BOSTON -- A 52-year-old Pelham, N.H., man who formerly served as chief financial officer for the troubled Merrimack Education Center, was indicted Tuesday on allegations he defrauded the state by making it appear MEC employees actually worked for the state.
Carl Nystrom faces up to 20 years in prison and fines of up to $250,000 for each count in the indictment that charges him with both mail fraud and wire fraud.
The Merrimack Education Center is a private nonprofit company that provides educational and technological resources to schools, towns and other nonprofits.
The private firm previously worked closely with the Merrimack Special Education Collaborative, a public agency that provides resources to special-needs children and adults, and MEC provided management and payroll services to MSEC.
Prosecutors accuse Nystrom of "engaging in a scheme to defraud the state" by putting ineligible MEC employees on the state's pension plan by making it appear the employees worked for the state-run MSEC instead of MEC.
Prosecutors accuse Nystrom of putting himself and four other MEC employees into the payroll computer system as MSEC employees, which enabled them fraudulently enroll in the state's pension plan.
"The indictment alleges that the purpose of the scheme was for Nystrom and the others who were fraudulently enrolled in the pension to obtain pension payments that they were not entitled to receive," U.S. Attorney Carmen Ortiz said in a prepared statement.
The indictment also alleges that Nystrom, an unidentified lobbyist and three other unidentified MEC employees were also fraudulently enrolled in the state's retirement system. Ortiz said in a prepared statement that the lobbyist and one of the unidentified former employees have already collected nearly $300,000 in pension payments.
A man who answered the telephone at a number listed to Nystrom hung up when a reporter asked to speak to Nystrom Tuesday evening.
Ortiz's office did not identify the others involved in the scheme, and a spokesperson said she could not immediately comment on whether the others will face charges as well.
It was not immediately clear when prosecutors allege the activities took place, and since federal workers were sent home from work early due to Tuesday's snowstorm, a spokeswoman for Ortiz was not immediately able to provide more details.
In a statement released Tuesday night, Nancy Sterling, a spokeswoman for MEC, said Nystrom was hasn't worked for the agency since August of this year.
"Well before this indictment, MEC conducted an internal investigation and corrected past accounting errors and other issues," Sterling wrote. "During the last few years, MEC has hired a turnaround team, revamped its policies and procedures, instituted strict audits overseen by an outside firm, and most recently, hired a full-time executive director with extensive experience in the nonprofit arena."
Sterling said MEC has and continued to cooperate with the federal investigation.
David Hastings, of Andover, was hired from Harvard University to become MEC's new executive director in late October as part of the agency's reorganization in the wake of the troubles.
Hastings declined to comment Tuesday night since the alleged improprieties occurred before he joined MEC.
John Barranco, the former executive director of both MEC and MSEC, was fired in September 2012, after he was accused of misusing at least $37 million in taxpayer funds while leading the agencies.
A state Inspector General's report accused Barranco of misusing $37 million of MSEC funds, spending some of that money on parties, bar tabs, and golf outings. The Inspector General also accused Barranco of misusing nearly $57,000 of MEC funds by charging shoes, dinners, furniture and a trip to the Kentucky Derby on MEC's American Express card.
Attorney General Martha Coakley's Office has been investigating Barranco's activities for more than two years now, but has yet to close the investigation or file charges.
The indictment issued against Nystrom is the first known criminal case stemming from the scandal that enveloped the two agencies in 2012.