Former Executive Director of Chelsea Housing Authority Charged with Conspiring to Defraud the United States

BOSTON – October 30, 2013 – (RealEstateRama) — The former Executive Director and Assistant Executive Director of the Chelsea Housing Authority (CHA) as well as an inspection consultant were charged today for their roles in rigging the inspection process for federally-funded housing units at the CHA.

Michael E. McLaughlin, 67, of Dracut; James H. Fitzpatrick, 63 of Acton; and Bernard J. Morosco, 50, of Utica, NY were indicted for conspiring to defraud the United States and the U.S. Department of Housing and Urban Development (HUD) by impairing, impeding, and defeating the proper operation of the physical condition assessment by HUD’s Real Estate Assessment Center (REAC), which relies on a statistically valid random sample of units to inspect.

According to the Indictment, pursuant to federal regulations to determine whether a
public housing authority is meeting the standard for its residents of conditions that are “decent, safe, sanitary, and in good repair,” REAC is required to “provide for an independent physical inspection of a public housing authority’s property or properties that includes, at a minimum, a statistically valid sample of the units in the PHA’s public housing portfolio to determine the extent of compliance with the standard.” REAC inspections are conducted by independent contractors who have received training from REAC on the inspection protocol and regulations and have been certified. Once certified, an inspector is given an inspector number and password to access the secure REAC server which contains data on all public housing authorities and also later enables the inspector to generate a random sample of units at the scheduled date of the inspection.

The indictment alleges that from 2006 through November 2011, McLaughlin and Fitzpatrick conspired with Morosco, whom they hired as a consultant for the REAC inspection process in those years. Morosco, himself a certified REAC inspector who had access to the secure REAC database, identified in advance the units of the CHA that would be randomly selected to be inspected by the assigned HUD REAC inspector on the day of the inspection. Morosco then provided to McLaughlin and Fitzpatrick a list of those units to be inspected sufficiently in advance of the inspection so that they could organize and direct REAC “SWAT” Teams of CHA employees to concentrate on ensuring that any needed repairs would be made to those identified units. When the REAC inspectors conducted the inspections in 2007, 2009 and 2011, the units that were randomly selected were the same as the ones provided in advance by Morosco.

“Today’s indictment alleges a serious breach of public trust that affected residents of public housing, people who depend on the integrity of federally funded housing authorities to have a decent place to live,” said United States Attorney Carmen M. Ortiz. “This office remains committed to ensuring that taxpayer dollars spent on federally-funded housing units are used appropriately and that those who are entrusted with those funds are held accountable for actions that abuse that trust.”

“The charges made today prove our continuing resolve to root out corruption in all forms, especially the kind that ultimately hurts our most financially needy and deserving families who reside in public housing,” said Special Agent in Charge of U.S. Department of Housing and Urban Development, Office of Inspector General Christina Scaringi.

If convicted, McLaughlin, Fitzpatrick and Morosco each face a statutory maximum of five years in prison, three years of supervised release, and $250,000 fine.

USA Ortiz and SAC Scaringi announced the indictment today.

The case is being prosecuted by Assistant U.S. Attorney S. Theodore Merritt of the Public Corruption and Special Prosecutions Unit.

The details contained in the Indictment are allegations. The defendant is presumed to be innocent unless and until proven guilty beyond a reasonable doubt in a court of law.