If you took a walk through your local Target, Meijer or Walmart (admit it, you all shop at Walmart!) on July 5th, you would have seen “Back To School” displays being set up as the July 4th merchandising was heading to the crusher.
What comes after “Back To School”?
Halloween candy displays (Candy Corn M&M's!) — and Steven Ingersoll's sentencing hearing on September 24 at 2:00 p.m.
Or, as I like to call it, “Back To Court”.
In an order filed July 13, Judge Thomas L. Ludington set a scheduling conference for August 11 at 3:00 p.m. to address
“the sentencing issues raised by the objections to the Presentence Investigation Report.” Ludington ordered the defense and prosecution to prepare, by August 3, “preconference submissions no greater than fifteen pages in length” that address the following issues:
-The Grand Traverse Academy’s business relationship to Steven Ingersoll's Smart Schools Management, Inc. (SSM) and Smart Schools Incorporated (SSI)
-Steven Ingersoll’s leadership role in the criminal conspiracy
-Tax Loss Assessment—SSM/SSI distributions to Ingersoll
-Steven Ingersoll’s financial solvency
Let's take them one at a time.
GRAND TRAVERSE ACADEMY: SSM, SSI BUSINESS RELATIONSHIP
The preliminary report contains suggested scoring calculations and shows the sentencing ranges established by the federal guidelines. According to the July 13 order, government prosecutors contend Ingersoll should be assessed two additional guideline points for his “abuse of a position of trust pursuant to U.S.S.G. § 3B1.3”, explaining as follows:
Steven Ingersoll abused the public trust placed in him by the school boards for the Grand Traverse Academy and the Bay City Academy, Lake Superior State University, and the people of Michigan who pay taxes to support the public schools of this state. Most, if not all, of the untaxed income received by Ingersoll was money that Ingersoll diverted initially from the public school academies that he was entrusted to operate for the benefit of the students, not him, his solely-owned entities, or his self-aggrandizing schemes. The misplaced trust induced by Ingersoll allowed him to use accountants, bookkeepers and his solely-owned entities to conceal his diversion of funds and to defeat the oversight mechanisms on which the public relied to prevent the abuses committed by Ingersoll.
As you can imagine, Ingersoll “disputes the Government’s assertion that Grand Traverse Academy (“GTA”) is a victim of Ingersoll’s abuse of trust.”
Ingersoll asserts that without his oversight and financial benevolence, the GTA would not have begun nor would the organization have survived. He explains in particular that had he not “rebated” the contractually agreed upon management fee as well as the lease payments, the GTA would have collapsed.
Yeah, it actually says that!
Falling back on the infamous (and debunked) “History of Grand Traverse Academy”, recently scrubbed from the Academy's website, Ingersoll explained using a summary from the document:
GTA’s budget faced continuous strain due to high building debt service, fluctuating funding and rapid expansion. SSM and Dr. Ingersoll co-signed for equipment leases and acquisition of the land upon which the high school wing was built. SSM and Dr. Ingersoll remain the guarantors of GTA’s land mortgage to this day. SSM and GTA agreed on the philosophy of small class sizes, continuous annual teacher salary increases, state of the art facilities and technology and maintenance of programmatic excellence. In 2008 and 2009, school funding was reduced. SSM provided financial support to GTA by four methodologies; direct donation, guarantee of debt, rebate of contractually authorized and budgeted earnings and an agreement to augment GTA’s revenue by leasing some of GTA’s facilities.
Let's take a step back and examine this. Using four "methodologies" (direct donation, guarantee of debt, rebate of contractually authorized and budgeted earnings and an agreement to augment GTA’s revenue by leasing some of GTA’s facilities) the History report strained credulity like a worn pair of Spanx.
Someone actually gazed into a funhouse mirror and blurted out this line, which made it into the History: The controversial $1.6 million “prepaid” is in actuality the remainder of nearly $5 million of earnings that SSM promised to pay to GTA according to its need.
But Ludington's order reveals Ingersoll is not the only person who believed the GTA “was not abused and that every transaction was fully disclosed.”
Margo Abbott, a former Smart Schools Management, Inc. employee who was based in Traverse City and worked at both the Grand Traverse Academy and Ingersoll's Bay City Academy, explained her view in a letter to the court.
The continuous effort to keep GTA in the “black” was always the driving force for Steve. He accomplished that in part by using his own personal resources, even putting his family’s residence on the line.
In 2007 he managed to gather the partners needed to refinance the school’s longterm debt and worked for months to get the deal to closing. It was a very stressful time and so much so that it actually landed Steve in the hospital with a heart attack on the day of the closing!
This is where I have to step in. I guess Margo has never heard of Miss Fortune's Cardinal Rule For Liars: never lie about something I can easily disprove.
As you can see in the excerpts above from the GTA's 2007 official bond issue statement, the closing date was March 13, 2007.
And the document clearly shows that Ingersoll had a mild heart attack on February 16, 2007, had a stent inserted and was released from the hospital on February 20.
