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Monday, January 19, 2015

MONEY MENAGE-A-TROIS: Part 1 Of An Exclusive Report From Miss Fortune

THE MONEY MENAGE A TROIS: Smart Schools Management, Inc.--Grand Traverse Academy--Smart Schools Incorporated


Part 1 in my exclusive series: A White Collar Crime Three-Way!


A salacious scandal often attracts avid interest, especially if it involves a ménage-à-trois... and fraud.

And this story has both! 

On January 8, Judge Thomas L. Ludington ordered Steven Ingersoll (and the four co-defendants in his upcoming federal fraud trial) to provide the court with “trial memorandum” explaining his defense theory.

Miss Fortune has analyzed Steven Ingersoll's document, submitted by attorney Jan Geht and made public on January 15, and brings you this exclusive report.


SSM-GTA-SSI: A WHITE COLLAR CRIME THREE-WAY?

Judge Ludington ordered Ingersoll to address the following issues:
 

Count 2 (Income Tax Evasion)

 (1) The alleged economic purpose, such as Ingersoll’s apparent need for cash, for the transactions outlined in the government’s April 23, 2014 superseding indictment; and

(2) the alleged legal justification, if any, for the proposition that the short-term “money flows” were not taxable income.

Counts 3, 4, and 5 (Wire Fraud)

 
The alleged economic purpose, if any, of the wire transactions.
 

Counts 6 and 7 (Income Tax Evasion)

Ludington ordered Ingersoll to address (i) the economic purpose, if any, for obtaining loans from SSI and SSM, (ii) the economic purpose, if any, for SSI and SSM providing the loans to Steven Ingersoll; 

and (iii) any of the other factors listed in Roth Steel Tube Co. v. Commissioner, 800 F.2d 625 (6th Cir. 1986) or in the draft jury instructions for the Counts that may be relevant to determining the characterization of the advances made to Steven Ingersoll.

Today's report focuses on Count 2, and in Part 2 I will analyze the millions in “loans” Ingersoll is alleged to have made to himself from the Grand Traverse Academy's taxpayer funds.

ONLY DEAD FISH GO WITH THE "MONEY FLOWS", DONTCHA KNOW?

Geht waved away any suspicions about the “money flows”, claiming that for two of the three transactions at issue in the case ($200,000 and $704,000), Ingersoll was merely drawing “down the funds to reimburse himself for money he [emphasis added] already spent on this project.”

Geht asserted that according to the terms of the Chemical Bank construction line of credit loan, “Dr. Ingersoll could only receive money after spending it himself [emphasis added]. 

As long as he fulfilled his obligation to spend at least $2,272,000 over the course of the project, he was entitled to receive $1.8 million back as reimbursement of money spent.” Geht continued, stating that “Dr. Ingersoll could only receive the proceeds of the loan” after submitting “sworn statements, waivers of lien, and any other reasonable documentation, prior to draws on the line.

[NOTE: Ingersoll borrowed the $1.8 million from Chemical Bank to use for construction costs to be matched by his “equity contributions” of $470,000. Although the Ingersoll defense theory memorandum doesn’t identify or define those “equity contributions”, it likely includes Ingersoll’s investment in the purchase of the Madison Avenue church building. Bay County property records reveal a purchase price of $270,000, and the county Register of Deeds office confirms a $270,000 mortgage was recorded against the property.]

I believe Geht’s defense theory is misleading, and does not come close to addressing the government’s allegations regarding the string of “draw payments” Steven Ingersoll requested from Chemical Bank—with documentation signed by his co-defendant Roy Bradley — and the flurry of electronic transfers that followed.

Let’s take a closer look at two of those “draw payments”.


$704,000: NEXT STOP...ROY BRADLEY'S CREDIT UNION ACCOUNT! STEP LIVELY AND WATCH THOSE CLOSING DOORS!

In June 2011, the government alleges that $704,000 traveled (after Bradley and Ingersoll had submitted “draw requests”) from Chemical Bank to the Madison Arts account, before being wired by Steven Ingersoll to Roy Bradley’s construction company credit union account. 

From there, Roy Bradley’s wife, co-defendant Tammy Bradley, wired $704,000 from the company’s credit union account to Gayle Ingersoll’s business account. (Gayle Ingersoll is a co-defendant, and Steven Ingersoll’s brother.)

