(Adds details on matter, lawyer's comment)
By Svea Herbst-Bayliss
BOSTON, April 2 (Reuters) - Former Massachusetts Treasurer Timothy Cahill has been indicted on fraud and conspiracy charges for allegedly using the state's taxpayer-funded lottery advertising budget to boost his sagging gubernatorial campaign, the state attorney general said.
Attorney General Martha Coakley said a Suffolk County grand jury handed up the criminal public corruption charges which include procurement fraud and conspiracy to commit violations of state ethics laws.
Her office alleges the 53-year old former Treasurer directed the lottery to change the content and timing of its ad campaign to benefit his own ailing gubernatorial bid.
"We are alleging that his fraudulent intent was to use the lottery (advertising) budget for his own benefit," Coakley said at a news conference, adding that he put his own interest ahead of that of the taxpayers.
If found guilty, Cahill could face prison time and penalties, Coakley said.
Last year a Boston jury sent former Massachusetts House speaker Salvatore DiMasi to prison after finding him guilty in a kickback case. He was the third consecutive House speaker in Massachusetts convicted of a felony.
As Treasurer, Cahill was in charge of the state lottery.
In September 2010, the state lottery used $1.5 million of its ad budget to air commercials that touted how well run the lottery was and that it benefited the state's towns and cities.
The advertisements did not mention Cahill or show his face but a focus group had previously determined Cahill's best selling point was his successful management of the Lottery, Coakley said.
Coakley said her office was alerted to the matter when Cahill's former campaign manager, Adam Meldrum, defected from the Treasurer's camp.
Cahill's lawyer, Peter Parker, said Cahill made the right choice to run the ads because he had an obligation to maximize Lottery revenues.
"We are confident that a jury will agree and in the end, the Attorney General will have wasted an enormous amount of time, energy and scarce resources to bring criminal charges that never should have been brought," he said in a statement.
Cahill was first elected to the position of Treasurer, where he also oversaw the state pension fund, in 2002 as a Democrat. In 2010 he ran for governor as an independent but lost to incumbent Deval Patrick, a Democrat.
This is not the first time Cahill has been investigated.
A year ago financial regulators sent subpoenas to the current Massachusetts treasurer as part of a probe into dealings between Cahill and his former first deputy, Neil Morrison, who worked at Goldman Sachs.
(Reporting By Svea Herbst-Bayliss; editing by Todd Eastham)
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