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Saturday, November 29, 2014

STEVEN INGERSOLL'S THIRD TRIAL DELAY: Start Reportedly Moved From December 2 to February 10, 2015

Although official US District Court filings do not yet independently confirm the information, the Traverse City Record-Eagle is reporting that Steven Ingersoll's federal fraud trial has been delayed a third time, with the start date moving from December 2 to February 10, 2015 (just in time for me to break out my snazzy resort wear wardrobe!)

In an article posted online, the Record-Eagle's Michelle Merlin (who's clearly been reading this blog!), claims the delay was granted after Ingersoll’s attorneys "requested more time to review the government's evidence"―an argument also known in legal circles as "The Dog Ate My Homework".

Merlin's source appears to be Ingersoll's attorney, Traverse City attorney Jan Geht, who is quoted in the article and likely provided the heads-up on his client's trial delay. Before he was indicted on April 10, Ingersoll's defense team (including Geht) spent nearly a year unsuccessfully negotiating a plea deal on his behalf.

"We wanted more time to prepare a defense to the tax evasion count based on the government data," said Geht. "We always thought that it had to do with the relationship between Grand Traverse Academy and Smart Schools Management, but it looks like once (the government) provided us with information, that it's more about his relationship with his wholly owned companies." 

In addition to Geht, a CPA and former tax division trial attorney for the U.S. Department of Justice, Ingersoll is represented by Detroit criminal attorney Martin E. Crandall. 

Crandall specializes in white-collar criminal defense.

THE BACKSTORY

In the Grand Traverse Academy's 2013 financial report, Ingersoll, on behalf of his Smart Schools Management firm, 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 SSM to work off the prepayment by “partially reducing cash transfers for future management fees through June 2016”. 

After dithering publicly for months about its supposed "plan" to collect the missing $1.6 million owed to the Grand Traverse Academy by Steven Ingersoll's Smart Schools Management, Inc., the Traverse City charter school's 2014 fiscal audit reveals its Board decided to just "write it off".

The so-called "prepaid management fees" were to have been received from Steven Ingersoll as follows
―hardly "chipping away" when you realize Ingersoll refused to return any money while the Board continued to pay him:

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

The Academy Board made the deal with SSM just weeks after demanding repayment of "at least $3,548,319.00".

Formerly carried on the Academy's books in 2012 as a "related party receivable", the $3.5 million dollars was quietly reclassified in 2013 as a "prepaid expense" and reduced to $2.38 million.


(Miss Fortune is currently investigating the reason for the reduction.)

The Record-Eagle article states that the Grand Traverse Academy board members and former board president Mark Noss now have "a more relaxed view of the money they said Ingersoll owed them".  Noss now manages the Academy as head of its management provider, Full Spectrum Management, LLC.

Noss was officially awarded his management contract on March 19 during an early-morning Board meeting, but actively remained a member of the Grand Traverse Academy Board. Noss participated in the April meeting in a dual role as both board member and management company head—an arrangement that is illegal in Michigan and expressly prohibited by the Academy Board's ethics policy. 

In addition, although the Academy board stated its intention to "cut ties" with former Smart Schools employees in a June 27 resolution, urging Noss to "reconsider any employees, especially those in management, with close ties to Smart Schools", Ingersoll's daughter-in-law, Gretchen, is reportedly still handling Academy finances for Full Spectrum Management. 

In addition to her job with Mark Noss, Gretchen Ingersoll is also currently employed by Steven Ingersoll's Smart Schools Management, Inc. And in another related development, Noss's son-in-law, Brian Lynch, was named by Ingersoll to head the Bay City Academy mere days after Noss took over the Grand Traverse Academy.

THE GOVERNMENT'S CASE...AND INGERSOLL'S DEFENSE

According to the government, this case began in 2009 when Steven Ingersoll “caused another charter school that he owned or controlled—the Grand Traverse Academy—to advance him funds that needed to be repaid”. 

Counts 6 and 7 of the April 27 superseding indictment “relate specifically to those advances and Steven Ingersoll’s personal income tax treatment of those transactions in 2009 and 2010.” The superseding indictment alleges that Steven Ingersoll either mischaracterized or omitted the advances from his personal income tax returns.

Ingersoll, then acting in concert with Roy C. Bradley, Sr., “conspired” to “induce Chemical Bank, an FDIC insured depository institution, to approve a $1.8 million construction line of credit loan to Madison Arts L.L.C. to finance the construction work for the Bay City Academy in Bay City.”  (The shell corporation 'Madison Arts LLC' was formed on December 16, 2010 by Ingersoll.)


After diverting approximately $932,000 from the Chemical Bank loan, Steven Ingersoll then transferred $704,000 to Roy Bradley and Tammy Bradley’s construction company’s credit union account. Tammy Bradley then transferred  $704,000 to Gayle Ingersoll’s business account.

Gayle Ingersoll then transferred the $704,000 to Steven Ingersoll and Deborah Ingersoll’s joint, personal bank account at Fifth-Third Bank. Once the $704,000 was in Steven and Deborah Ingersoll’s personal account, Steven Ingersoll was able to use that money to partially repay the Grand Traverse Academy.

The government alleges the bank fraud conspiracy began when Steven Ingersoll submitted a $704,000 draw request to Chemical Bank supported by Roy Bradley’s certification of construction work at the Bay City Academy's Madison Arts campus.

Rather than using the loan for the Bay City construction project, Steven Ingersoll used loan proceeds to partially repay the advances from Grand Traverse Academy. The superseding indictment alleges that all five of the defendants “conspired to a series of transactions that diverted at least part of the funds required to be used on the Bay City Academy project to the Ingersolls’ personal bank account at Fifth-Third Bank.”


While the government has previously stated its position that "Steven Ingersoll misused his authority to improperly advance himself funds from the Academy", an October filing revealed the government considers the Grand Traverse Academy's practice of reflecting those advances in its fiscal audits as "accounts receivable" as "prohibited by law".

And while Jan Geht is focused on defending Ingersoll against the tax evasion counts, longtime business associate Mark Noss appears to employ the usual double-talk in his attempt to defend Ingersoll in the court of public opinion.

The theory du jour?
“It was the management fee that was budgeted for Smart Schools, and as the fiscal year came to a close and there was not enough, the books were not going to balance, Smart Schools was generous enough to either pay back or pledge back money over a period of time,” said Noss in the article.

While Noss uses the "hand in the cookie jar" excuse, he neglects to explain (likely because the Record-Eagle reporter didn't pose the question) the financial resolution of that "generous" receivable.

The Academy receivable was satisfied by Ingersoll's Smart Schools Management, Inc. in the first 60 days of the subsequent fiscal year with earnings drawn against the prospective fiscal year's budgeted Academy funds.

That's right—Ingersoll used taxpayer funds provided by the federal government and the State of Michigan to satisfy his "generous" receivable.

Money out, money in! 


SIR, MAY I REMIND YOU THAT YOU ARE UNDER OATH!


It will be interesting to observe Mark Noss on the witness stand next February, attempting to answer a federal prosecutor's incisive questions about the June 13, 2013 demand letter.

Wonder if he'll have such a "relaxed view" about that $3.5 million when he's under oath? 










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