Michael E. McLaughlin, former high-paid Chelsea housing chief, faces federal charges

By Sean P. Murphy and Andrea Estes, Globe Staff

The former chief of the Chelsea Housing Authority was charged Wednesday with four felony counts of deliberately concealing his inflated salary from state and federal regulators from 2008 until he resigned in 2011, triggering a scandal that has rocked Massachusetts’ public housing system to its foundation.

US Attorney Carmen M. Ortiz ­announced the federal charges against Michael E. McLaughlin, 67, of Dracut, alleging that McLaughlin deliberately underreported his annual salary by up to $164,000 a year in mandatory ­reports to state and federal housing regulators. The charges were contained in a document that is normally used when the defendant has agreed to plead guilty.

Each violation carries a penalty of up to 20 years in prison and a $250,000 fine, but McLaughlin, who has no criminal record, will probably face a much less severe punishment. Under federal guidelines, a conviction on even one count calls for at least eight months in jail.

Public officials greeted news of the charges with satisfaction, saying that McLaughlin had ­violated the public trust for years at the Chelsea Housing Authority while he built up his power and salary at the ­expense of the low-income people he was supposed to serve.

State Attorney General ­Martha Coakley said her office will continue a criminal investigation that has focused in part on McLaughlin’s fund-raising for Lieutenant Governor ­Timothy P. Murray.

McLaughlin was barred from most political fund-
raising as a public employee, but he actively organized ­numerous fund-raising and ­political events for Murray and frequently communicated with him by cellphone.

“It is alleged in [Wednesday’s] action that Michael McLaughlin exploited his position as housing authority director to knowingly and intentionally commit fraud against taxpayers, in violation of federal law,” said Coakley, whose office collaborated with Ortiz on the federal charges. “We are also inves­tigating whether McLaughlin committed additional state violations, and that investigation remains ongoing.”

Reached by telephone, McLaughlin declined to comment. His lawyer, Thomas Hoopes, also declined to comment.

By 2011, McLaughlin was making $360,000, according to a Globe analysis, making him one of the highest-paid public housing officials in the United States. His abrupt resignation led to calls for an overhaul of the state’s little-scrutinized public housing authorities.

“Michael McLaughlin lied to state and federal officials for many years,” said Kimberly Haberlin, a spokeswoman for Governor Deval Patrick. ­“Today’s actions are necessary and appropriate to hold him account­able.” Patrick pressured McLaughlin and his entire board of commissioners to ­resign after McLaughlin’s salary was reported by the Globe.

Chelsea city manager Jay Ash said that McLaughlin had duped an entire city.

“When he was in Chelsea, Mike McLaughlin appeared to be a reformed rogue,” said Ash, referring to McLaughlin’s longtime reputation as a political wheeler-dealer. “He gave every appearance of a guy who was conducting himself in a proper way, but the evidence shows otherwise. I am very dis­appointed that he misled me and others.”

Although a federal grand jury has been investigating McLaughlin’s conduct in ­Chelsea for more than a year, the charges against him came not from the grand jury, but in a document called a criminal information. Prosecutors normally file such a document when a defendant agrees to a plea deal.

The charges against McLaughlin come less than a week after Murray, his close ­political ally, announced that he would not seek the governorship in 2014, surprising some observers, since Murray had been aggressively raising money. Murray has been questioned by prosecutors in the inves­tigation.

Murray said that he simply wanted to spend more time with his family, and a spokesman said Wednesday that ­Murray’s decision had nothing to do with the McLaughlin inves­tigation.

“We have been waiting for over a year for these charges to be brought,” said Thomas ­Connelly, executive director of the Massachusetts Chapter of the National Association of Housing and Redevelopment Officials. “I’m pleased they ­finally have been brought. He’s done irreparable harm to the public image of housing ­authorities.”

Patrick has proposed abolishing the state’s 242 public housing authorities after the McLaughlin scandal, replacing them with a handful of regional boards that would oversee housing for more than 300,000 low-income and elderly people.

McLaughlin resigned in late 2011 after the Globe reported his oversized salary and the fact that he was in line for one of the largest pensions in state history, up to $278,000 a year. The housing authority’s board of directors repeatedly ­approved generous pay increases for McLaughlin without ­actually knowing his salary, the Globe found.

At the time, McLaughlin ­admitted to a Globe reporter that he had deliberately under-reported his salary in reports to state and federal regulators, attrib­uting the misleading ­reports to “the rebel in me.”

But Ortiz and Coakley said that what McLaughlin did was criminal. In 2008, Ortiz and Coakley said, McLaughlin’s salary was at least $242,908, but he told federal and state regulators that he made only $151,945. The next year, the prosecutors allege, McLaughlin understated his salary by $136,000, and in 2010, he under­reported his pay by ­another $164,000.

And in 2011, McLaughlin reported a salary of $160,415 when he was really paid “at least $324,896,” based on federal tax filings. The Globe estimated that McLaughlin actually made $360,000 in 2011, based on a complete review of all income called for in his contract.

When first interviewed by the Globe in 2011, McLaughlin insisted that he deserved his large salary, comparing himself to football great Joe Montana.

It is unclear when McLaughlin will appear in court. Both the plea and the sentence would need to be approved by US District Court Judge ­Douglas P. Woodlock.

The criminal charges also put at risk McLaughlin’s lucrative pension, estimated to be as high as $278,000 a year, accord­ing to calculations based on his annual salary and number of years of service. McLaughlin filed for his pension shortly after his resignation, but the Chelsea Retirement Board froze his retirement application pending an investigations by the state ­attorney general.

Under state law, public employ­ees are liable to forfeit pensions if convicted of crimes in the performance of their ­duties.

Officials at the Chelsea Housing Authority said the charges against McLaughlin may ultimately be good for the organization.

“Maybe this turns the page, and we can try to regain the public trust,” said Albert R. ­Ewing, executive director of the authority.