Less than six weeks after receiving the Thrun Law Firm’s blistering May 31, 2013 legal opinion outlining details of Steven Ingersoll’s $3.58 million dollar looting of the Grand Traverse Academy, members of its Board of Directors faced tough questions about Ingersoll from agents of the IRS Criminal and Revenue divisions.
But courtroom observers who attended the opening days of Steven Ingersoll’s sentencing hearing in late October reported to Miss Fortune the agents testified that board members interviewed denied any knowledge of the missing money.
That is, except one — its president, and longtime Ingersoll business associate, Mark Noss
According to the testimony of IRS Revenue Agent Michael Wisniewski, although Noss initially denied knowledge of the missing money during a phone call, Noss changed his tune during a face-to-face interview.
Noss, interviewed in his office by Wisniewski, admitted that he did know about the $3.58 million dollar loss, but claimed it was legal for Ingersoll to take the millions.
You'd have to ask Mark Noss why he considered Ingersoll's massive withdrawals of the Grand Traverse Academy's taxpayer-fueled cash legal, but another damaging financial practice emerged that every Board member had a part in — the school's growing reliance on short-term State Aid Anticipation note borrowing.
The Academy Board authorized every loan transaction with an resolution, and those signed documents were included with every loan application.
Didn't anyone see the pattern...or did they just ignore the practice?
Beginning in the fiscal year ending June 30, 2009, the Grand Traverse Academy's manager, Steven Ingersoll, began to borrow massive sums, likely due to the impact his embezzlement was beginning to have on the Academy's throttled cash flow.
The Academy had two short-term notes payable at the end of the fiscal year ending June 30, 2009 totaling $3.2 million dollars. At the end of June 2009, there was still $2,000,000 yet to be paid.
By the end of the fiscal year ending June 30, 2011, The Academy had two short-term notes totaling $5,587,294 (with a $5,537,219 principal and $50,076 accrued interest).
Starting in May of 2011, the State of Michigan began taking payments for a $2.0 million State Aid Anticipation Note with the Michigan Finance Authority directly out of state aid payments prior to distributing the remaining funds through Lake Superior State University and Wells Fargo.
Although the Academy paid off a remaining $600,000 balance to the Traverse City State Bank and $3,400,000 due to charter school finance company Robert W. Baird & Co., the Academy borrowed an additional $6,400,000 in State Aid Anticipation Notes during the year from the Michigan Finance Authority, leaving the Academy with an ending balance of $5,537,218 at June 30, 2011 — nearly the same amount it owed at the beginning of the year.
In the fiscal year ending June 30, 2012, the Academy began the year with a short-term debt balance of $5,537,218. The Academy paid off two remaining notes from the previous fiscal year with a new short-term note for $4,600,000 million in August 2011.
The balance at the end of June 30, 2012 was $4,208,719.
During the fiscal year ending June 30, 2013, the Academy borrowed another $4,275,000 in short-term State Aid Anticipation Notes. With a beginning balance of $4,208,719, and payments totaling $5,230,990, the school was left with an ending balance of $3,252,729.
It's like the guy who goes to his bank and says he just wants to borrow enough money to get out of debt.
Instead of a pattern of subsequent borrowing to pay off the previous year's obligations, the school should have been building cash reserves instead of relying on larger and larger loans.
Wonder why no one noticed that pattern?