The Massachusetts attorney general's office said today that it has uncovered the largest welfare fraud in state history, allegedly masterminded by a professor who recruited students, women friends and neighborhood residents to collect up to $1 million.

Tipped by Massachusetts investigators, police in Harrisburg, Pa., arrested Dr. Robert C. Hayes, 34, an assistant professor of recreation education at Northeastern University in Boston, on charges of grand larceny and forging checks and birth records from 1975 to 1979.

The arrest came as Massachusetts authorities were announcing to a morning news conference that a Suffolk County grand jury here on April 29 had handed down 30 indictments on 364 counts against Hayes and four other allegedly employed by him.

Hayes, on medical leave from Northeastern since last October, formed an organization called Interested Neighborhood Action Inc. in 1972 ostensibly to serve as a nonprofit, state-subsidized residential treatment center for youthful offenders. In 1975 he began treatment programs for alcoholics and battered women.

However, Assistant Attorney General Harvey A. Schwartz alleged: "They were nonexistent programs which he used to enroll nonexistent people for welfare; Interested Neighborhood Action was a front for the welfare scheme."

And last January, the two-story wood building that housed the treatment unit on Columbia Road in the city's low income Dorchester neighborhood was leveled by what fire officals call a suspicious fire.

Hayes bilked General relief and Aid to Families with Dependent Children as well as programs issuing food stamps and Medicaid, which was used to obtain prescription durgs, Schwartz charged.

Under state and federal statues, applicants for government assistance merely have to prove their financial status is below the poverty level by showing rent receipts, electric bills and birth certificates.

"Mostly he would send in his girlfriends -- he's a sharp, handsome guy -- or his female students or kids from the neighborhood housing projects," said Jesse Brown, an investigator for the state Bureau of Welfare Audit. "He would cash most of the checks and pay out either a one-time fee of about $50 or a little from each check he'd get."

"We've documented $200,000 that he received, and we expect it's several hundreds of thousands more," said Schwartz. "He used the apartments of friends and relatives and Post Offices boxes as addresses; we believe he's probably still receiving money."

Throughout the operation, Schwartz said, social workers made only one home visit and in that case Hayes "just rounded up kids from the streets -- welfare isn't legally allowed to make surprise visits."

Said Brown: "Each department is understaffed -- they don't investigate; besides, social workers aren't required to verify addresses in dangerous neighborhoods. A lot of times they're in fear of their well-being."

Police began investigating the scheme a year ago, when a patrolman, on a routine traffic check; spotted a bundle of Social Security cards and welfare documents in a car.