Saturday, April 26, 2014

MONEY FOR NOTHING: What's a Little Edu-Fraud Among Friends?

Wolf or Sheep?
Nearly two weeks after Miss Fortune broke the news on this blog, the Traverse City Record-Eagle published a story today confirming Steve Ingersoll's $2.3 million dollar, Grand Traverse Academy multi-year management fee overpayment!

Miss Fortune analyzes the Record-Eagle story, and reveals more about the multi-million dollar misappropriation scandal threatening the future of the Grand Traverse Academy.


The Record-Eagle story claims that Grand Traverse Academy founder Steven Ingersoll owes the school $1.6 million, describing the amount as "a debt that hovers over his head as he defends himself against federal bank fraud and tax violation charges."

[Miss Fortune: that sounds like a comment directly from the mouth of Ingersoll's attorney, Jan Geht. Geht is also a certified public accountant. The "debt" hangs like stockyard stench over the entire Academy board, not just Ingersoll.]

Grand Traverse Academy is a Michigan taxpayer-funded public school academy that Ingersoll helped launch in 2000. Ingersoll's company, Smart Schools Management Inc., ran the charter school’s human resources and financial services wings until about a month before authorities announced an indictment against Ingersoll early this month.

In the indictment unsealed on April 10, federal authorities alleged that Ingersoll used an unspecified amount of money from a $1.8 million bank loan that was supposed to be used to convert a former Bay City church building to "reduce his indebtedness to the Grand Traverse Academy resulting from advances Steven Ingersoll had made to to himself (emphasis added) from funds belonging to the Grand Traverse Academy."

Academy officials prepaid Smart Schools $2.3 million, and $1.6 million that’s still owed could hang in the balance of Ingersoll’s case, his lawyer said.

[Miss Fortune: If Ingersoll used money from the bank loan to repay his Grand Traverse Academy "indebtedness", then those funds are subject to a federal fraud "clawback".

Kiss it goodbye, Kaye!

And did you notice how deftly Geht threw Kaye Mentley and company under the school bus?  By claiming Academy officials prepaid Ingersoll--overpaid him, to be exact--we get an insight into Geht's potential defense strategy: my guy didn't do it; they gave it to him!

Even the official 2013 audit report stated that in addition to receiving “prepaid management fees”, Smart Schools Management also had the ability to “transfer funds between the Academy’s and Smart Schools Management, Inc.’s bank accounts” without prior approval.

The audit report reveals that on behalf of his firm, Ingersoll "took cash advances" for the management fee each year in the beginning of the school year based on the budgeted figure and “without further Board action”. That observation was not refuted by either the Academy board or Ingersoll.

Your move, Mr. Geht!]

“If we’re successful, it can be repaid. If we’re unsuccessful, I think Dr. Ingersoll is going to have to look at his finances,” said Jan Geht, the lawyer who represents Ingersoll.

[Nice one, Mr. Geht! Let's read between the lines: Ingersoll's going to declare bankruptcy.]


The Record-Eagle reports that Academy officials said they severed ties with Ingersoll at his suggestion to prevent his pending case from casting a shadow over the school. But at least one strong thread ties Grand Traverse Academy and its new management company with Ingersoll: Mark Noss, another school founder and former board president who’s closely worked with Ingersoll for over 20 years.

Noss launched Full Spectrum Management, LLC, to take over for Smart Schools. Noss and Ingersoll are both optometrists who went to school together and collaborated 20 years ago to come up with the Integrated Visual Learning program, which applies behavioral optometry concepts to education.

Noss said he knew nothing of the transactions that placed Ingersoll on federal prosecutors’ radar.

“I’m surprised by the indictment because I only know Steve Ingersoll as a professional colleague,” Noss said. “I’ve only known Dr. Ingersoll to be of high character.”

[Miss Fortune: Yes, a character who employs your son-in-law!]

For his part, Noss said it was “a logical transition” for him to move into the management company role.

“I have a very thorough understanding of the Academy’s history and its opportunities, and furthermore I have a deep knowledge of the unique and innovative school model which is built on neurological development,” Noss said. 

[Miss Fortune: Pulling his best "Schultzie" impression, Noss claims he "knew nothing"! 

Funny, that's about how much Noss's son-in-law, Brian Lynch, knows about running a charter school. 

