Michigan lawmaker requests probe into NMU land deal tied to $8M state grant

Kim Kozlowski
The Detroit News

Concerns around a land deal involving Northern Michigan University's foundation, a former Upper Penninsula hospital and a Marquette-based developer who serves on the NMU board have prompted a state lawmaker to ask Attorney General Dana Nessel to investigate. 

The deal has raised questions of a "potential conflict of interest" and "possible misuse of state and local public funds," according to a 13-page letter that Rep. Sara Cambensy, D-Marquette, wrote Thursday.

Part of the concern involves the recently signed $76 billion budget, which included $8 million allocated for vacant building demolition at the site of the former hospital in a $1 billion pork barrel spending part of the bill.

At issue is the property of the old Marquette General Hospital, which is located  near  the university's campus. The community-owned hospital was purchased in 2012 by the for-profit Lifepoint Health. The company built a new hospital downtown, UP Health System-Marquette, and the old hospital building has been for sale for several years.

Enter Robert Mahaney, who was appointed in 2015 by then-Gov. Rick Snyder to an eight-year term on the NMU board. Mahaney is president of the Veridea Group, a Marquette-based real estate development and hotel management firm, according to NMU's website.

Mahaney entered into an agreement with Lifepoint to buy the property three years ago.

Michigan State Rep. Sara Cambensy, D-Marquette

"While I am unclear and not aware of the private nature of that transaction, that sale did not conclude," Cambensy wrote. "What is clear is that Bob Mahaney and Veridea Group remained interested in acquiring that property."

Last summer, Brad Canale, CEO of the NMU Foundation, began discussions with Lifepoint to buy the property for $1 and transfer it Veridea and Mahaney, an ex-officio member to the NMU Foundation Board, according to Cambensy's letter. The plan included Lifepoint providing a $10 million “donation” to the NMU Foundation on the condition that the NMU Foundation provide over 52,000 square feet of office space for seven years. 

The transfer of the property from the NMU Foundation to Veridea also was to include that Veridea would received tax considerations for the demolition of the property.

Canale said in a statement that the NMU Foundation has been "transparent in the overall process" and needs to evalute Cambensy's letter.  

"The NMU Foundation will cooperate fully with any investigation the Attorney General may pursue," he said. "We have nothing to hide, including our motivation to facilitate the alignment of resources and partners needed for the transformation of the critical site directly next to campus. Taking action for the betterment of our campus community and our larger community is something we are proud to be doing."

Canale added that the community development opportunity "is supported by the state, as well as the City of Marquette, the Marquette Brownfield Redevelopment Authority, the Michigan Economic Development Corporation, and members of the Marquette community as evidenced by public forums held earlier this year."

Mahaney and the Attorney General's office could not be reached for comment.

In a $1 billion part of the state budget set aside for lawmakers' pet projects, $8 million was dedicated to demolish a vacant building at the former hospital site. 

"It is now my understanding that the MEDC is prepared to award the NMU Foundation and this project another $5 million for the demolition of the buildings as well," Cambensy said.

NMU spokesman Derek Hall said university leaders received Cambensy’s letter on Thursday, the same day it was released publicly. 

"The details provided in the letter are under review," Hall said in an email. "The hospital redevelopment project is an NMU Foundation effort. The NMU Foundation is a separate entity with their own leadership and governing board." 

Reached by phone, Cambensy said there are several questions that don't sit well with the public including the involvement of the NMU foundation to negotiate a deal in 2019 between two private entitites; the conflict of interest involving Mahaney in his role as NMU board member and CEO of the company involved in the deal, and the whether "an insider was trying to negotiate a deal to benefit himself or his company." 

Lastly, the taxation piece is a concern along with the lack of transparency from the NMU foundation and Mahaney, the lawmaker said.

"All government bodies and those that are serving in those positions, appointed or elected, have the obligation to operate in the public eye and always put the public’s best interest first and not a private interest," said Cambensy.

"A lot of people are questioning if we have appointed board members at Northern Michigan University that are using their position to benefit financially."

kkozlowski@detroitnews.com