Shortly after receiving the $704,000, Gayle Ingersoll wired it to Steven Ingersoll’s joint, personal account.

In its superseding indictment, the government alleges Steven Ingersoll used that $704,000 to “reduce his indebtedness to the Grand Travese Academy resulting from advances Steven Ingersoll had made from funds belonging to the Grand Traverse Academy.”


(Doesn’t everybody wash money transfer hundreds of thousands of dollars through multiple financial institutions with the help of four accomplices people? Yeah, I always move my money that way!)

Attorney Jan Geht slipped up, and revealed his bad hand in the defense memorandum by contradicting his assertion that Ingersoll was entitled to receive reimbursement after spending the money himself. 

Here's how.

The documents Geht identified that Ingersoll produced to get his so-called “reimbursement” — “sworn statements, waivers of lien, and any other reasonable documentation” — are the due diligence items that accompany a construction line of credit loan's contractor draw process.

And if Bradley was providing a “sworn statement” to Chemical Bank (an itemized list of all individuals and companies who provided improvements, materials or labor toward the Bay City Academy construction project and an accounting of all monies due to those parties) when requesting payment, he was also providing “waivers of lien” — evidence of Bradley’s payment for labor and materials and not Steven Ingersoll's

Booyah! Score one for Miss Fortune! 

STEVE, ROY, THE BIKE SHOP...AND A 9-MONTH WAIT!

In the second transaction, a $30,000 payment from Roy Bradley to Steven Ingersoll is at issue.

Geht describes that transaction the way we all hope a doctor would a coconut-sized tumor — “benign”, explaining that Ingersoll had sold Roy Bradley a “bike shop” for $35,000. 


Reportedly providing Ingersoll with a $5,000 down payment, Bradley paid the remaining balance in these steps:

In May 2011, Bradley wrote a $30,000 check to Gayle Ingersoll, not his brother Steven. 

Gayle Ingersoll deposited Bradley’s check, and subsequently wrote a check for $30,000 to his brother Steven.

In early June 2011, Steven Ingersoll’s wife, co-defendant Deborah, deposited the $30,000 check from Gayle Ingersoll, along with $9,000 cash into the joint, personal bank account she shared with Steven Ingersoll at Fifth Third Bank. (The government alleges Deborah Ingersoll made three $9,000 “structured deposits” into the joint Fifth Third bank account, using different branches to make the deposits.)

Structuring includes the act of parceling what would otherwise be a large financial transaction into a series of smaller transactions to avoid scrutiny by regulators or law enforcement. Structuring often appears in federal indictments related to money laundering, fraud, and other financial crimes. Smaller transactions (under $10,000 in cash) are executed in an amount below the statutory limit that normally does not require a bank or other financial institution to file a report with a government agency. 

And the dirty little secret about multiple $9,000 deposits at different branches of the same bank? They still draw attention.

Hey, everybody pays for real estate that way, right?

Steven Ingersoll’s attorney, Jan Geht, states that since “Roy Bradley is entitled to earn income for his work, there is nothing surprising about him using a part of those proceeds for personal reasons.”

But even if you accept that theory, riddle me this: why would Bradley wait 282 days after he paid Ingersoll the $30,000 to have the “bike shop” title officially transferred to him? 

Is it possible this is just another cover story?

Maybe!

Let’s look at the actual Bay City real estate transaction Geht describes as the “bike shop” sale.

THUNDER CYCLE IS THUNDERSTRUCK: ROY BRADLEY'S 9-MONTH WAIT FOR HIS BIKE BABY

Roy Bradley runs Thunder Cycle Custom Works out of a building located at 510 Columbus Avenue in Bay City. 

Although the government alleges Bradley started the $30,000 real estate payment check process in May 2011, Ingersoll didn’t “quit claim deed” the property to Bradley until well over nine months later — on February 7, 2012.

Yes, Roy Bradley is entitled to earn income for his work and there is nothing surprising about him using a part of those proceeds for personal reasons.

But why would he (or anyone) wait 282 days to get a receipt for his $30,000 check — a deed from Steven Ingersoll verifying Bradley legally owned the Columbus Avenue “bike shop” property? 

Even Miss Fortune can't answer that question!

COMING TOMORROW: PART 2-Embezzlement or Loans?

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