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Wednesday, December 31, 2014

ARTIFICIAL DISSEMINATION? Miss Fortune Takes the Traverse City Record-Eagle Back To School! Explosive New Official State of Michigan Documents Reveal Much More About The Grand Traverse Academy's Missing Millions While Local Newspaper's Editorial Shortcomings Flap In The Breeze

If you kidnapped hundreds of wild chimps and plopped them in front of desktop computers, they’d likely do a better job of reporting on Steven Ingersoll and the Grand Traverse Academy than the Traverse City Record-Eagle has.

And you always know what a chimp is thinking — unlike most reporters, they don’t wear pants. 

In a recent profile, the newspaper sounded more like a PR flack, merely reprinting (without follow-up) comments made by the Grand Traverse Academy’s board chair, Flint-area optometrist Brad Habermehl.

Sweeping away concerns and sounding like a karaoke remix of Patti LaBelle’s 1992 hit, “New Attitude” (new year, new superintendent, new school board…you get the picture), the story revealed an editorial lack of intellectual curiosity.

For example, Habermehl’s comments about the charter school’s auditors labeling a $2.3 million dollar amount “prepaid” a misnomer went unchallenged.

A natural follow-up question would have asked Habermehl what accounting term he would have used.

However, anyone seeking to do more than a puff piece about impact of the looming federal fraud trial of former Academy manager Steven Ingersoll would have done some homework before speaking with Habermehl.

Miss Fortune has, and here’s what I’ve discovered: 

Over the last fiscal five years (beginning in 2009), the Grand Traverse Academy consistently carried on its books large amounts classified either as "amounts receivable from sources other than governmental units" or "related party receivables".

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.

It appears the "related party receivable" amount was attributable to Steven Ingersoll.

In its 2013 audit, the Grand Traverse Academy revealed that the $3.5 “related party receivable” had been reclassified as a “prepaid expense” and had shrunk to $2.3 million dollars.

And how does Miss Fortune know that?

Here's how: I've done the research necessary to uncover key documents that reveal the facts I've consistently reported since Ingersoll was indicted in April.

After discovering Ingersoll's theft, the Grand Traverse Academy Board may have attempted to stave off any meaningful public disclosure of the loss, but time ran out. In documents filed in Ingersoll’s federal fraud case, the government alleges Ingersoll misappropriated an estimated $3.5 million, and the Academy's 2012 fiscal audit appears to confirm that, revealing an outstanding $3,548,319 "accounts receivable from related parties" in that year's audit...but there's much more.
On June 13, 2013, Traverse City attorney Doug Bishop, former counsel for the Grand Traverse Academy, issued a “demand letter” (above) to Steven Ingersoll for the return of over $3.5 million.

In his letter, Bishop referenced the Academy's 2012 fiscal report in this statement: "It appears, at this point, that the amount due is at least $3,548,319.00, which, to our understanding, was a figure calculated by Dr. Ingersol (sic) as indicated to be due as of June 30, 2012."

Bishop was clearly referring to the 2012 audit financial note that revealed the "amounts receivable from related parties" was $3,548,319 and acknowledging that he and the Board knew the "party" was in fact Steven Ingersoll.

Within days of the letter being sent to Ingersoll and former Academy Board president Mark Noss, the 2013 fiscal year ended on June 30.

When the 2013 financial report was issued in late October, the $3,548,319.00 2012 "related party receivable" had been reclassified as a “prepaid expense” and cut to $2,338,980 ― a reduction of $1,209,339.

And how did that happen?

Miss Fortune can exclusively reveal the explanation — using clues found in Steven Ingersoll’s June 16, 2013 response to Bishop’s demand letter.

In his response (shown at left), Ingersoll sidesteps any discussion on his apparently inappropriate usage 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”. It appears from Ingersoll's comments 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.

Using “prepaid” and “receivable” interchangably throughout the letter, (obtained by a Freedom of Information Act request) Ingersoll responds to Bishop’s demand for an immediate repayment of the $3.5 million dollars by telling him that “a three year plan to eliminate the receivable was developed and put in progress. By 6-30-13 the plan will have reduced the pre-paid balance from $3.5 to $2.3 million.”

Although the letter does not reveal how the receivable balance went from $3.5 to $2.3 million, the Academy’s 2013 audit reveals 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. 

Amounts due from Smart Schools Management, Inc. were shown in 2012 as "accounts receivable" and included as "unassigned fund balance". The balance ($2.3 million) was reclassified in 2013 as "prepaid expenditures".

Although Habermehl was quoted in the December 27 Record-Eagle profile objecting to the "prepaid" term, saying "nothing that happened with the finances that we were ashamed of", it appears that Michael Flanagan, Michigan Department of Education's Superintendent of Public Instruction, would disagree.

And how does Miss Fortune know that, too?

Shown at left is the May 7, 2014 letter Flanagan sent to Dr. Tony McLean, the President of the Academy's authorizer, Lake Superior State University, clearly revealing his concerns — while exposing the Michigan Department of Education's "lack of statutory authority" to recommend or compel any corrective action.

Flanagan provides a laundry list of corrective actions, advising McLean that the Grand Traverse Academy could conduct a forensic audit, or take legal steps to recover the excess prepayments to Ingersoll's Smart Schools Management, Inc.

And Flanagan suggests that the Academy board establish clear and unambiguous board policies that would prohibit contracts that include or involve nepotism, conflicts of interest, or related party transactions, in any form or fashion.

However, it appears that the Academy already has "clear and unambiguous board policies" in its 397-page Board member manual.

But are those policies being followed? 

It doesn't appear so to Miss Fortune.

School Daze...Vision Therapy or Conflict of Interest?

Steven Ingersoll and Mark Noss graduated from Ferris State University's College Of Optometry in 1980.

But it wasn't until Ingersoll and Noss teamed up to form the Excel Institute, a multi-disciplinary collaborative effort with psychologist Patricia Engler and Battle Creek optometrist Bruce Christensen, that the duo's private "vision therapy" business really took off.

And with nearly 1,200 students, the Grand Traverse Academy was a fertile hunting ground for clients for the Excel Institute's "education remediation programs".

Formed in Michigan on January 18, 2005, the company was registered on behalf of Ingersoll by attorney Doug Bishop. If you've been paying attention, you'll remember that Bishop was the Grand Traverse Academy's attorney and "media contact".

In February, 2011, the Excel Institute and icon Learning (an Excel  subsidiary) moved into the building housing Noss's optometry practice, Full Spectrum Eyecare, on Munson Avenue in Traverse City.

icon Learning was described by Noss as "a tutoring method developed around the concept that students who may be struggling with academics may not have learning disorders. Many have simply developed incorrect learning habits that affect the way lesson content is perceived and absorbed."

And guess what, parents? icon Learning specializes in providing "visual learning" services for students from 3rd to 12th grade...the same grade range as the Grand Traverse Academy!

As recently as November 2013 (while still President of the Grand Traverse Academy Board), Noss held an "open house" in his role as the a Developmental Optometrist and Director of the Excel Institute. The event was pitched to parents as an opportunity to learn how "Integrated Visual Learning may help children struggling in school". The Excel Institute, LLC also has offices in Grayling and Alpena, both locations operated under the direction of Noss's Full Spectrum Eyecare.

So, would the Noss/Ingersoll business relationship be considered a "conflict of interest"?

The next time you spot a chimp, sans pants, you should ask him. 

I'm sure he'll have an answer...and it will be easy to see if he's lying.