It surprises me that many people who've heard of Steven Ingersoll's federal case continue to describe it as "too complicated" for the average person to understand.
While the case does have its share of complexity, it's simple enough to be summed up in a few words: a public school academy manager, who appears to have been granted an inordinate amount of power by the school's board, allegedly misappropriated millions of dollars and cooked up a bank fraud scheme to repay $704,000 of his estimated $3.5 million dollar debt.
Simple as that. But that doesn't mean past and present Academy Board members are off the hook just yet, especially in light of the twisting and turning narrative that unspooled since Ingersoll's indictment and the recent "write off" of nearly $1.7 million of Ingersoll's Academy-related debt. For example, as recently as mid-September, the Board's attorney Kerry Morgan publicly floated the notion the Academy would "wait until after the federal charges against Steven Ingersoll" had been "resolved" to decide what to do about the outstanding debt―while in retrospect it appears the Board had already written off the amount well in advance of Morgan's statement.
While local coverage of Ingersoll's federal fraud case has been sporadic and incomplete, it has been seamlessly covered on this blog, beginning with breaking the news of the $2.38 million dollar "prepaid expense" nearly eight months ago.
However, the activity that may have spurred the federal case has not yet been investigated...yet.
Let's look at embezzlement.
EMBEZZLEMENT FOR DUMMIES
Embezzlement in Michigan is considered to be the theft of property by a person managing it for another individual or entity, and embezzlement cases are treated very seriously in this state. In order for a theft crime to be considered embezzlement in Michigan, the person stealing the property must have a legal right to access it for another individual, and this factor is what deems a crime to be embezzlement rather than another type of theft.
Those who are charged with counts of embezzlement in Michigan face harsh penalties for their actions, and these penalties will depend on just how much of another person’s property they took for their own personal gain.
The charges and penalties a person may face after being convicted of embezzlement in the state of Michigan will greatly depend upon the value of the property in question. For extreme Michigan embezzlement cases involving property valued at over $100,000 a person may face a fine of $50,000, or 3 times the value of the property as well as up to 20 years in prison.
A person who engages in a conspiracy to embezzle is equally liable.
MISSING MILLIONS...AND MISSED OPPORTUNITIES
On June 13, 2013, Traverse City attorney Doug Bishop, counsel for the Grand Traverse Academy, issued a “demand letter” to Steven Ingersoll for the return of over $3.5 million.
In his letter, Bishop referenced the Academy's 2012 fiscal report in this statement: "It
appears, at this point, that the amount due is at least $3,548,319.00,
which, to our understanding, was a figure calculated by Dr. Ingersol (sic) as
indicated to be due as of June 30, 2012."
Bishop was clearly referring to this financial note that revealed the "amounts receivable from related parties" was $3,548,319 and revealing he and the Board knew the "party" was Ingersoll:
In his letter, Bishop continues:
"We have been directed by the Board to make a demand for immediate payment for all amounts due from Smart Schools Management, Inc. (Smart Schools) and/or Steve Ingersol (sic). These amounts include, but are not necessarily limited to, any amount formerly designated as a receivable on Grand Traverse Academy’s financial statements.
Please further understand that no GTA funds are to be paid to Smart Schools for any management fee or other service fee of Smart Schools until these amounts are paid in full.
It appears, at this point, that the amount due is at least $3,548,319.00, which, to our understanding, was a figure calculated by Dr. Ingersol (sic) as indicated to be due as of June 30, 2012. To the extent that it is your position that this obligation has been reduced by any sum, we will require documented proof of all repayment transactions, transferring funds from Smart Schools Management, Inc. to Grand Traverse Academy. Such documented proof must include, at a minimum, confirmation of the Grand Traverse Academy account to which the payment was made and the Smart Schools Management, Inc. account from which the payment came. The documentation should include documentation of wire transfer or copies of checks and other transfer documents."
Within days of the letter being sent to Ingersoll and former Academy Board president Mark Noss, the 2013 fiscal year ended on June 30.
When the 2013 financial report was issued in late October, the $3,548,319.00 2012 "related party receivable" had been reclassified as a “prepaid expense” and cut to $2,338,980―a reduction of $1,209,339.
In addition, although Bishop's letter firmly stated that "no GTA funds are to be paid to Smart Schools for any management fee or other service fee of Smart Schools until these amounts are paid in full", the Academy struck a unique deal with Ingersoll.
Did they accept a repayment plan that would require Ingersoll to return the cash he'd five-fingered from the Academy?
While the 2013 audit report revealed that Smart Schools Management agreed that it "owed Grand Traverse Academy an amount classified as a prepaid balance" ($2,338,980), the Academy Board worked out what they termed a "repayment" plan with Ingersoll. 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 Smart Schools' expected future management fees, allowing Ingersoll to pay them back by being paid less.
According to the 2013 financial audit, the prepaid management fee “reductions” were scheduled to be received from Ingersoll's Smart Schools Management, Inc. as follows:
It's now clear from court documents recently made public in Ingersoll's federal fraud case that he was aware of the impending charges well over a year ago, and likely made the agreement with the Academy for repayment while his attorneys were negotiating a plea bargain.
But how was the $3,548,319 reduced to $2,338,980?
Did Ingersoll come up with $1,209,339 or was another, secret deal made?
No one's asked that question yet, so I've sent a Freedom of Information Act query to the Academy Board requesting:
●any and all response letters from Ingersoll/Smart Schools Management, Inc. relating to demand for repayment
●documentation of wire transfers by Ingersoll or copies of checks and other transfer documents
●additional correspondence relating to the Academy’s decision to reduce Ingersoll’s obligation by at least $1,209,339.
The statute of limitations on embezzlement cases in the state of Michigan is 6 years.