}

Friday, March 27, 2015

I WANT A NEW TRIAL! Roy Bradley Files "Me, Too!" Motion; Seeking "Judgment of Acquittal" or New Trial

You can say this about Roy Bradley—"Little Buddy" to Steven Ingersoll's "Skipper"—he's not original.

Just like Ingersoll's lawyer Martin Crandall did, Bradley's criminal defense attorney, Mark A. Satawa, filed a motion on March 24 seeking either an order for judgment of acquittal, or an order for a new trial. 

In the motion, Bradley states that he "joins Ingersoll’s argument with regard to the void for vagueness issues concerning the tax law".  

Vagueness and tax law?

Now that you mention "vagueness", there's a wonderful nugget buried in the 15-page document: by not deducting the Bay City Academy-related labor costs as expenses (you know, the costs he paid in cash, off the books and without contributing the requisite Social Security), Roy Bradley actually overpaid his taxes!

Or so his attorney says.

Let's take a look at the key points in Bradley's motion:

1) Based on the compounding of several errors at trial as to Count 2, the interests of justice require this Court to vacate the conviction against Roy Bradley, enter a verdict of acquittal, or in the alternative, order a new trial.

2) The indictment did not give Roy Bradley adequate notice of what he needed to defend against at trial. This was compounded by violations of the government’s most basic discovery obligations, and resulted in trial by ambush. ("Trial by ambush"? Yes, it really says that!)

TRIAL...AND ERRORS: Did Roy Bradley intentionally file a false tax return with underreported income?

The jury said yes, but Satawa states that the government’s theory as to Count 2 was based on two main factors. First, Bradley allegedly under-reported his income to Uncle Sugar, resulting in a tax of $590,000, and a tax deficit of approximately $300,000. Second, Roy Bradley paid workers in cash, and did not issue W2’s or 1099’s, as required by law. 

Satawa claims, with respect to the first factor, the government’s proofs failed to establish sufficient evidence that Roy Bradley intentionally filed a false tax return with under-reported income. 

In addition, the government also alleged that Steven  Ingersoll failed to recognize $934,000 as taxable income. But Bradley asserts that, based on the evidence introduced at trial, that $934,000 is not taxable to him, any more than it was taxable to Steven "Skipper" Ingersoll. 

Stating that there's a "lack of evidence as to why Mr. Bradley’s revenue should have included this disputed $934,000, or in the alternative why his gross receipts should have been reduced by $934,000."

At trial, the government presented testimony and evidence regarding the alleged under reporting of federal income tax, returns filed by Roy Bradley and inaccurate revenue and deductions. Satawa indicates the government's evidence was offered almost entirely through IRS Revenue Agent Michael Wisniewski.

Wisniewski testified that Steven Ingersoll sent $3,029,000 to Roy Bradley–which was the figure Wiseiewski used as revenue for Roy Bradley and/or Thunder Builders. The evidence at trial related to the disputed $934,000 – or at least $904,000 of it – was that Roy Bradley sent back to Ingersoll $934,000, almost immediately upon its receipt. 

(What...is there a "five-second" rule governing financial hide-the-salami that I should be aware of?)

Satawa asserts that "not only can this not be defined as a taxable event to Roy Bradley, there was no evidence introduced at trial even suggesting that Roy Bradley knew anything" about Steven Ingersoll’s reporting of his income tax in 2011.

Wisniewski explained during the trial that he recalculated the Bradley’s 2011 tax liability, arriving at a government version of the alleged tax liability. Wisniewski reviewed the Bradley’s bank records, focusing on payments made to Thunder Builders and/or Roy Bradley from Steve Ingersoll and/or his companies.
 

Wisniewski testified that he calculated gross receipts for Thunder Builders and/or Roy Bradley by counting all deposits from Steve Ingersoll and/or his companies. For expenses, Wisniewski testified that he relied upon Government Exhibit 124, the Thunder Builders Vendor Summary, as a starting point, and that he made two corrections to that summary to correct what he described as double payments. 

Wisniewski testified that based on his calculations, the Bradleys had a tax deficiency of approximately $300,000. 

But Satawa asserts that in order to reach a revenue figure of over $3,000,000, income of almost $2,000,000, a tax due of approximately $590,000, and a tax deficit of approximately $300,000, Wisniewski's calculation relied on “facts” or assumptions that were unfounded.

