SOUTH KINGSTOWN — Two months after a former administrator at the University of Rhode Island was indicted on 10 federal fraud charges, URI officials say they are putting in place measures designed to prevent future fraud.

Robert Felner, a nationally known educator and founding director of URI’s School of Education, was indicted Oct. 22 in Louisville, Ky., on charges including mail fraud, conspiracy to embezzle and income tax evasion.

According to the federal indictment, Felner, 58, diverted $1.7 million from a respected education research center he had established at URI. The fraud began while Felner was at URI and continued after he became dean of education at the University of Louisville in 2003, federal authorities say.

In an interview last week to discuss the investigation, URI officials reiterated their surprise at the scope of the alleged deceit, and said Felner’s colleagues at URI’s National Center on Public Education and Social Policy knew nothing about the alleged embezzlement, which an indictment says began in 2001 and continued until last spring.

URI officials say Felner’s colleagues at the education center — including its director, Anne Seitsinger, and business manager, Diana Laferriere — trusted Felner and believed that a nonprofit agency he had set up in Illinois, which allegedly was a front for his embezzlement, was legitimate. They never questioned that the agency had just one employee, Thomas Schroeder, 58, who is also charged in the indictment.

“They believed in [Felner] blindly,” said Robert A. Weygand, URI’s vice president of administration. “We were disappointed by that. But the federal authorities have told us they see the University of Rhode Island as a victim in this scheme, and we see [Felner’s colleagues] as victims, too.”

The investigation into Felner started earlier this year when officials at the University of Louisville became suspicious of his handling of a federal grant and contacted campus police. Their concerns sparked a five-month investigation by the Secret Service, the U.S. Postal Inspection Service and the Internal Revenue Service. The investigation led authorities to the URI center, established by Felner in 1997.

Felner and Schroeder, a former colleague of Felner’s at the University of Illinois, conspired to embezzle $1.7 million from URI’s National Center on Public Education and Social Policy and $450,000 from the University of Louisville by diverting payments from school districts and federal grant money to the phony agency, the indictment said. The indictment also alleges that Felner underreported his income by $1.5 million and underpaid his federal income taxes by $500,000.

URI officials say that Seitsinger, Laferriere and the center’s other employees were kept in the dark about most of the center’s finances. They had no idea that hundreds of thousands of dollars for work developing surveys for school districts in Atlanta, Buffalo and Santa Monica allegedly flowed into private bank accounts controlled by Felner and Schroeder, say URI officials.

Felner was careful to control the paperwork related to most of the center’s contracts and simply disbursed payments to the staff at URI to cover salaries and other expenses, said URI’s general counsel, Louis J. Saccoccio. One notable exception was the center’s largest contract — with the Rhode Island Department of Education — which was handled by Seitsinger and Laferriere. The contract was not part of the federal investigation.

Felner also had a “strong personality” — inspiring a fair share of supporters and critics — and his colleagues at the center were inclined not to question his practices, Weygand said.

“He was like a cult-figure to them, really,” Weygand said. “They had a blind faith in him that was not warranted.”

No one at the center has been fired as a result of the investigation, he said.

But Weygand said URI will begin reviewing the finances of the center and dozens of other self-sustaining centers. Currently, a committee oversees the finances of service centers such as the university’s print shop, but independent research centers and self-sustaining programs have not received the same degree of scrutiny.

In addition, Weygand said the centers’ grants and contracts will now pass through URI’s Office of Research. The university also plans to begin “periodic reviews of these centers on an ad hoc basis, without advance warning,” Weygand said.

“We know that the people who worked for Felner were reliant on him to be a rainmaker and bring in the money,” Weygand said. “It’s not an uncommon situation. But we want to make sure that people who work here are not so dependent on certain rainmakers and researchers that they can’t question the operation in a way that will protect the university and the center.”

The future of the National Center on Public Education and Social Policy is uncertain. The staff is down from 16 employees last year to just 7 this year. Center employees are working on just a handful of contracts, including one from the Rhode Island Department of Education. That contract is not part of the federal investigation.

It is unclear, Weygand said, whether the center will be able to secure more contracts. If not, the center will close.

Felner’s trial, originally set to begin Dec. 22 in Kentucky, has been postponed because his attorney has asked for more time to examine the prosecution’s evidence. A new date has not been set, according to the office of U.S. Attorney David Huber.

jjordan@projo.com