Thursday, October 15, 2015

NO BACON FOR YOU!: Government Alleges Steven Ingersoll's Massive "Improper Advances" From Grand Traverse Academy Drove Tax Evasion, Conspiracy; Convictions. Ingersoll Diverted Money From Chemical Bank Loan To Repay GTA.

Were you as surprised as I was to hear federal prisons will soon be removing all pork products from their menus? 

Geez, what's a convicted fraudster gonna do in a few weeks he starts craving a nice, toasty BLT?

In order for my readers to understand the context in which the government will likely be using Steven Ingersoll's activities at the Grand Traverse Academy as an "aggravating factor" during his sentencing hearing, your girl Miss Fortune has decided to into the Wayback Machine — specifically April 2014.

In the superseding indictment, the government alleged that, once Steven Ingersoll fell too far into debt — at one time owing three to four million dollars to Grand Traverse Academy — it became necessary for him to try to repay the indebtedness in another way: Count 1 alleged, in part, that Steven Ingersoll sought to use $934,000 of Chemical Bank construction loan proceeds to reduce his indebtedness to the Traverse City charter school.

Ingersoll was convicted on that count, conspiracy to defraud a financial institution related to the Chemical Bank loan on January 2011, along with Counts 6 and 7  — tax evasion for failing to report taxable income for the years 2009 and 2010.

In addition, the government alleged that when Ingersoll found that he needed to rebate funds to the Grand Traverse Academy, he and the other defendants engaged in a series of "circular, unexplained, and purposeless transactions that shuffled proceeds from a Chemical Bank loan through various parties’ bank accounts." Ultimately, the funds ended up in the Ingersolls’ personal bank account at Fifth-Third Bank and later, at the Grand Traverse Academy. These allegations formed the basis of Count 1, conspiracy to commit bank fraud. (While Steven Ingersoll, Deborah Ingersoll, Gayle Ingersoll, Roy Bradley, and Tammy Bradley were charged with Count 1, only Steven Ingersoll and Roy Bradley were convicted.)

According to the superseding indictment, the case began in 2009 when Ingersoll caused the Grand Traverse Academy to pay his closely-owned corporations, Smart Schools Management and Smart Schools Incorporated, the entire school management fee when the Academy received its funds from the State of Michigan. Then these two corporations made distributions to Steven Ingersoll personally, which he did not report as taxable income — forming the basis for the tax evasion counts (Counts 6 and 7).

During the trial, the legal and business relationship between the Grand Traverse Academy, Ingersoll's Smart Schools Management, Inc. and Smart Schools Incorporated remained relevant only to Count 1 and the government's theory that the group engaged in a conspiracy to commit bank fraud in order to assist Steven Ingersoll and Smart Schools Management to repay the liability to the Grand Traverse Academy.

U. S. District Judge Thomas L. Ludington sought to limit introduction of evidence related to competing factual versions of how the liability developed and who was responsible for the liability — the warring "philanthropist" or "thief" theories, as dubbed by Miss Fortune. 

However, a document referred to during the trial as the "Thrun letter" was a complete game-changer.

The letter was inadvertently included in discovery received from a Traverse City CPA firm, and an attorney for the Grand Traverse Academy filed a motion to quash a subpoena issued to the Thrun letter's author, attorney Margaret Hackett. The Grand Traverse Academy filed its motion to prevent Hackett from taking the witness stand, contending that her testimony was privileged and could not be elicited at trial.

Judge Ludington denied the motion, making a Solomon-like decision to "split the baby" and allow Hackett to testify while denying the government's request to enter the Thrun letter into evidence.

In his March 2, 2015 order, Ludington explained his reasoning:

"Evaluating those factors (note: criteria that must be satisfied in order to hold that a communication is protected under the attorney-client privilege) reveals that the communication at issue here—the statements made by Steven Ingersoll—are not protected by the attorney-client privilege. First, in making the statements, Steven Ingersoll was not seeking legal advice. Instead, the statements request a certain characterization of payments so that Steven Ingersoll could avoid serious tax reporting implications. Nor were the statements made to Steven Ingersoll's legal advisor. Steven Ingersoll's statements were not "made in confidence" because there were several third-parties attending the meeting (either in person or via telephone); these individuals included an independent auditor, an SSM employee, and presumably, GTA board members. Indeed, unaddressed by the parties' papers is the suggestion that the meeting was necessary to resolve questions related to GTA's audit, a requirement of state law. Thus, Grand Traverse cannot invoke the attorney-client privilege to bar Meg Hackett from testifying about Steven Ingersoll's statements made at a GTA board meeting."

(The factors Ludington referred to are: (1) where legal advice of any kind is sought (2) from a professional legal advisor in his capacity as such, (3) the communications relating to that purpose, (4) made in confidence (5) by the client, (6) are at his instance permanently protected (7) from disclosure by himself or by the legal advisor, (8) unless the protection is waived.)

Hackett's testimony revealed that Steven Ingersoll made admissions directly related to his tax liability during the May 20, 2013 Grand Traverse Academy board meeting and thus were directly related to Count 1 and Counts 6 and 7. 

It's such a shame that there's been no proper investigation of Ingersoll's alleged embezzlement at the Grand Traverse Academy and the role of possible co-conspirators yet.

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