First, that the $934,000 that passed from Steven Ingersoll to Roy Bradley, and then from Roy Bradley back to Ingersoll a few days later, is taxable to Roy Bradley. Satawa points out that "this alone represents approximately $300,000 in unreported and unpaid taxes to the Government."  Satawa claims the government "presented no evidence to support this conclusion."

Satawa asserts that the summary of Thunder Builders’ expenses, presented by the government during the trial, were in fact "under-reported." 


Underreported...overreported! Who can keep this stuff straight?

And finally, Agent Wisnieski acknowledged that his calculations did not give Roy Bradley credit as an expense any of the cash labor he paid to workers. As to the allegation that Mr. Bradley was convicted of Count 2 because he paid his workers in cash, Satawa says there are two separate and independent issues with these allegations. 


Here's one of them: with respect to IRS Forms 1099/W-2s, Satawa claims that "Agent Wisniewski’s calculations confirm that the US Treasury actually benefitted from Roy Bradley not taking a deduction for labor paid in cash." 

Yes, by not deducting the roughly $6.00 an hour he paid his employees, Bradley actually did Uncle Sugar a solid!

WTF?

Citing his testimony at trial, Satawa says Agent Wisniewski calculated "approximately $270,000 as the amount of cash labor paid to employees by Mr. Bradley." 

Despite that, Wisnieski admitted that he did not give Mr. Bradley any deduction for any labor expense – resulting in Mr. Bradley over-reporting his income by almost $300,000, and therefore over reporting his taxes by about $100,000. (Ah, yes...but did Bradley actually pay his taxes?)

I can't decide—is this legal turd-polishing or just your average, everyday douchebaggery?

TRIAL BY AMBUSH: Did Roy Bradley have adequate notice of what he needed to defend against at trial?

When IRS Revenue Agent Wisniewski testified at trial, he stated that he relied upon Government Exhibit 124, the Thunder Builders Vendor Summary, as a starting point, and that he made two corrections to that summary to correct what he described as double payments. Wisniewski testified that based on his calculations, the Bradleys had a tax deficiency of approximately $300,000.

During his testimony, Wisniewski and the government referenced a document that he had prepared summarizing income and/or expense figures attributed to Roy Bradley for the 2011 tax year.

Satawa asserts that neither the government’s proposed “amended” 2011 tax return, nor the income and expense summary document(s) on which it is based upon, were ever provided to the defense team in discovery.  


In addition, Satawa claims that the "Second Superseding Indictment alleged the overt acts relating to Mr. Bradley to be payment of construction workers employed in cash and failure to report wages paid to workers to the Internal Revenue Service or the Social Security Administration."

Continuing, Satawa claims that "never once was underreporting income alleged as an overt act relating to Roy Bradley in the Second Superseding Indictment, or was it argued to the objective of the alleged conspiracy." 


Satawa says Roy Bradley prepared for trial, and fashioned his defense on what the attorney claims was the government’s "repeated notice" with regard to Bradley's involvement in Count 2-Conspiracy to defraud the Government. 

However, Satawa claims that Agent Wisniewski’s testimony on February 27, 2015 was the "first suggestion by the government that Roy Bradley’s involvement in Count 2 included the filing of his own 2011 tax return, or that extended his involvement extended beyond paying the workers in cash in any way."

While the government's response to the Bradley and Ingersoll motions has not been made public, U. S. District Judge Thomas L. Ludington has scheduled a motion hearing for May 6 at 3:00pm.

Stay tuned...

Although it appears that he's not yet in federal custody, Bradley's now in the Federal Inmate Locator database. Bradley was found guilty by a jury on December 2, 2014 of four felony charges related to the illegal removal of material containing asbestos at what is now the Bay City Academy.



Thursday, March 26, 2015

WE WANT A NEW TRIAL: Convicted Tax Cheats Steven Ingersoll and Roy C. Bradley, Sr. File Motions In U. S. District Court Seeking Judgment of Acquittal, New Trial!

BREAKING NEWS! MOTION HEARING SET FOR MAY 6 @ 3:00pm!

- Steven Ingersoll Files "Judgment Of Acquittal" and "Motion For New Trial"
- Roy C. Bradley, Sr. Says "Me, Too!"
- "Insufficient evidence", "Government misconduct" cited
- Ingersoll floats the "loan" theory...again!

