Restitution: Retirement Board Will Examine the Idea of McLaughlin to Pay Back CHA

There were mixed feelings two weeks ago, on July 17th, after former Chelsea Housing Authority (CHA) Director Michael McLaughlin received his sentence in Boston’s Federal Court.

On the one hand, he got far more time in jail than many expected.

But on the other hand, the judge refused to grant restitution to the CHA to the tune of more than $500,000 – money that had been marked for use in improving long-neglected housing units in the CHA that fell victim to McLaughlin’s salary skimming.

Now there is new hope after a Chelsea Retirement Board hearing last Thursday morning in which the Board agreed to re-examine the idea of restitution to the CHA as they move forward with automatic pension forfeiture hearings at an August meeting.

Board members unanimously agreed to go forward with two hearings, the first being a standard forfeiture hearing where McLaughlin would likely keep his portion of retirement contributions and the second being a hearing that could end up granting restitution to the CHA from that same chunk of money representing his own contributions.

State Pension administrators told the Record that McLaughlin’s contributions over 43 years tally up to around $252,000.

Retirement Board Attorney Brian Monahan told the Board that it could take three specific actions. First, due to the criminal plea and sentencing, an automatic pension forfeiture hearing (known as a 15-2) would be called. In that hearing, another hearing (known as a 15-4) would be conducted.

There, the Board would examine whether McLaughlin’s actions constitute misconduct applicable to his office or position. If he were found to have done that – which most believe is an easy decision for the Board given the conviction last week – he would lose his state pension, but would get to keep his own contributions at 0 percent interest. Since he has more than 43 years of credited service in the state pension system, his own contributions add up to a healthy sum, and Retirement Board officials agreed to pin down that number – which later was confirmed to be just north of $250,000.

That said, the most controversial hearing – which was somewhat unexpected – came when the Board agreed to hold a hearing (known as a 15-1) that would seek to garnish 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 told the Board Thursday.

He indicated later that the Board could offset the entire amount of McLaughlin’s deductions if it were found the misconduct reached up to that amount, but it could not go beyond that amount.

“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.”

Early on, the CHA seemed to be surprised and satisfied with the call for an extended hearing that could deliver funds to them.

“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 called for restitution in the case so as to fix dilapidated conditions in housing units that they claim still exist as a consequence of the failures of the McLaughlin Administration to address capitol improvements and maintenance.

Nevertheless, Monahan warned the Board that McLaughlin would likely make the compelling argument that he did not misappropriate any funds due to the fact that the former CHA Board had written and approved his contract and excessive salary.

“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,” continued Monahan. “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 key will be determining whether there was misappropriation and, if so, just how much the CHA is entitled to garnish from McLaughlin’s deductions. Apparently, it will likely revolve around a 1997 case between Thomas Doherty and the Retirement Board of Medford – where just such things were hashed out.

Were the Chelsea Board to rule in favor of restitution, McLaughlin would be entitled to a District Court review of the decision.

The Board indicated they would like to hold the hearings during its August meeting, and that letters of notification would be going out first thing this week.

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