But Margo makes it sound like Ingersoll came this close to keeling over at the closing table!
So, will I believe anything she tells me? Nope!
But Margo, more a moth to the flame than someone at the white-hot center of this conspiracy, continues:
I worked closely with the GTA Auditor in each of those years providing information needed. I saw the outcome of the audits; which were reviewed, scrutinized and vetted by the State of Michigan (Glenda Rader, Treasury), Lake Superior State University, and Traverse Bay Intermediate School District. There were NO issues noted because there was NO wrongdoing. I was there; I saw and understood the financial position of GTA. The charges of bank fraud and theft from GTA are simply unfounded and untrue.
Without knowing the date of Abbott's letter, it seems like she only hung around to eat the sausage and wasn't invited to watch the boys grind the raw meat and stuff the casings.
And look who joined the party!
While the Academy board appears to acknowledge that it paid Ingersoll's management fee in advance of him actually performing his services (and earning the money!), it nevertheless acknowledges it approved the transactions.
Doug Bishop, former legal counsel for the GTA, explained as follows to the Michigan Department of Education in a letter dated October 29, 2013:
In particular, in recent years, SSM’s management fee has been included in the proposed budget prepared by SSM, for GTA, providing for a management fee to SSM which has been equal to, or exceeded, an amount which would approximate 12% of GTA’s revenues and/or operating budget. SSM has taken that management fee, apparently as one or more lump sum payments, in the early portions of each prior fiscal year, in what SSM and/or GTA’s prior auditor categorized as a “pre-paid” expense.
Thereafter, if economic conditions for the current fiscal year did not support a management fee of the magnitude budgeted, SSM would reduce its management fee and then show the portion of the pre-paid fee which had been reduced, as a prospective refund, or
“receivable” on GTA’s annual financial statement. This procedure apparently was done with the blessing of the prior auditor, as previous audits never suggested that the procedure of prepaying the management fee, or the method of accounting for the refunded portion of the fee, were improper or questionable.
So, what part of "magnitude" did you miss when referring to Ingersoll's management fee?
A "prospective refund" that was never actually repaid, even after it exceeded $3.5 million dollars!
But it's just fine, because the "blessing of the prior auditor" (a shady buddy of Steven Ingersoll's) gave the misappropriation scheme an almost Vatican-like aura!
There were also concerns raised as to the controls on expenditures and disbursements to SSM and whether they were properly handled and documented. These were not raised by the prior auditor. . . .
At the same time, GTA made an unequivocal demand of SSM to immediately repay the “receivable” which had resulted from the reduction in budgeted management fees which had been paid in advance for the previous several years. As of June 30, 2013, this “receivable” remained outstanding in the amount of $2,338,980.00, although the current year’s management fee, as is now earned and entered on a monthly basis, is not being paid to SSM, and the amount of the monthly fee is being credited against the receivable.
Not so fast! As I revealed on this blog June 29, a previously undisclosed Grand Traverse Academy letter from Doug Bishop, the Academy's former attorney, to Michigan Department of Education auditor John Brooks dated November 25, 2013, revealed startling information.
Although the Academy had publicly claimed it would not pay Steven Ingersoll's Smart Schools Management, Inc. its 2013/2014 management fee, there was one exception.
Although charter school's board of directors, headed at that time by longtime Ingersoll crony Mark Noss, revealed in the Academy's 2013 financial statement its decision to credit Ingersoll's future management fees against his $2.38 million dollar "prepaid expense" balance until it was reduced to zero, the Board still authorized a cash payment of "approximately $332,000 in pre-obligated, annual debt service of SSM with regard to GTA has agreed to pay to SSM."
You read that correctly!
After publicly revealing in its 2013 financial audit (which apparently no one read until I broke the story of Ingersoll's $2.38 million dollar prepaid balance on this blog), and sticking to the story that Ingersoll would be "working off" his prepaid balance by foregoing any fee payments, the Grand Traverse Academy board apparently
Yeah, Ingersoll needed money to pay a debt apparently unrelated to the Grand Traverse Academy, so a provision was apparently made to provide him with the cash.
And I state "apparently", because the payment was never mentioned in the Academy's 2014 financial report.
I hope the feds are taking notes!
But Ingersoll and his cronies circled the wagons, claiming all of these transactions were disclosed and approved by both Lake Superior State University and the GTA board.
And Doug Bishop, the Grand Traverse Academy's former legal counsel, reinforced that story in an October 29, 2013 letter to the Michigan Department of Education. Referring to the 2013 forensic audit conducted by Dennis, Gartland & Niergarth, Bishop stated:
The results of the forensic audit did not disclose any payments to SSM not authorized by the Board of Directors in GTA’s budget.
So, can I take that to mean they were all in it together?
Yeah, I thought so!
TOMORROW: Ingersoll’s Leadership Role in the Criminal Conspiracy; Tax Loss Assessment—SSM/SSI Distributions to Ingersoll; Ingersoll’s Financial Solvency