MEDICAID MONEY: Feds probe $283,000 email hack

Nov. 17—TRAVERSE CITY — A September email hack netting a scammer $283,000 in Medicaid reimbursement funds is now being investigated by the U.S. Dept. of Homeland Security.

"There is an agent out of Grand Rapids doing a forensic investigation," said Brian Martinus, interim CEO of Northern Lakes Community Mental Health Authority.

"They're working with Northern Lakes and GTI to see if we can recover some of those assets back to the agency," Martinus said Thursday during a Northern Lakes board meeting.

Traverse City Police previously confirmed the hacker, falsely posing as a representative of Grand Traverse Industries, emailed Northern Lakes asking for banking information.

An unnamed staffer or staffers with Northern Lakes responded by providing the information, police said, and that's when the theft took place.

Capt. Keith Gills confirmed Thursday that local police have provided information to the federal agency, and that they're working together on the case.

Gillis said subpoenas have been issued to area banks, their response has been slow and the federal agent assigned to investigate is likely tracking the hacker's IP address — internet protocol, or the unique number linked to all online activity.

"They used a computer and that leaves a trail," Gillis said.

This is the second time Martinus has updated Northern Lakes board members on the case, an example of how leaders say they are focused on improving transparency of an organization that has faced a series of financial and other challenges.

The Northern Michigan Regional Entity, which manages Medicaid funds for Northern Lakes, is essentially functioning as an emergency manager after Northern Lakes in September placed two executives on administrative leave and the human resources officer was fired.

Joanie Blamer, chief operations officer, and Lauri Fischer, chief financial officer, remain on paid leave, pending an investigation, Martinus previously said, adding that the decisions were unrelated to the email hack.

Northern Lakes contracted with a professional advisory firm, Rehmann, to take on the responsibilities of a CFO for $45,000 a month beginning Oct. 1, an agreement provided to the Record-Eagle shows.

Rehmann's Richard Carpenter attended Thursday's board meeting remotely and said he and support staff were getting up to speed on the programs the organization runs and the services it provides.

The contract with Rehmann also calls for an audit of Northern Lakes financial department and a report on these findings had been expected by Oct. 31.

The audit is still in process, board members heard Thursday.

On the agenda was a discussion about choosing a governance model — either stay with the Carver model or pick something new — though board members instead decided the issue required further study.

Board Chair Ben Townsend will chair an ad hoc committee to study options and make a recommendation in favor of further study.

Critics say use of the Carver Model, which gives a board the authority to hire the CEO but no authority over any other employee or over the workings of the organization, has caused — or at least contributed to — the organization's management problems.

The board also agreed to form a CEO search committee — the Northern Michigan Regional Entity will play an oversight roll until a new CEO is hired.

It was unclear, however, whether the meetings of this search committee would be open to the public.

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.

"If we're going to move forward, let's move forward with principal," Townsend said at one point.

Townsend was referring to a motion by the board directing Martinus to work with community groups in an effort to respond to crisis calls more efficiently, though the sentiment was similarly echoed during other discussions.

The next regular board meeting will be Dec. 21 at Northern Lakes' Hall Street location in Traverse City beginning at 2:15 p.m.