NORTHERN LAKES Mental health agency files claim for email hack; contract OK’d for $45K/month CFO | Local News | #hacking | #cybersecurity | #infosec | #comptia | #pentest | #hacker

TRAVERSE CITY — A local nonprofit was repaid $100,000 of a $283,000 loss after an unnamed staffer or staffers with Northern Lakes Community Mental Health last month provided banking information to a hacker.

Police said the hacker, posing as a representative of Grand Traverse Industries, falsely said in an email to Northern Lakes that GTI’s bank information had recently been updated and requested payment for services.

The investigation into the theft remains open, Traverse City Police Department Capt. Keith Gillis said Thursday.

Northern Lakes officials previously confirmed the organization sent a $283,000 payment in response to the unnamed hacker’s request.

“That was an outside actor hacking into a computer system,” Northern Lakes Interim CEO Brian Martinus said last month.

On Thursday, Martinus told the organization’s board during a regular meeting that an additional $1,859.98 had been recovered by Huntington Bank’s loss department.

The payment of $100,000 was through an insurance claim to the Michigan Municipal Risk Management Authority, Martinus said, adding that GTI is still out $181,941.58.

The email hack is the latest financial challenge faced by the organization providing mental and behavioral health services in six counties — Crawford, Grand Traverse, Leelanau, Missaukee, Roscommon and Wexford.

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

Joanie Blamer, chief operations officer, and Lauri Fischer, chief financial officer, were placed on leave on or before Sept. 18, pending an investigation, Martinus previously confirmed.

Martinus said these administrative leave decisions were unrelated to the email hack, but declined to comment further.

A new agreement between Northern Lakes and professional advisory firm, Rehmann, now calls for the organization to pay the firm $45,000 a month for up to 100 hours of service plus expenses, records show.

The agreement, an unsigned copy of which was provided to the Record-Eagle, began Oct. 1 and could last two years, with contracted staff billed at between $570 and $225 an hour.

Rehmann will take on the responsibilities of CFO, evaluate current policies, prepare board financial reports, manage banking and cash flow and assist with fielding applicants and hiring a new CFO.

Northern Lakes is also in the midst of an audit of its financial and human resources departments, meeting minutes show, and a report on findings is expected by the end of the month.

The cost of the Rehmann contract wasn’t mentioned until later in the board meeting, and appeared to alarm at least one Northern Lakes board member, Kate Dahlstrom.

“I know that we are in a unique situation and everything is in crisis mode … I’m really unhappy with the fees,” Dahlstrom said. “We have too many interims.”

A Sept. 21 email from Eric Kurtz, head of the NMRE, to Northern Lakes leadership, provides some context for the costly contract.

The email from Kurtz states that the NMRE would contract with Rehmann and charge Northern Lakes for their services unless Northern Lakes contracted with Rehmann themselves.

This was necessary, Kurtz said, to make sure Northern Lakes was in compliance with government reporting requirements.

“This is NOT my preferred route, but I want to be clear that this is a matter that can’t wait for another month,” Kurtz said in the email.

Martinus on Thursday also told the board regarding the email hack, he’d met with GTI and with Northern Lakes’ attorney, Haider Kazim, about remaining funds due GTI, and thought they might be paid, “by close of business next week.”

Grand Traverse Industries is a nonprofit 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 Executive Director Cindy Evans previously confirmed the nonprofit works through Northern Lakes to bill Medicaid.

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

During back-to-back and hours-long meetings Thursday, board members also had substantive discussions about starting a new CEO search, archiving meeting videos, changing the governance model — how the board oversees the organization — and brainstormed future steps to to someday move beyond NMRE oversight.

One public commenter encouraged new board members considering a CEO search to review past coverage by the Record-Eagle to see how a previous search was botched.

“It was painful,” she said.

Penny Morris, who serves on the Northern Lakes board and is a Grand Traverse County commissioner, said she’s focused on the future.

“I think for all of us, bottomline is, we’re trying to turn over a new leaf,” Morris said, during discussion about archiving meeting video recordings, which the board approved.

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