NORTHERN LAKES: Costly email hack, suspensions plague community mental health authority

Oct. 1—TRAVERSE CITY — Two Northern Lakes Community Mental Health Authority executives were placed on administrative leave and the FBI and local police were contacted about an unrelated $283,000 phishing scheme — the latest setbacks faced by the beleaguered organization.

Joanie Blamer, chief operations officer, and Lauri Fischer, chief financial officer, were placed on leave on or before Sept. 18 "pending an investigation," said Brian Martinus, interim CEO of Northern Lakes. He declined to comment further on the suspensions or give additional details.

Police said a hacker posing as a representative of Grand Traverse Industries sent an email to Northern Lakes falsely stating GTI's bank information had recently been updated and requested payment for services.

"CMH had sent the amount of money for services that GTI were providing," said TCPD Capt. Keith Gillis.

Officials on Wednesday confirmed Northern Lakes sent a $283,000 payment in response to the unnamed hacker's request.

"That was an outside actor hacking into a computer system," Martinus said, adding that the case has been turned over to the FBI.

In addition, audits of Northern Lakes' financial and human resources departments are being conducted, Martinus said.

A third member of the leadership team, Matt Leiter, who served as human resources director, was "let go" several months ago, Martinus said.

The administrative leaves, the significant financial loss and the audits of two crucial departments are the latest in an array of internal issues the organization has grappled with in recent years.

Blamer and Fischer returned a call to the Record-Eagle, but both declined to comment. Blamer said Northern Lakes has a policy that only the CEO can speak to the media and neither she nor Fischer wanted to violate the policy.

In 2021, two former employees filed complaints with the Equal Employment Opportunity Commission, accusing Northern Lakes of harassment and of fostering a hostile work environment.

The complaints were lodged after records showed Blamer and human resources staff directed an investigation into the personal lives of the two former employees.

The EEOC complaints were ultimately dismissed or settled, but not before Northern Lakes paid $130,000 in legal fees to investigate the employees, clarify board rules and handle civil litigation.

The legal fees were not initially included in board packets, and came from invoices three law firms submitted to Northern Lakes and the organization previously provided to the Record-Eagle in response to a Freedom of Information Act request.

The Northern Michigan Regional Entity manages Medicaid funds for behavioral health treatment in five CMHs covering 21 counties in northern lower Michigan.

Northern Lakes provides services in six counties — Crawford, Grand Traverse, Leelanau, Missaukee, Roscommon and Wexford — and as many as 16 board members are appointed to three-year terms by their respective county commissioners.

NMRE began overseeing Northern Lakes in August 2022, with Martinus appointed interim CEO in October. That oversight was to include a search for a new CEO, as the agency has been without a permanent CEO for more than two years.

Blamer began serving as interim CEO in July 2021; she was twice named to the post permanently and, both times, the job offer was rescinded.

Searches done by Northern Lakes had yielded more than 50 candidates, only a handful of whom were interviewed, including Blamer and another candidate who was offered the job but declined it after salary negotiations went sour.

The lack of a CEO and the May 2022 decision by the Grand Traverse County board to sever the county from an enabling agreement with Northern Lakes and form its own agency prompted NMRE to provide oversight to make sure services were being delivered.

Grand Traverse County commissioners had sought to sever the agreement after what they called decades of poor service to some of the area's most vulnerable residents.

The CEO search has not been restarted, as leaders from the six Northern Lakes counties were in the process of rewriting an enabling agreement that created the agency about 20 years ago. Martinus said the next step is to rewrite bylaws for the agreement. Once that is done, it clears the way for the search, he said.

The audits, approved by the NMRE board, are being conducted by the Rehmann Group of Traverse City and will include reviews of accounting policies and procedures, financial reporting, grant activities, recruiting and selection processes, employee relations, payroll processes and more, according to a document received by the Record-Eagle.

Martinus would not say whether the audits are connected to Blamer's or Fischer's administrative leave status. They are are expected to be complete by the end of October and any decisions on whether to pursue further investigation will be made then, he said.

Martinus also would not say if the audits are connected to Leiter's departure.

Sometime in February, however, meeting minutes from a Northern Lakes board committee show, Leiter was no longer employed following a revelation by the organization's recipient rights director.

Recipient rights is an internal office of Michigan's community mental health organizations, whose staff are tasked with protecting the rights of people who receive mental health services.

Dec. 6, 2022, meeting minutes of the Recipient Rights Advisory Committee show Brian Newcomb, director of Northern Lakes' recipient rights office, "spoke about an issue and requested the required protections."

Newcomb, minutes show, stated that the human resources director had asked him to change the outcome of a neglect complaint his office had investigated and substantiated.

The case was a "Neglect 1" level case, minutes show, regarding behavior by an unnamed Northern Lakes worker against an unnamed person who received services from the organization.

Neglect 1 is the most serious form of abusive behavior the office investigates and, when substantiated, requires immediate termination, according to the Michigan Department of Health and Human Services.

The unnamed employee resigned rather than face disciplinary action, Newcomb told committee members, who then voted unanimously to task Martinus with investigating.

Leiter, who was not referred to by name in meeting minutes, was human resources director at the time of Newcomb's report and left about two months later, records show.

Martinus declined to comment on the reasons for Leiter's departure.

On Tuesday, Grand Traverse Industries Executive Director Cindy Evans questioned how officials determined the phishing scheme involved someone posing as a representative of the non-profit, but confirmed they have not recently been paid by Northern Lakes.

Grand Traverse Industries is a non-profit organization which, since 1974, has provided comprehensive services to people with intellectual and developmental disabilities.

Today those services include career training and job experience and the non-profit works through Northern Lakes to bill Medicaid for these services, Evans said.

Evans added Grand Traverse Industries is trying to work with Northern Lakes on securing payment.

Whether the $283,000 will be recovered may partly depend on whether the email scheme originated from inside or outside the US, police officials said of the open investigation.

Traverse City Police Department has served search warrants on an unnamed bank or banks; recovery chances are better if the schemer is in the US, Capt. Gillis said.

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