At the start of each fiscal year, beginning July1, 2007 and continuing for six years until 2013, Grand Traverse Academy (GTA) manager Steven Ingersoll advanced his entire annual Smart Schools Management, Inc. fee from the Traverse City, Michigan charter school’s bank account before it had been earned — and before he was contractually entitled to receive it.
Although based on a percentage of the GTA board’s preliminary budget figures, Ingersoll’s management fee was adjusted downward after actual budgets were calculated.
However, Ingersoll never really repaid the difference between the amount he'd advanced himself and the actual management fee he received.
So how did the receivable grow from $538,864 on June 30, 2007 to $3,551,328 on June 30, 2012 if Ingersoll, as he’d claimed to the GTA board, booked each year’s fee overpayment as a receivable and paid it off at the beginning of the next fiscal year?
Simple: after Ingersoll had paid the previous year's receivable balance using Michigan state aid money provided to the Grand Traverse Academy, he transferred that money back from the Academy’s bank account to one of his Smart Schools accounts, and created a new, and even larger, receivable balance.
(Ingersoll finally admitted the scheme on December 9, 2015 while testifying under oath during his ongoing sentencing hearing.)
Representatives of the GTA board, including its then-president Mark Noss, and Steven Ingersoll met with attorneys from the Thrun Law Firm on May 20, 2013.
During the meeting, Ingersoll admitted owing the charter school at least $3.5 million but asked to have the debt classified as a “loan”.
According to the May 30, 2013 Thrun Law Firm’s 15-page legal recommendation to Noss/GTA, the issue before the Board related “to funds withdrawn from the Academy’s general fund by Steven Ingersoll and/or representatives of SSM, which exceed the amount appropriated or authorized by the Board to be paid to SSM for either management fees or the reimbursement of Academy expenses.”
The letter estimated Ingersoll’s debt to the Traverse City charter school at $3,548,319 based on information provided by CPA Tony Henning.
As Henning had relied solely on “financial reports and representations of Steve Ingersoll” to determine the amount, Thrun repeatedly urged the GTA board to “independently verify the full sum due” instead of merely accepting Henning’s number.
Representing the interests of the GTA and its board, not Steven Ingersoll and Smart Schools Management, Thrun affirmed in its May 30, 2013 letter that “Steven Ingersoll openly admitted, when asked by us during the May 20th meeting, that a conflict exists between his personal interests and the interests of the Academy.”
However, the Academy Board ignored Thrun’s recommendation to verify Ingersoll’s numbers, instead using CPA Henning’s exact $3,548,319 amount in a June 13, 2013 “demand letter” issued by GTA attorney Doug Bishop to Steven Ingersoll.
On June 30, 2013, the GTA board and Ingersoll agreed on a “repayment plan”, revealing the details in the Academy’s 2013 financial statement.
The agreement allowed Ingersoll to “work off” his balance by foregoing management fee payments over the remaining three fiscal years of his management contract.
However, GTA board president Mark Noss oversaw an early morning meeting on March 19, 2014 where the board voted unanimously to officially "withdraw from the management contract with Smart Schools Management, Inc."
Minutes later, the board accepted the resignation of "Mark Noss as the President of the Board."
Although Noss tendered his resignation during this meeting, the resignation was not effective immediately.
GTA records reveal Noss continued to serve in a dual role as a board member until its May 2014 meeting, nearly two months after signing a multi-year, multi-million dollar management contract.
Steven Ingersoll was indicted on April 9, 2014 and charged with three counts of wire fraud, two counts of tax evasion, one count of conspiracy to defraud the government, and one count of attempted conspiracy. (Four co-defendants, including Ingersoll’s wife Deborah, were also charged on various fraud and conspiracy counts).
An April 24, 2014 superseding indictment further charged Steven Ingersoll with tax evasion regarding his attempt to “disguise the money allegedly received from Grand Traverse Academy” — which was also named by the government as the motive for Ingersoll’s bank fraud conspiracy and tax evasion conspiracy.
Steven Ingersoll was convicted of three counts of fraud and tax evasion on March 10, 2015. Ingersoll’s sentencing hearing began on October 21, 2015 and is scheduled to resume July 11, 2016.
On March 15, 2016, an accountant formerly employed by Mark Noss at Full Spectrum Management revealed to the GTA board and the charter school’s authorizer, Lake Superior State University, that Noss had been making $12,500 monthly payments to Ingersoll since April 2014, shortly after Noss assumed control of the GTA.
Using information provided by the whistleblowing accountant, (who resigned shortly after making his revelations public), federal prosecutors were able to substantiate that between April 8, 2014 and March 1, 2016, Steven Ingersoll received a total of $627, 624.14 from Full Spectrum Management, the educational services provider owned by Mark Noss and holder of the management contract for the Grand Traverse Academy or Grand Traverse Academy itself.
All of that money went into accounts owned by Steven Ingersoll and his solely owned entities.
An excerpt from that April 29, 2016 document states:
“In assessing the credibility of Habermehl as a witness and Noss as an affiant in this matter, the court must consider the relationships they have with Ingersoll and how their financial and personal relationships with Ingersoll have influenced the representations that Habermehl and Noss have made to the court.
The evidence discussed above casts doubt on the credibility of Ingersoll, Noss and Habermehl.”