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Two in Chelsea Housing scheme sentenced in federal court

A former Chelsea Housing Authority manager and a consultant were sentenced on Thursday to short prison terms for their roles in rigging federal inspections of apartments that were managed by the housing agency.

James H. Fitzpatrick, a former manager, was sentenced to three months in prison and one year of supervised release, and Bernard J. Morosco, the consultant, was sentenced to six months in prison and one year of supervised released.

Before imposing his sentence, US District Court Judge Douglas P. Woodlock said both men had, for the most part, led admirable lives extending themselves on behalf of family, including elderly parents, and choosing work that helped provide housing to the needy.

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But both were guilty of a fraud on the government, which hurt public housing tenants, Woodlock said, and prison was necessary to deter others who might contemplate white-collar crime of the same sort.

"Sometimes the fact of incarceration is as important as the length of it and it need not be too severe," Woodlock said.

Woodlock's sentences fell far below the terms recommended by the US Attorney's office: eight months for Fitzpatrick and 15 months for Morosco. But in imposing them, Woodlock also rejected the pleas from attorneys representing Fitzpatrick and Morosco that they be spared from prison time in favor of probation or house confinement.

Woodlock said the specter of Michael E. McLaughlin, the former Chelsea Housing Authority executive director, "loomed over" the courtroom. Witnesses at the trial of Fitzpatrick and Morosco described the housing authority as deeply corrupted by McLaughlin, who previously pleaded guilty to hiding his inflated $360,000 salary at the small agency, and to conspiring to rig the inspections. McLaughlin is serving a four-year prison sentence.

But however manipulative McLaughlin may have been, Woodlock said, Fitzpatrick and Morosco failed to resist participating in a conspiracy that "undermined a critically important government service."

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"What they did was wrong," Woodlock said. "It was a way to game the system, a way to cheat the system."

Fitzpatrick, 64, and Morosco, 51, were convicted in April of conspiring to defraud the government by thwarting the ability of the US Department of Housing and Urban Development to make spot checks of the agency's apartments, which are reserved for families and the elderly whose income is below certain levels.

Fitzpatrick and Morosco did so by obtaining a list of the apartments HUD intended to inspect weeks in advance and then making sure those few, select apartments were in near perfect condition by the time of the inspections.

The scheme was intended to make sure the agency received a coveted high performance rating from HUD. High performance ratings qualified the housing agency for additional federal funding and less scrutiny from US regulators of its spending and other management practices.

The Chelsea Housing Authority consistently received the highest ratings during the seven-year period in which Morosco, a HUD-certified inspector, was paid $25,000 in consulting fees. Its score plummeted after the housing agency severed relations with Morosco.

Woodlock described Fitzpatrick as "a high-level functionary" in the scheme, who passed information from HUD necessary for Morosco and McLaughlin to carry out the fraud.

He said Morosco abused his trust as a HUD-trained inspector to obtain the list of apartments to be inspected from HUD computers.

"The scheme couldn't work without Morosco," Woodlock said.

McLaughlin abruptly retired in 2011 days after stories in the Globe exposed his annual pay and the fact that he had kept his salary secret for years from state and federal overseers.

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Fitzpatrick, testifying in his own defense during the trial, portrayed McLaughlin as having orchestrated virtually everything done by the agency's administrative staff, especially when it benefited McLaughlin.

McLaughlin failed to make promised improvements, like new boilers and modern kitchens, because he used the money instead to pay his inflated salary, according to testimony.

The Chelsea Housing Authority is now trying to repair some of the damage done by suing an array of former managers, accounting firms, and board members.

The lawsuit is intended to force McLaughlin and others to pay for financial losses because of alleged misappropriation of funds or negligence in failing to stop it.


Sean P. Murphy can be reached at smurphy@globe.com. Follow him on Twitter @spmurphyboston.