative based in Dedham, cited the organization for “excessive and unauthorized salary compensation and fringe benefits’’ and “inadequate controls over food and meeting expenses.’’

The audit also criticized the state’s Department of Elementary and Secondary Education for failing to effectively monitor the collaborative, a finding that Bump said may point to a systemic problem in the supervision of more than two dozen special education collaboratives across the state.

Bump said she is planning to “look back at the whole scope of work to answer the question of whether we have a broken system.’’

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