-GTA BOARD HAS KNOWN FOR YEARS RECOVERY UNLIKELY!
Interlochen Public Radio reported today the Grand Traverse Academy Board could finally be ready to recover $1.67 million dollars from convicted felon Steven Ingersoll...maybe.
However, IPR reveals the Academy Board President Brad Habermehl is “not confident they (the Board) will be able to recover money” from Ingersoll.
And it’s no wonder the Board would say that — a slippery sidestep whose hidden meaning zipped right over the head of the reporter.
Habermehl knows more than he's letting on...way more!
On August 25, 2014, Academy Board attorney Kerry Morgan told the Traverse City Record-Eagle he'd been looking into how and whether it was even possible for the school to retrieve the outstanding $1.67 million from Smart Schools: “The fundamental question is whether there’s a legally enforceable obligation for that money to be paid.”
In response to my September 2, 2014 email asking for clarification about a “legally enforceable obligation”, Morgan explained the concept:
“GTA had a management contract with Smart Schools Management, not Ingersoll. Smart Schools Management (SSM) is a corporation, Ingersoll an individual. GTA’s recovery if any must arise from under the management contract.
The fact that Ingersoll is the owner SSM does not make him personally liable on a contract between SSM and GTA. This is the nature of corporate liability.
Statements that ‘Ingersoll owes GTA x dollars’ are misleading. If the Ingersoll personally owes GTA any money it must arise from some legal obligation. An oral promise without valid consideration is simply not an enforceable legal obligation.”
Take a real close look at this sentence: “GTA’s recovery if any (emphasis added) must arise from under the management contract.”
Looks like the Academy might be out of luck, but that's no surprise to anyone on the Board.
A REPAYMENT PLAN WITHOUT A WRITTEN CONTRACT: It's Only Worth The Paper It's Printed On
As I revealed exclusively on this blog September 2, 2014, the Grand Traverse Academy never amended Ingersoll’s Smart Schools Management contract with the agreed upon details of the three-year fee “repayment plan” outlined in the Academy's 2013 fiscal annual report, apparently leaving the charter school without a (let's all say it together) “legally enforceable obligation for that money to be paid.”
Oh, and a friendly oversight that left a giant loophole big enough for Steven Ingersoll to walk through.
And how did Miss Fortune learn the Grand Traverse Academy had not amended its management agreement to include the repayment plan with Steven Ingersoll's Smart Schools Management?
Academy Board President Brad Habermehl confirmed that fact...directly to me in an email!
Habermehl, responding in an email to my Freedom of Information Act request seeking a copy of any agreement/contract confirming the details (and contingency plan) of Smart Schools' repayment of a $2.38 million amount classified in the Academy's 2013 fiscal audit as a "prepaid balance", confirmed there were "no documents that exist beyond the 2013 audit, which can be found on the Academy's website, pertaining to your request."
In the July 18, 2014 Traverse City Record-Eagle, Habermehl was quoted musing out loud about a possible recovery plan: “Do we sue Smart Schools or take it to court? What are our options? The $1.6 million has been haunting us for over a year now.”
However, during the Academy’s Board meeting the previous afternoon (July 17), Habermehl read the following statement supportive of Ingersoll into the official record:
“If not for the efforts and intellectual contributions of Dr. Steven Ingersoll and Kaye Mentley and Smart Schools’ willingness to rebate its earnings, GTA would not likely exist today. Over the years GTA needed substantial financial support and Smart Schools always supplied what the Academy needed.
Analysis of GTA’s audited financial statements and board minutes from June, 2004 through March, 2014 shows that Smart Schools gave GTA $3.3 million from its budgeted and contractually authorized earnings. Additionally, Smart Schools planned to rebate another $1.6 million from its future earnings which is classified on GTA’s books as a non-spendable asset.
Smart Schools founded and funded GTA from its origin. GTA flourished in large part because Smart Schools was willing to rebate its contract and budgeted authorized earnings during GTA’s lean years of infancy, expansion and State funding reductions.
With Smart Schools no longer associated with GTA the board will now go into closed session to consider disposition of the $1.6 million non-spendable asset.”
DEBT ARBITRATION: A Plan To Settle For Less?
IPR reports the Academy Board may bring in an “outside arbitrator”, although Habermehl says he’s “not confident the money will ever be recovered because of liens the government has placed on Ingersoll’s assets”.
Although the IRS recently registered two federal income tax liens against Ingersoll and Smart Schools Management, Inc. ($124,455.02 on May 18 and $7,509.45 on May 4) in Grand Traverse County, the federal government has yet to place any liens against Ingersoll's assets.
That will only occur after Ingersoll is sentenced in September.
According to official Board documents acquired by multiple Freedom of Information Act requests (and federal court filings), here's what really happened during the years Habermehl airily dismisses as the "Ingersoll incident":
At the beginning of each fiscal year between 2007-2012, Steven Ingersoll advanced (in a lump sum), his annual Smart Schools Management/Grand Traverse Academy management fee.
Although based on Board-approved preliminary budget figures, Ingersoll’s management fees are later adjusted downward after actual budgets are calculated. However, Ingersoll withholds the difference each year during this six-year period and withholds the money from the Academy.
Instead, Ingersoll books amounts owed to the Grand Traverse Academy as “accounts receivable” from Smart Schools Management, and his balance grows from $538,864 on June 30, 2007 to $3,551,328 by June 30, 2012.
The Academy makes no attempt to demand repayment from Ingersoll until 2013, although Ingersoll does make a $704,000 payment to the Academy on June 30, 2011 using part of a $1.8 million dollar Chemical Bank loan he obtained for renovation of his Bay City Academy.
On May 20, 2013 (at Ingersoll’s request), the Grand Traverse Academy Board's then-President Mark Noss calls a meeting with the Board, Ingersoll and Academy attorney Margaret Hackett.
Ingersoll, acknowledging to those in the meeting he’s under federal investigation for fraud and tax evasion, asks the Board to characterize his $3.5 million dollar debt to the school a “loan”.
On May 30, 2013, Hackett issues a legal opinion (referred to during Ingersoll’s federal trial as the “Thrun letter”) to the Academy Board.
Contents of the letter have never been publicly revealed but, per Hackett’s testimony during Ingersoll’s trial, he told those attending the May 20 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.
When asked by the government during Ingersoll’s trial if the Grand Traverse Academy, as a public school academy, was even allowed to make a loan, Hackett said no. Saying that the Grand Traverse Academy had “no legal authority” to loan money to Steven Ingersoll, Hackett explained that Michigan law prohibits a public body, like the appointed board of a charter school, from making any loans.
And while former Academy attorney Doug Bishop issued a "demand letter" on June 13, 2013 to Ingersoll seeking return of over $3.5 million dollar, an agreement was later made to allow Ingersoll to work off roughly $2.38 million dollars over three years by forgoing his management fee payments. (The difference between the initial $3.5 million and the plan's $2.38 million is never explained.)
But the agreement is never formalized, put in writing and signed by both parties — leaving the Grand Traverse Academy without the protection of what attorney Kerry Morgan called a “legally enforceable obligation”.
And, without that obligation, there's no recovery.
So was it really an oversight...or a well-timed favor to a fellow
We may never truly know...but I think I have a pretty good idea why Mr. Full Spectrum Management just took out a $417,000 mortgage against his home.
With talk by Habermehl of the Academy's high school expansion plans, that $850,000 80-acre parcel adjacent to the Grand Traverse Academy is suddenly looking like a real good investment.