The shocking true story of how the Grand Traverse Academy board of directors nearly succeeded in delivering a $1.0 million payday to the head of its management company with an insider sweetheart real estate deal!
The second installment of a three-part examination of the planned expansion of the Grand Traverse Academy by Mark Noss/MDN Development, LLC.
Although Steven Ingersoll was convicted on March 10, 2015, and sentenced on December 15, 2016, stunning revelations about his previously undisclosed financial relationships with select board members and the former head of Lake Superior State University’s charter school office—including the December 8, 2015 testimony of former board president Brad Habermehl, who admitted soliciting a $300,000 “loan” in late 2014 for a “school project” on behalf of his “friend and colleague” Steven Ingersoll, hefty monthly cash payments made by current manager Mark Noss to Ingersoll between April 2014 and March 2016 and the April 27, 2016 “letters of support” sent on behalf of Ingersoll by Noss, Harger and Habermehl to the Michigan Board of Optometry—continue streaming out of United States District Court in Bay City and in documents uncovered by this blog through Freedom of Information Act requests.
Ingersoll, who fraudulently converted over $6.2 million from the Grand Traverse Academy and the Bay City Academy, (handlily beating former Detroit mayor Kwame Kilpatrick's high six-figure take), set the stage for former board president Mark Noss to take control of the Traverse City charter school with his own management company.
In turn, just months after the Grand Traverse Academy emerged from a budget deficit in June 2015, the Traverse City charter school's board handed Noss his own sweetheart deal—the construction of a math and science building with the potential for a $1.0 million profit.
On February 2, 2016, the Grand Traverse Academy board of directors, during a special meeting called to order by Lea Piché, approved a revised lease resolution that stated the Grand Traverse Academy had explored and failed to secure direct construction funding for its planned expansion, and received an offer to lease newly constructed facilities from MDN Development, LLC.
The GTA board signed a revised 20-year lease agreement with Noss on February 2, 2016 requiring the school to make monthly lease payments beginning February 2017.
In addition to the above-market monthly lease rate ($30,000 per month, then levitating like a séance table to $38,000 monthly by the contract's second year), the lease contained a Purchase Option clause, with a price tag that delivered quite a punch.
The “lessee (the Grand Traverse Academy) may exercise an option to purchase the building, fixtures and premises from the lessor on February 1, 2019 for a sum of Three Million Nine Hundred Thousand Dollars ($3,900,000).”
The initial lease, approved by the board during a May 6, 2015 meeting, called for a $3,500,000 purchase price, with monthly lease payments ranging from $22,000 to $30,000. (Noss formed his private, for-profit development company, MDN Development, LLC, on June 18, 2015.)
During MDN Development's 18-month odyssey to nail down construction financing, various Grand Traverse Academy board members, and the school's superintendent Susan Dameron, made public statements they knew, or ought to have known, were misleading.
For example, during a May 12, 2016 appearance on WTCM/NewsTalk 580's “The Ron Jolly Show”, Dameron and board member Lea Piché made hollow assertions during a discussion about the proposed 29,700 square foot classroom addition, variously claiming during the interview that the “management company” was providing the financing for the new building, while insisting there would be “no payments for the first year”.
Dameron stated during the May 12, 2016 interview that the school would simply “negotiate with the bank to pick up that loan”, and that Noss was not profiting from the construction, lease and subsequent sale of the new building.
However, she offered no concrete facts, construction budget figures or proof.
In fact, Dameron publicly made other conflicting statements about the project and its cost.
In a March 18, 2016 report on UpNorthLive.com, Dameron was quoted as stating the “project is costing the school around $3 million”.
And on Mr. Jolly’s show (this time, without mentioning any specific dollar amount), Dameron claimed that Noss was charging the Academy exactly what he was borrowing from the bank.
If you weren't listening carefully, you'd be forgiven for thinking that Comstock Construction's winning bid was $3.9 million, the amount the Grand Traverse Academy board had already agreed to pay Mark Noss/MDN Development.
While investigating the story and seeking to determine if Noss had suddenly developed an egalitarian streak and would not make “any money” on the deal, I submitted a Freedom of Information Act request to Lake Superior State University's charter school office seeking documents that could illuminate what really happened.
Here's what I discovered:
A September 2, 2016 email from Dickinson-Wright attorney,
Roger A. Swets, to Rebecca Clawson at Lake Superior State University stating:
“MDN will obtain a construction loan with a 3 year term from Traverse City State Bank (TCSB) to financing [sic] the construction of the expansion. The ground lease and facilities lease are long term documents so that the construction loan from TCSB can convert into long term financing if it takes more than 3 years for GTA to be able to directly finance the exercise of its purchase option.”
And there's more: the true construction cost estimate was $3.2 million, not $3.9 million.
A September 30, 2016 email to Clawson from Dan Stahl at Traverse City State reveals those key financing details:
“Project Description: In January 2016, Comstock Construction provided the winning bid to construct a two-story, 25,116 SF “Math and Science Center” high school addition, connected on the north side to the existing campus at Hammond Road and Three Mile Road.
AAI provided architectural site plans, with an expected completion in about 10-12 months from ground breaking. The expansion will accommodate 350 students in 10 new classrooms, administrative offices, conference and utilities rooms, along with some unfinished “white box” space for future expansion.
Comstock built the existing campus, and estimates $3.236M in build costs, with the remainder of the requested loan funds allocated to potential overruns, borrowing costs and interest reserve.” (Emphasis added.)
You read that correctly.
Although the actual construction of the expansion was estimated at roughly $3.2 million, the Grand Traverse Academy board of directors had agreed to cover not just the cost of construction, it would reimburse Noss for his borrowing costs and interest reserves. (Isn't that what those $30,000 a month lease payments were supposed to cover?)
If the school had leased the building for three years, and shelled out $1.27 million in lease payments to Noss, (a lease, not a lease option where a portion of that amount would have been deducted from the $3.9 million agreed upon purchase price) before purchasing the building it would have...well, you'll just have to wait until Friday, January 20th to find out in the final installment of this series!