Former Chief Financial Officer of Merrimack Education Center Charged with Pension Fraud

BOSTON—A former senior executive at Merrimack Education Center (MEC) was charged today in federal court in connection with a fraud on the commonwealth of Massachusetts’ pension system.

Carl A. Nystrom, 52, of Pelham, New Hampshire, was indicted on mail and wire fraud charges. The indictment alleges that he engaged in a scheme to defraud the state by allowing ineligible MEC employees to enroll in a state pension plan, making it appear as though those individuals were employees of a state entity when they were not.

MEC was a tax-exempt organization, a so-called not-for-profit company, engaged in the business of providing diversified educational and technological resources to schools, cities, towns, and other non-profit organizations. MEC offered a broad range of special education, professional development, facilities management, transportation, and technology programs. Merrimack Special Education Collaborative (MSEC) was a public entity engaged in providing educational and vocational services to children and adults with physical, emotional, and developmental challenges. Pursuant to an administrative fee agreement, MEC provided fiscal and management services to MSEC, to include payroll services.

According to the indictment, Nystrom served as MEC’s chief financial officer. During the relevant time period he directed and caused other MEC employees to code him and four other ineligible MEC employees in the ADP payroll system as MSEC employees. This fraudulent coding caused periodic paychecks and end-of-year W-2s to be made in the name of MSEC for each of the miscoded individuals. In addition, each of the miscoded individuals fraudulently enrolled in the state 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. The indictment also alleges that in addition to Nystrom, a lobbyist and three other MEC employees were fraudulently enrolled in the state retirement system. The lobbyist and one former MEC employee have already collected nearly $300,000 in pension payments.

If convicted, Nystrom faces up to 20 years in prison, to be followed by three years of supervised release, and a $250,000 fine on each count.

United States Attorney Carmen M. Ortiz; Glenn A. Cunha, Inspector General of Massachusetts; John Collins, Special Agent in Charge of the Internal Revenue Service’s Criminal Investigation in Boston;  andVincent Lisi, Special Agent in Charge of the Federal Bureau of Investigation, made the announcement today. The case is being prosecuted by Assistant U.S. Attorneys Diane C. Freniere and Andrew Lelling and Special Assistant U.S. Attorneys Andrew Doherty and Eileen O’Brien of the Massachusetts Attorney General’s Office and the Massachusetts Inspector General’s Office, respectively.

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.