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Official in fraud case takes leave

Accused of misspending $10m from Merrimack special education group

By Michael Rezendes
Globe Staff / June 30, 2011

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The education official accused of siphoning more than $10 million in public funds from a Merrimack Valley agency dedicated to special needs students is taking an unpaid leave from a related nonprofit organization, where he has received more than $500,000 in annual salary and benefits, according to the nonprofit’s board of directors.

John B. Barranco, the former director of the Merrimack Special Education Collaborative, the public agency that provides direct services to special needs children, was recently accused of paying himself, a former girlfriend, and a handful of top staff inflated salaries and bonuses through his control of the nonprofit Merrimack Education Center. He was also accused of racking up more than $50,000 in personal expenses on a credit card issued by the nonprofit, including improvements to two vacations homes and a trip to the 2005 Kentucky Derby.

In a statement released yesterday, the education center’s board said Barranco “offered to take a leave of absence to ensure the board was able to conduct a proper review’’ of the allegations lodged last week by state Inspector General Gregory W. Sullivan.

Sullivan’s findings, issued after a yearlong investigation, are also being reviewed by criminal and civil prosecutors in the state attorney general’s office and by the state auditor.

In its statement yesterday, the board said that chairman Gary Garmon will oversee the day-to-day operations of the nonprofit center, which provides school transportation, teacher training, and other services to school districts. The collaborative oversees the teaching of special needs students for 10 school districts in the Merrimack Valley, in space leased from the center.

“In one of his first acts, Garmon assured all school superintendents who receive MEC’s services that there will be no interruption in the high level services which MEC provides,’’ the statement said.

The nonprofit board, which met Monday, also said that it had voluntarily provided more than 12,000 pages of documents to Sullivan’s office in an effort to cooperate, but that Sullivan never gave the center “an opportunity to refute the allegations.’’ The board offered no further comment.

However, Jack McCarthy, a senior assistant inspector general, said the center did not fully comply with investigators. “They in fact did give us many documents, but some of the most important documents that we requested they would not give us,’’ he said. “And they would not give us access to Mr. Barranco or members of the board.’’

Yesterday, Nancy Sterling, a spokeswoman for ML Strategies, which is representing the board, also said that four members of the center’s board are stepping down. Two of them, she said, are retiring school superintendents who submitted their resignations in May. Two additional members will step down tomorrow, when their terms expire, leaving the center with nine board members, Sterling said. Sterling said she was not authorized to provide the names of the board members who are leaving their posts.

In letters to the center’s board last week, Sullivan also accused Barranco of using the center’s credit card for Christmas gifts to a daughter, luxury clothes, and more than $16,000 in gasoline purchases from 2003 to 2010. He also said Barranco had used deception to inflate his teacher’s pension to more than $150,000 a year.

In April, Sullivan wrote to the Massachusetts Teachers Retirement System to say that Barranco is not entitled to receive all of the pension he is collecting. Earlier, the retirement system had moved to reduce Barranco’s pension, a decision that Barranco appealed.

Sullivan, in his letters, which were also sent to officials at the collaborative, said Barranco amassed the funds for large salaries and other abuses in part by fleecing the collaborative. Barranco, a former superintendent of the Groton-Dunstable Regional School District, headed the collaborative for more than a decade until retiring, in 2005.

But Sullivan said Barranco retained effective control of the collaborative through his current position as executive director of the education center. And in 2006, directors of both organizations approved two agreements that transferred $11.5 million from the collaborative to the center over a period of several years.

In his letters, Sullivan said the agreements are invalid, in part because the services provided by the center to the collaborative under one of the agreements were not put out to bid. He also recommended that the collaborative sever ties with the center and demand the return of the $11.5 million, calling the arrangement and Barranco’s lavish spending, “one of the most outrageous abuses this office has ever seen.’’

Thomas Lent, an attorney for the collaborative, said the organization views Barranco’s leave as “a constructive step forward.’’

Efforts to reach Barranco last night were unsuccessful.

After Sullivan released his findings, a spokesman for Attorney General Martha Coakley said that prosecutors with the Public Integrity and the Public Charities divisions were reviewing them.

In addition, state Auditor Suzanne M. Bump said she is investigating whether the salaries and other questionable practices at the center and the collaborative are part of a larger problem in the patchwork of more than two dozen education collaboratives that help educate special needs students.

“What we’re endeavoring to do is determine whether we have a total system failure,’’ she said.

Michael Rezendes can be reached at rezendes@globe.com