Steven Ingersoll's criminal defense attorney, Martin E. Crandall, filed a motion on March 24 seeking an order for judgment of acquittal, or an order for a new trial. 

In addition, Ingersoll's co-defendant Roy C. Bradley, Sr. joined the motion. Filed on behalf of Bradley by his attorney, Mark Satawa, the "joinder" motion claims the "government did not provide sufficient evidence that Roy Bradley knowingly joined a conspiracy with the intent to defraud the United States."

Part 1-STEVEN INGERSOLL'S ARGUMENTS: VIOLATING THE DUE PROCESS CLAUSE?

Ingersoll's motion lists three "separate and independent reasons" for either a judgment of acquittal as to Counts 2, 6, and 7 of the Superseding Indictment, or ordering a new trial.

First, Crandall claims Ingersoll's conviction violates the Due Process Clause because the statutory provisions at issue are "vague or highly debatable" or the governing law is "completely unsettled by any clearly relevant precedent."

Second, Crandall argues that the conviction must be set aside because of the "improper comments made by the prosecutor during opening and closing arguments.

Third, a new trial must be ordered because the prosecution made "repeated remarks in both opening and closing that described the government’s burden of proof as mere preponderance of the evidence, and further described the indictment itself as the standard against which the evidence must be judged".


1) THE LAW GOVERNING THE DISTINCTION BETWEEN SHAREHOLDER LOANS/TAXABLE DISTRIBUTION "TOO VAGUE TO GIVE FAIR NOTICE" 

During the case, the prosecution argued that certain distributions from wholly-owned companies to Steven Ingersoll were taxable to Ingersoll. The defense theory was that these distributions were "shareholder loans". Crandall claims that, based on the evidence before the jury, Ingersoll did not have "fair notice" that his tax reporting was improper. 

Citing a laundry list of court decisions as precendent (Sanders v. FreemanUnited States v. Critzer, United States v. Mallas), Crandall states that "the disagreement regarding taxes owed by Dr. Ingersoll properly belongs in a civil suit, not in a criminal prosecution."

Specifically, the motion states that "the Court gave the jury an eight-factor test for determining whether the distributions were shareholder loans." The motion does not list the factors, and I was not in court when the jury was being instructed, but the "bona fide loan issue" has been addressed in various income tax cases.

Courts have applied multiple factors to determine whether a transfer of funds was a loan or income, including whether: (1) there was a promissory note or other evidence of indebtedness, (2) interest was charged, (3) there was any security or collateral, (4) there was a fixed maturity date, (5) a demand for repayment was made, (6) any actual repayment was made, (7) the transferee had the ability to repay, (8) any records maintained by the transferor and/or the transferee reflected the transaction as a loan, and (9) the manner in which the transaction was reported for Federal tax purposes is consistent with a loan. 

The loan graphic shown above was created for "Money Menage A Trois-Part 2", a story that was published on this blog January 20, 2015. The graphic presents Ingersoll tax attorney Jan Geht's own answers to an eight-factor loan test in Ingersoll's pre-trial defense memorandum. (Maybe Crandall forgot to read that document.)

For example, in the motion Crandall cites a government exhibit that showed Ingersoll had a net worth of $1.9 million and his income tax returns showed him as having adjusted gross income of $356,714 in 2009, $283,741 in 2010, and $334,594 in 2011 as proof of Ingersoll's "independent ability to repay the loans."

While Crandall's motion did not address the source of  Ingersoll's "loans", the stunning March 3 testimony of Meg Hackett may have provided the answer. Hackett, a Grand Rapids attorney representing the Grand Traverse Academy board, testified on March 3 that during a May 20, 2013 Academy board meeting, Steven Ingersoll asked the board to characterize his $3.5 million dollar indebtedness to the charter school as a “loan”. 

When asked by the prosecution why Steven Ingersoll needed to have his debt “recharacterized”, Hackett said Ingersoll told her he “needed the sums characterized as a loan for reasons related to an IRS investigation and/or audit.”  Ingersoll was clearly aware of the ongoing federal investigation into his finances. 

