Two weeks following former Chelsea Housing Authority (CHA) Director Michael McLaughlin’s sentencing in Boston’s Federal Court on July 17th, reactions were decidedly mixed.
While the jail sentence imposed was considerably longer than many had anticipated, the judge declined to order restitution to the CHA in the amount of more than $500,000 – funds that were earmarked for repairs to long-neglected CHA housing units damaged by McLaughlin’s salary skimming scheme.
However, prospects for restitution have brightened following a Chelsea Retirement Board hearing last Thursday morning. The Board voted unanimously to revisit the restitution question and will proceed with automatic pension forfeiture hearings scheduled for August.
The Board approved two distinct hearings: a standard forfeiture hearing in which McLaughlin would likely retain his own retirement contributions, and a second hearing that could potentially authorize restitution to the CHA from those same contributions.
According to state Pension administrators who spoke with the Record, McLaughlin’s contributions accumulated over 43 years total approximately $252,000.
Retirement Board Attorney Brian Monahan outlined three possible actions available to the Board. An automatic pension forfeiture hearing (a 15-2) would occur first as a result of the criminal conviction and sentencing. A second hearing (a 15-4) would then take place.
During that proceeding, the Board would determine whether McLaughlin’s conduct amounted to misconduct related to his office or position. Should the Board find such misconduct – which most observers consider probable given last week’s conviction – his state pension would be forfeited, though he would retain his own contributions at 0 percent interest. With more than 43 years of credited service, his contributions represent a substantial amount, which Retirement Board officials agreed to calculate precisely – later confirmed to be just over $250,000.
The most contentious development emerged when the Board agreed to schedule an additional hearing (a 15-1) that would attempt to recover McLaughlin’s own contributions as well.
“If as a result of the misconduct potentially identified in the 15-4 hearing, it was found that there were misappropriations of funds, then the Board could order an offset of his deductions that would be given to the injured party, in this case, the Chelsea Housing Authority,” Monahan stated to the Board Thursday.
He subsequently indicated that the Board could offset the complete amount of McLaughlin’s contributions if misconduct reached that threshold, but could not exceed it.
“The Board would sit as a judge on this,” Monahan told the Board. “It’s the burden of the government agency to prove the misappropriation and call witnesses. If any dollars were found to be misappropriated, that would be offset against any of Mr. McLaughlin’s accumulated deductions.”
The CHA initially appeared surprised and encouraged by the prospect of an expanded hearing that might result in financial recovery.
“I guess I’m pleased to see the Retirement Board has fairly evaluated the situation and have come to a conclusion that an extreme penalty is justified,” said CHA Board Chair Tom Standish. “Michael McLaughlin certainly did a lot of damage during his term of office and this could get the residents some measure of restitution.”
The CHA has sought restitution to address deteriorated conditions in housing units, which they attribute to the McLaughlin Administration’s failure to undertake necessary capital improvements and maintenance.
Still, Monahan cautioned the Board that McLaughlin would likely assert a strong defense: that he did not misappropriate funds because the former CHA Board had drafted and approved his contract and salary package.
“I will tell you that it appears Mr. McLaughlin’s argument is he did not misappropriate any funds and the U.S. District Court did not order any restitution,” he said.
“His argument is that because he was contractually obligated to receive that salary by the Board, it was not a misappropriation,” Monahan continued. “That is an argument presented to Federal Judge Woodlock in a sentencing memo. The Board needs to consider the weight of that. You should anticipate that argument will be made because it already has been made in Federal Court.”
The crucial question will be whether misappropriation occurred and, if so, how much the CHA may recover from McLaughlin’s contributions. The determination may hinge on a 1997 case involving Thomas Doherty and the Medford Retirement Board – which addressed similar issues.
If the Chelsea Board rules for restitution, McLaughlin would have the right to seek District Court review of that decision.
The Board indicated its preference to conduct the hearings during its August meeting, with notification letters to be sent out early this week.