Thursday, August 17, 2017

TAKEOVER: Bay City Academy Begins New School Year Under Financial Cloud; Ballooning Budget Deficit Triggers Michigan Department Of Treasury Supervision.

BREAKING NEWS: A Michigan Department of Education (MDE) official confirmed in an email this afternoon the MDE has transferred financial oversight of the Bay City Academy, (the Bay City, Michigan, charter school rode hard by founder Steven Ingersoll and put up wet), to the Michigan Department of Treasury.

Scoring a 2017 deficit that shot up by a shocking $250,000 over the previous year, the Bay City Academy is now shouldering a deficit that, based on a percentage of its revenues, swelled to over 45%. 

In 2016, it was 35%.

A school district is put under the oversight of the Department of Treasury if it maintains a deficit for five years, and the MDE official confirmed in his email the Bay City Academy's deficit elimination plan would not resolve the deficit. 

The Bay City Academy began FY 2017 with a deficit and ended the fiscal year with an increased deficit.

More details as they become available.

ACCOUNTS DECEIVABLE: Grand Traverse Academy Addicted To Short-Term Borrowing; Jonesing For Benjamins Under Ingersoll Regime Put School In Multi-Million Dollar Hole!

NOTE 11 - Short-Term Notes 2009 

The Academy had two short-term notes payable at the end of fiscal year ending June 30, 2009 totaling $3,200,000. There was a State Aid Anticipation note from the Traverse City State Bank in the amount of $1,200,000 with an interest rate of 3.75 % due by March of 2010. There was also a note with the Traverse City State Bank that had a balance of $1,303,575 which was paid off in July of 2008 through a refinancing with Fifth Third bank for a new State Aid Anticipation note. In addition to the refinanced amount of $1,303,575 another $2,696,425 was included to establish the new State Aid Anticipation note for a total $4,000,000 with a variable interest rate not to exceed 7% per annum. At the end of June 30, 2009 there was still $2,000,000 yet to be paid.

Coming Friday, how the Grand Traverse Academy relied on short-term loans to stay afloat, and why that debt sank the charter school like the Titanic.

Wednesday, August 16, 2017


In a June 16, 2013 letter to Doug Bishop, an attorney representing the Grand Traverse Academy’s board of directors, Steven Ingersoll sidestepped any discussion on his embezzlement misappropriation of public money, sternly reminding Bishop that “the financial relationship between the Grand Traverse Academy and Smart Schools Management has been symbiotic from the inception of the Academy”. 

Ingersoll's 2013 commentary confirmed that the Academy had so far insinuated itself into a position of interdependence with his privately-owned management company that blurred lines were consistently crossed. 

And now we know those lines were likely criminal, including a conspiracy to violate a general fund minimum balance bond covenant by inflating the Grand Traverse Academy's financial position. The Grand Traverse Academy's board of directors were ultimately responsible for falsified reports that covered-up Steven Ingersoll's embezzlement misappropriation of nearly $5.0 million.

Aided by the Traverse City charter school's board of directors, who knew definitively after a March 20, 2013 meeting with two Thrun law firm attorneys, former superintendent Kaye Mentley and then-president Mark Noss that Ingersoll owed the school at least $3.5 million, the Academy’s 2013 audit revealed the charter school utilized an agile bit of financial alchemy, transforming its multi-million dollar Ingersoll-generated “receivable” into a “prepaid expense” — camouflaging Ingersoll's misappropriation with the guise of an asset. 

However, if you strip away the artifice of those financial tricks, including manipulative accounting practices, and material misrepresentations to skirt covenant violations and hide catastrophic losses from bondholders and creditors, you're left with this deeply negative and rapidly deteriorating financial position.

And the fraud continues.

Tuesday, August 15, 2017

DEFAULT IN OUR STARS: Wide-Ranging Accounting Fraud Covered Up Theft Of Millions From The Grand Traverse Academy; Brazen Misappropriation Of Funds By Steven Ingersoll Camouflaged By Financial Statement Alchemy. SEC Complaint Filed!



During a seven-year period (between 2007 through 2014), the Grand Traverse Academy presented deliberately misrepresented, misstated or omitted its financial statement data for the purpose of misleading bondholders and creating a false impression of the charter school's financial strength.

Fraud in financial statements takes the form of overstated assets or revenue or understated liabilities and expenses.

Over a seven-year period (between the fiscal year ending June 30, 2007, through the fiscal year ending June 30, 2013), the Grand Traverse Academy carried on its books six- and seven-figure amounts classified variously as “amounts receivable from sources other than governmental units”, “prepaid expenses” or “related party receivables”. 

Although he has yet to be criminally charged with embezzlement for the years-long scheme he perpetrated with the Grand Traverse Academy board's cooperation and consent, Steven Ingersoll admitted under oath in late 2015 during his sentencing hearing utilizing a fabricated accounts receivable scheme as financial cover for diverting millions of dollars from the Grand Traverse Academy. 

Under oath.

In short, Ingersoll paid himself his entire management fee in a lump sum and the beginning of each school year based on an estimated budget. 

At the end of each fiscal year, when the budget required an inevitable downward adjustment, Ingersoll booked his annual overpayment as a “receivable”, then used school funds at the beginning of the next fiscal year to repay the receivable, and then created a new (and even larger) receivable each year.

In its 2010 audit, the Grand Traverse Academy revealed it was owed $2,715,251, an amount classified as “amounts receivable from sources other than governmental units”. 

The 2011 audit revealed that the Grand Traverse Academy was owed a whopping $2,500,000 from “related parties”, the first use of that classification. In 2012, the “related party receivable” amount had ballooned to well over $3.5 million dollars. That “related party receivable” amount was attributable to Steven Ingersoll, who admitted his debt during a May 20, 2013 Grand Traverse Academy board meeting with Mark Noss, Kaye Mentley and attorneys from the Thrun Law firm. 

So why were the obvious red flags ignored, and will there be consequences for inflating financials to deceive bondholders and investors?

The scale of Ingersoll's misappropriation of funds at the Grand Traverse Academy raises a larger issue: providing incomplete and inaccurate information could lead to securities fraud charges.

By making misleading public statements in regards to the deteriorating financial state of the Traverse City charter school, its board of directors provided incomplete or outdated information to potential investors, including violating a general fund balance bond covenant.

In a May 6, 2013 SEC press release, George S. Canellos, Co-Director of the SEC’s Division of Enforcement, said, “Statements that are reasonably expected to reach the securities markets, even if not prepared for that purpose, cannot be materially misleading”.

I am conducting an in-depth investigation of fraud, and the results are shocking, like the table below that reveals the Grand Traverse Academy's general fund balances without Steven Ingersoll's financial padding. 

Stay tuned.