Lynch was recently named by Steven Ingersoll to head his other charter school, the Bay City Academy. As Miss Fortune revealed, Lynch parlayed a lapsed teaching certificate, a brief career as an insurance agent, and his key family relationship into a job as the new Superintendent and President of Instructional Services at the Bay City Academy. 

Ingersoll founded and funded the BCA, and his Smart Schools management company still oversee its operations.

Look very closely at Noss's Full Spectrum Management--and you'll see a company whose incorporation papers were faxed to Lansing the very day its selection was announced by the Grand Traverse Academy!

According to its charter with Lake Superior State University, the Grand Traverse Academy is required to perform "due diligence" when selecting an education management provider. 
Just because Mark Noss understands "the Academy’s history" doesn't mean he's qualified to head its management.

Or is history about to repeat itself?]

The Record-Eagle story, quoting the 2013 audit report, stated that “Smart Schools Management, Inc.’s ability to prepay their fee and withhold payment of overpaid fees enables Smart Schools Management, Inc. to abuse their access to public funds.”

Noss did not see a problem with the practice, which had been going on for years without being flagged by an auditor.

“Smart Schools Management took their management fee that was budgeted for that fiscal year,” Noss said. The fee was adjusted down at the end of the year, and the remaining amount was owed to the schools.

“There was never an advancement or more money provided to Smart Schools that they weren’t entitled to,” Noss said.

[MISS FORTUNE: Sure, the fee was adjusted down at the end of the year (from projected budget to actual), and the remaining money was owed to the school...but it was never paid back!

Interesting how Noss feels Smart Schools was "entitled" to all the money it received--even the $2.3 million overcharge Steven Ingersoll lifted from the Academy's bank account like a deft pickpocket!

History, meet repeat!


The Record-Eagle story stated the 2013 audit report prompted school officials to cease prepaying fees and ask Smart Schools officials to return the advance payments, said Doug Bishop, a lawyer who represents Grand Traverse Academy.

[Miss Fortune: That comment from Doug "F**k 'em" Bishop makes me channel Al Pacino from "And Justice For All"!

"You're out of order! You're out of order! The whole trial is out of order!"

For those just joining the story, let me explain Bishop's nickname. The Traverse City Record-Eagle recently revealed that Bishop, a Trustee at Northern Michigan College (NMC), stated in an email to William Myers, the NMC board’s vice chair his opposition to recording the board's meetings:

 “As always I am against video taping but will support the majority of the board. If we were to implement a video recording policy of our regular meetings, in our primary meeting spot (which is what TCAPS does), put them on line for a short time and then archive them for the current year, we would have met every legitimate concern. If the (Record-Eagle) didn’t think that was sufficient I would have a hard time not saying publicly “F --- em” (“That’s a joke Tim”).”

(Bishop reportedly spelled out the obscenity in his email...sounds like the good barrister earned his new nickname! Behind-the-scenes decision-making at its finest, until now. )

Show me the demand letter, "F**k 'em"!

As outlined in the 2013 audit report, here's the real deal the Grand Traverse Academy made with Ingersoll:

In the auditor’s report, Smart Schools Management agreed that it “owed Grand Traverse Academy an amount classified as a prepaid balance” ($2,338,980), and worked out a repayment plan with the Academy. The plan called for Smart Schools to "work off the prepayment" by “partially reducing cash transfers for future management fees through June 2016”.

In plain language, the Academy would simply deduct the $2.3 million overcharge--in three installments--from Steven Ingersoll's expected future management fees as follows:

2014: $774,000
2015: $960,000
2016: $604,980

Think about that for a moment. Imagine you're on the board of a charter school, and your management company has siphoned $2.3 million more they were legally entitled--directly from your own bank account.

What do you do? Do you call a cop?  

Or do you cover it up, and allow him to "pay you back" by "paying him less"? ]
But Kaye Mentley said she’s "not concerned" about the $1.6 million owed by Ingersoll and Smart Schools.

“At this time the payment schedule that was arranged has been kept,” she said.   

[Miss Fortune: Kaye, do you mean the "payment schedule" that called for Smart Schools to work off the overcharge by “partially reducing cash transfers for future management fees through June 2016”?

And if that's what you mean by "payment schedule", then how do you propose to collect the rest now that you've "severed ties"?

If that's what you mean, you might want to start shopping for your own lawyer!]

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