ANOTHER MISS FORTUNE EXCLUSIVE REPORT!
“The Academy expressly acknowledges that SSM’s expressed hope to pay the Academy $1.6 million in the future is a mere promise and does not create any rights or entitlements in the Academy.”
At the Grand Traverse Academy's July 18, 2014 Board meeting, president Brad Habermehl read a prepared statement in support of Steven Ingersoll (shown at left) that seemed to come out of nowhere.
But did it really?
A FULL AND FINAL RELEASE OF ALL CLAIMS BY THE ACADEMY
In early July, months after the Grand Traverse Academy had terminated its management contract with Steven Ingersoll's Smart Schools Management, Inc., Ingersoll's attorney, Jan Geht, drafted a proposed settlement agreement and sent it to Academy attorney Kerry L. Morgan for review.
Morgan had replaced Doug Bishop as the Academy's “counsel of record” prior to Bishop's formal July 21 resignation. In a resignation letter to Academy Board president Brad Habermehl, Bishop explained he did not wish to continue as counsel of record for the Academy, a move he said was “agreeable to the Board”.
The settlement agreement sought to release Ingersoll and Smart Schools Management (“SSM”) from having to repay the outstanding $1.6 million he owed the Academy.
NOTE: The remaining $1.6 million was due by Ingersoll from an estimated $3.5 million related party receivable debt. The government alleges Ingersoll diverted the money from the Academy, into Smart Schools Management, Inc.'s bank accounts, before moving it through another Ingersoll-controlled business (Smart Schools Incorporated), where it ultimately landed in Ingersoll's personal bank accounts.
While the $3.5 million was originally classified in the Academy's 2012 audit as an accounts receivable, a “prior period adjustment” that appeared in the Academy's 2013 audit revealed the remaining “balance” ($2.38 million dollars) had been reclassified as prepaid expenditures and nonspendable fund balance,
In return, Ingersoll would “release the Board and the Academy from any claim relating to the cumulative difference between the contractual management fee and the actual management fee (of approximately $2.8 million) that SSM may be legally entitled to as a result of the Reimbursement Resolution.”
The reimbursement resolution? What's that?
Leave it up to Miss Fortune to tell you...and show you!
THE REIMURSEMENT RESOLUTION: May 4, 2012
The Academy Board passed
a resolution on May 4, 2012 maintaining a management fee cap at 12 percent of revenue, among other things.
As you can see at left, the resolution “gratefully” acknowledged the many contributions, financial and otherwise, of SSM and Ingersoll.
If you read closely, the resolution reveals the Academy Board agreed that it intended “to extend to Smart Schools Management, Inc. its financial resources in an amount equal to 12% of total revenue as financial conditions allow.”
You know what they say about good intentions — the road to hell is paved with them.
And two years later, those “good intentions” came back like karma, ready to reawaken the Academy Board with a bracing kick.
HEADS I WIN, TAILS YOU LOSE: THIS IS FAIR, RIGHT?
The agreement drafted by Geht, shown at left and obtained by Miss Fortune from Lake Superior State University's charter school office by a Freedom of Information Act request, asks for the moon—but doesn't promise the stars in return!
Among the highlights are these clauses, reproduced verbatim:
The Board, recognizing the hazards (and unwelcome publicity) of litigation and all the support that SSM has shown to the Academy over the years, agrees to release the SSM from any obligation to reduce the Non-Spendable Fund Balance of approximately $1.6 million in return for the SSM’s agreement to release the Board and the Academy from any claim relating to the cumulative difference between the contractual management fee and the actual management fee (of approximately $2.8 million) that SSM may be legally entitled to as a result of the Reimbursement Resolution.
Hey, there's the infamous May 4, 2012 resolution! Although it was described in the Academy's 2013 fiscal report as a method to control costs by setting a management fee cap at 12% of revenue, it sure doesn't sound like Geht bought into that restriction.
Instead, Geht plays hardball and inserts this clause:
The board agrees that, having terminated its contractual relationship with SSM, the Academy may be no longer entitled to require SSM to reduce the Non-Spendable Fund Balance.
In addition, Geht reminds the Academy of its “pay it forward” scheme that enabled Ingersoll to appear like he was making donations to the school bought him much more than good will:
The Board agrees that the voluntary year-end adjustments by SSM were made based on an explicit understanding that SSM would continue serving as the Academy’s management company, would continue earning its contractual management fee, and would reduce the Non-Spendable Fund Balance utilizing funds obtained through its management contract with the Academy.
And if that wasn't enough, Geht steps onto the crazy train and repeats the fiction (debunked on this blog) that the $1.6 million Ingersoll owed the Academy was somehow part of his pay-it-forward, faux financial contribution scheme.
As we now know, the $1.6 million was actually the remainder of a $3.5 million dollar “related party receivable” owed by Ingersoll to the Academy.
Although the $3.5 million was originally classified in the Academy's 2012 audit as an accounts receivable, a “prior period adjustment” that appeared in the Academy's 2013 audit revealed the “balance” ($2.38 million dollars) had been reclassified as prepaid expenditures and nonspendable fund balance—giving the Board the cover it needed to continue the fiction that Ingersoll had “donated” the money.
This clause, included in the proposed settlement document, confirms my point:
The Board agrees that SSM, in fact, satisfied all but $1.6 million of its cumulative $4.9 voluntary year-end adjustments.
In an effort to further soften up the Board, Geht switches to fluent Weasel, and drops this weaselific bit of doggerel into the proposed agreement:
The Board has been advised by SSM that it intends to donate to the Academy $1.6 million (or a portion thereof) as a charitable contribution in the future but the Board recognizes that the SSM’s ability to do so hinges on the outcome of the dispute between Dr. Steven Ingersoll and the federal government.
So a federal fraud trial where a conviction on even one of his seven counts could send Ingersoll to prison for years is just a “dispute”?
Attorney Kerry Morgan forwarded the proposed agreement, which included prepaid expense/contributions calculations by Geht that deviated significantly from those published in the Academy's fiscal audit and the Board's “history” document, to Lake Superior State University's charter school office.
Mark L. Dobias, LSSU's attorney, responded with a terse letter to Morgan dated August 18, explaining he had reviewed the documents with Nick Oshelski and Rebecca Clawson.
The verdict? The LSSU charter school office did not approved the proposed settlement or resolution.
And although Nick Oshelski recently confirmed in an email that no agreement was ever signed, on September 12 the Academy Board announced that it had decided to wait until after Ingersoll's federal trial to sue Smart Schools in an attempt to recover the $1.6 million still missing.
Apparently changing their minds yet again, the Academy Board revealed in its 2014 fiscal audit that the $1.6 million had been officially written off.
SO WHAT ABOUT THAT (FORMERLY) SECRET DELAWARE CORPORATION, MISS FORTUNE?
It appears that Steven Ingersoll had formed a corporation in Delaware in 1994, calling it "Integrated Visual Learning".
And how do I know that it's Ingersoll?
Easy! Integrated Visual Learning holds copyrights on a number of documents, including this one:
It reveals that an IVL vision screening course instructor handbook was published in Bay City, Michigan.
Well, even though I can't access information to identify the officers of this Delaware corporation, the feds will have no problem!