Discussing his $3.5 million dollar debt (and referring to spreadsheets detailing the sums he had transferred from the Grand Traverse Academy's accounts to his personal bank accounts and those of Smart Schools Management), Hackett said Steven Ingersoll told those in the meeting that he “could not afford to pay that (his Academy debt) and his taxes all at the same time”, and needed to have the debt characterized as a loan.

The government alleged during the trial the so-called “inculpatory statements” made by Steven Ingersoll on May 20, 2013 were evidence that showed, or tended to show, Ingersoll’s involvement in an act, or evidence that can establish guilt.


But back to Martin Crandall and Steven Ingersoll: in the motion, Crandall points up the "evidence showed that there was an actual act of repayment [to the Grand Traverse Academy] of at least $700,000 in 2011. In fact, the only plausible explanation for the flow of money from Dr. Ingersoll to Smart Schools, Inc. to Smart School Management in June of 2011 is that this flow served as repayment of loans."

Or could it be that the "repayment", made on June 30, 2011 (the last day of the Grand Traverse Academy's fiscal year) was a last-minute, desperate attempt to prevent the Academy from plunging into a deficit?

Hmmm! Miss Fortune will have to wait and see what the Government says in its response to this motion.

2) PROSECUTOR'S OPENING AND CLOSING ARGUMENTS: THE "BALANCED SCALES" AND THE "PUZZLE METAPHOR

Crandall stated that the prosecution twice suggested to the jury that its burden of proof was mere preponderance of the evidence: once in opening, then once during closing rebuttal. 

During opening, the prosecutor described the government’s burden of proof as "a balanced scale needing only to be tipped one way or the other. If you think of the scales of justice, presumption of innocence doesn’t mean we start with the scales tipped one way and the government has to tip it the other way. It means we start even, an empty or balanced situation, and the purpose of the trial is to present the evidence that will tip that one way or the other and you, ladies and gentlemen, ultimately decide which way that evidence tips."

Calling the prosecutor’s “balanced scales” metaphor used in opening, and the “puzzle” metaphor for reasonable doubt made in rebuttal, Crandall asserted both "invited the jury to give improper weight to the prosecutions’ personal views of the evidence and improperly described the government’s burden as mere preponderance of the evidence."

Could it be that Crandall, who began his opening statement by waving around an aerial view photo of the Grand Traverse Academy, claiming that everything at the GTA was “transparent, open and obvious, may merely be jealous of the skillful, evocative hand gestures the Assistant U. S. Attorney employed to underscore her points?

3) BURNING DOWN THE HOUSE: VICKI KUNDINGER'S CREDIBILITY QUESTIONED (My husband prepared the tax returns for Mr. Steve Ingersoll until my husband died...and then after that I had a house fire)

Claiming that the Assistant U. S. Attorney's comments regarding the testimony of one Vicki Kundinger (the widow of Steven Ingersoll's former accountant, Duane) were "improper", Crandall included the following excerpt from the government's closing argument:
This is after Duane Kundinger is dead -- and, by the way, that was yet another act of concealment or defrauding or attempted defrauding committed in the course of this case, where yesterday Steven Ingersoll calls a witness to say, yes, my husband prepared the tax returns for Mr. Steve Ingersoll until my husband died, and then after that I had a house fire.
Now, the obvious intent of that information, bringing that testimony, was to suggest that that's where Steven Ingersoll's records went, but then today you see the letter, Exhibit 427, 'not this one -- and I won't go back to 427, but the letter. Well, in fact, May 10th, before -- of 2010, before Mr. Kundinger died, he had returned not just the tax returns but the records back to Steven Ingersoll. So that was yet another intent to deceive you and you can draw inferences from that, too.
 
Crandall maintains the letter referenced by the prosecutor (shown above) was related only to work Duane Kundinger had done for Smart Schools, Inc.  The motion states it "expressly referenced only the preparation of Form 1120S (S Corp. U.S. Income Tax Return) and a Michigan Business Tax Annual Return (form 4567)", and Crandall asserts that Duane Kundinger returned some documents related to preparation of Smart Schools, Inc.’s 2009 tax returns – not that all documents in Mr. Kundinger’s possession relating to Ingersoll or any of his businesses were also returned.


Tomorrow, in Part 2, Miss Fortune looks at Roy Bradley's motion, submitted by his attorney, Mark Satawa.

I hope there's blueberry pie!