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Patrick requests Chelsea receiver

Wants outsider to run troubled housing agency

By Scott Allen and Sean P. Murphy
Globe Staff / November 17, 2011

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Governor Deval Patrick initiated a rare state takeover yesterday of the troubled Chelsea Housing Authority, aiming to restore order at an agency that has been reeling since the abrupt resignation of the executive director this month amid outrage over his $360,000 annual compensation.

Acting on Patrick’s behalf, Attorney General Martha Coakley plans to petition a justice of the Supreme Judicial Court today to appoint an outside receiver who would oversee day-to-day operations of the embattled authority. The receiver would replace the five-member board of directors that resigned en masse this month along with executive director Michael E. McLaughlin, following sharp criticism from Patrick.

The receiver would have the power to compel employees to cooperate with burgeoning state and federal investigations of the authority. This comes amid reports that the authority’s accountant shredded and removed documents around the time McLaughlin quit and that on his last day, McLaughlin cosigned checks to himself for more than $200,000.

If the petition is approved, state officials say, it would mark only the third time that a court has appointed a receiver to run one of the local authorities that provide housing for low-income families in the state. And it would mark the first time that a receiver was appointed because virtually all the local leadership resigned.

“This will help restore the public’s confidence, and my own, and will put the housing authority on a better path,’’ said Patrick, who has described himself as “boiling’’ mad over McLaughlin’s pay and personal conduct.

McLaughlin has admitted that he concealed his $360,000 compensation - perhaps the highest salary of any public housing official in the United States - in reports to the state, attributing the deception to “the rebel in me’’ in an interview with the Globe.

After the Globe revealed his true pay, he hastily resigned on Nov. 3, but not before cosigning checks to himself totaling $201,000 for what he said was unused vacation, sick, and personal time. He said the authority had owed him $335,000, but $134,000 was withheld for taxes and other obligations.

Officials at the state Department of Housing and Community Development, which provides millions in funding for the authority, attempted to stop payment on McLaughlin’s checks, but he had already cashed one for more than $80,000.

James McNichols, the authority accountant who approved the payments to McLaughlin and who last week was put on administrative leave, has admitted that he destroyed the time sheets that would have allowed investigators to determine whether his former boss should have received the money, according to a source with direct knowledge of McNichols’s actions.

McNichols explained to state investigators that he destroyed the records based on the 2007 advice of a former housing authority lawyer who is deceased, according to the source. McNichols, a former bouncer who is very close to McLaughlin and helped him remove boxes from the office on the night before he quit, could not be reached for comment last night.

Patrick’s petition for receivership answers the request of Chelsea city councilors and housing advocates who asked Patrick last week to step in to stop the authority’s “outrageous and unconscionable’’ actions. Since McLaughlin’s pay became public, many residents have worried that the scandal was dragging Chelsea back to the bad old days of the early 1990s, when a state receiver was appointed for the entire city.

Among the beleaguered staff at the authority’s Locke Street offices yesterday, there was grudging acceptance that the state takeover was all but inevitable.

“Although I feel very strongly that we have the senior management and staff in place to run the authority . . . we will not oppose the request for receivership,’’ said Albert Ewing, McLaughlin’s former top aide, who was named executive director and given a $40,000 raise by the board of directors just days before they all resigned.

Ewing suggested in a letter to state housing officials that receivership was needed mainly because of the absence of a board and that receivership should not last longer than three months, when he expects a new board to be in place.

But City Manager Jay Ash said that finding replacements for the board will be no easy task. “The authority is likely to remain without a governing board for the indefinite future because of the difficulty in recruiting qualified members,’’ he wrote in an affidavit to be filed with the petition for receivership.

“Receivership is the best way to get to the bottom of everything that’s happened,’’ Ash said in an interview.

McLaughlin’s lawyer, Thomas Hoopes, declined to comment last night.

The petition for receivership is expected to be heard on the same day that the Chelsea Retirement Board is scheduled to discuss McLaughlin’s application for a pension based on his extraordinary compensation package. McLaughlin, 66, filed a pension application that indicates he should be paid about $278,000 a year in retirement benefits for the rest of his life, a record high for the state.

State retirement officials, as well as the attorney general, have warned Chelsea officials that they should not pay McLaughlin anything until the various investigations are complete. Coakley’s office said that McLaughlin may not be entitled to his full pension if he violated the False Claims Act by telling state officials he made $160,000 when the true sum was more than double that amount.

“It is far wiser to postpone the board’s consideration of Mr. McLaughlin’s pension application than for the Commonwealth to seek to recover additional monies paid to Mr. McLaughlin as a result of his false statements and/or illegal conduct,’’ Edward R. Bedrosian, Coakley’s first assistant, wrote in a Nov. 15 letter to Chelsea officials.

Court receivership for a housing authority is extremely rare, happening only twice before in state history, state officials said. A judge appointed a receiver to oversee the Boston Housing Authority for several years in the early 1980s at the request of tenants who complained of “indescribable conditions.’’

But Coakley and Patrick argue that the leadership vacuum in Chelsea, coupled with the swirling investigations into allegations of criminal wrongdoing, justify a receiver for the housing authority.

“We strongly support this step to place the Chelsea Housing Authority into receivership and help bring much needed accountability,’’ Coakley said yesterday. “As our office moves forward with its own investigations, we hope this strong action today will help prevent the further abuse of taxpayer money.’’

The receivership petition requires the approval of a single justice of the SJC, and Justice Robert J. Cordy is scheduled to preside today. If Cordy approves, the Department of Housing and Community Development would then recommend a receiver for his approval.

Coakley’s office said the receiver would report back to the court in 90 days.

Andrea Estes of the Globe staff contributed to this report. Allen can be reached at allen@globe.com; Murphy at smurphy@globe.com.