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On way out, housing chief cashed in

State orders Chelsea agency to halt payment on $200,000 in checks

MICHAEL E. McLAUGHLIN MICHAEL E. McLAUGHLIN
By Andrea Estes and Sean P. Murphy
Globe Staff / November 5, 2011
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Former Chelsea Housing Authority executive director Michael E. McLaughlin instructed the office accountant to write him checks for more than $200,000 Thursday, just an hour before he left the office for good amid an uproar over his $360,000 annual pay package.

Incensed, state officials ordered the Chelsea Housing Authority to stop payments on the checks, but McLaughlin had already cashed one for more than $80,000.

McLaughlin said he was owed the money for unused sick, vacation and personal time during his 12 years at the authority, but state officials believe that McLaughlin’s entire contract may be invalid because he concealed his full pay from the state. Governor Deval Patrick demanded McLaughlin’s resignation Wednesday, saying he was “boiling’’ mad.

“When my investigator found these checks, he couldn’t believe his eyes,’’ said Inspector General Gregory W. Sullivan. “The idea that he would be riding off into the sunset with a bag of cash is completely contrary to the interests of taxpayers.’’

The Chelsea Housing Authority offices at 54 Locke Ave. were swarming yesterday with nearly a dozen state and federal investigators, who found newly shredded documents. The agents from several agencies including Sullivan’s office and the US Department of Housing and Urban Development, seized computer hard drives and paperwork and quizzed employees.

McLaughlin has already confirmed that he took six boxes of materials from the office after the building had closed on Wednesday night, saying they were personal mementoes. However, he declined to allow a Globe reporter to look inside the boxes.

State officials issued a blanket order to the new interim director of the authority, Albert Ewing, to make no further payments of any kind to McLaughlin, who, until Thursday, may have been the highest-paid public housing official in the United States.

“The department hereby orders that the CHA immediately stop, suspend, cancel, and refrain from making any further payments of any kind to Michael McLaughlin, including any payments for sick or vacation leave or any other form of payment, no matter how categorized,’’ wrote Steven Carvalho, acting director of the state Department of Housing & Community Development.

Employees told investigators that the five-member housing authority board - two of whom have quit so far - had authorized the payments to McLaughlin at a hastily called meeting Thursday. McLaughlin posted notice of the meeting Monday, a day after the first Globe report about his salary.

Neither McLaughlin nor board chairman Henry Cordero returned calls seeking comment. On Wednesday, Patrick demanded the resignation of the entire board, including Cordero, who was his appointee. Cordero has so far refused to step down.

According to a memo written by the housing authority’s senior accountant, James McNichols, his former boss “directed me to cut him severance checks according to his employment contract’’ at about 1 p.m. Thursday, around the same time he was saying goodbye to his staff.

McNichols said he cut three checks for McLaughlin, one for $114,237 for 1,111.93 hours of unused sick leave, a second for $81,578.79 for 793.16 hours of unused vacation and a third for $5,133.82 for 47 hours of accrued personal time.

McLaughlin directed the accountant to withhold an additional 135 hours of unused sick leave, roughly $22,000, “for any expenses that arise.’’

Under the terms of his contract, McLaughlin was entitled to six weeks’ vacation. He was allowed to cash in up to four weeks of unused vacation each year, adding about $25,000 to his annual salary of $334,642.

The check for $81,578.79, which he has already cashed, represents the value of the remaining two weeks of his vacation time for all his years on the job. That suggests that McLaughlin has not taken a vacation since 2003.

McLaughlin repeatedly hid his full $360,000 compensation package from state officials, listing his salary as $160,000 on budget documents.

Earlier this week, Inspector General Sullivan asked Chelsea and state retirement officials to slash McLaughlin’s pension in half by basing it on $160,000, which he argues is McLaughlin’s legally authorized salary.

If the benefit is based on his real salary of $360,000, his pension would be approximately $279,000, the largest in state history.

Sullivan said yesterday that he thinks the perks in McLaughlin’s contract probably violate state guidelines, especially his right to cash in 100 percent of his unused sick leave.

“The principal theory we’re operating under is that he was overpaid without legal authority with public money,’’ Sullivan said. “If it is determined that these payouts don’t meet federal and state guidelines, we’re going to make sure he doesn’t get them.’’

Governor Patrick has temporarily frozen Chelsea’s $2.5 million in state funding for public housinguntil the housing authority provides copies of its budget, McLaughlin’s contract, and quarterly and annual reports, all signed under the pains and penalties of perjury.

Patrick also ordered more than 200 other housing authorities across the state to resubmit their financial paperwork, including their executive directors’ pay, to make sure they are being truthful.

Meanwhile, US Senator Scott Brown weighed in for the first time on McLaughlin’s salary, sending a letter along with another Republican senator to the secretary of HUD. Brown and Senator Charles Grassley of Iowa asked whether HUD officials have determined if McLaughlin misled them as well and how much federal stimulus money had gone to Chelsea.

“Given that Mr. McLaughlin acknowledged that he was investigated for political corruption prior to obtaining his current position, what steps did HUD take to mitigate any problems that might occur during his tenure?’’ asked the senators, referring to the fact that the 66-year-old McLaughlin has been investigated for corruption in the past but never indicted.

Even McLaughlin’s staunchest defenders have publicly criticized McLaughlin following reports about his compensation, nearly twice the salary paid to the housing director of New York City.

In an e-mailed statement, Thomas Connelly, executive director of the Massachusetts chapter of the National Association of Housing and Redevelopment Officials, called McLaughlin’s salary “outrageous and irresponsible,’’ and urged housing authority boards to learn from Chelsea’s “misguided and hurtful experience.’’

Last week, Connelly had described McLaughlin as a “superstar,’’ saying he had won multiple awards for turning around the rundown housing agency.

Gregory P. Bialecki, Patrick’s secretary of housing and economic development, confirmed that personnel from his office were among the investigators at the Chelsea authority. “Our staff is on site at the housing authority to secure electronic files, and we will continue to take the steps necessary to ensure state funds are properly allocated to support affordable housing for Chelsea residents,’’ he said.

Andrea Estes can be reached at estes@globe.com. Sean P. Murphy can be reached at smurphy@globe.com.

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