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Friday, June 6, 2014

60 DAYS: The Steven Ingersoll/Grand Traverse Academy Scandal Top Ten List

It's really been just 57 days since Steven Ingersoll's federal indictment was unsealed, but this scandal's just begging for a recap.

With the story breaking nationally on Diane Ravitch's blog, here is Miss Fortune's list of  "Ten Most Wanted" facts (in no particular order) about the growing financial scandal threatening the Grand Traverse Academy.


On April 13, this blog broke the news that federally-indicted charter school manager Steven Ingersoll had racked up a $2,338,980 "prepaid expense/expenditure balance" for overpayments he made from the Grand Traverse Academy's bank accounts to his Smart Schools Management, Inc. The story has never been publicly refuted by either the Academy board or Steven Ingersoll. The Academy's June 2013 audit report revealed that Smart Schools Management agreed that it “owed Grand Traverse Academy an amount classified as a prepaid balance” ($2,338,980), and worked out a repayment plan with the Academy. The plan called for Smart Schools to "work off the prepayment" by “partially reducing cash transfers for future management fees through June 2016”.


On April 10 Ingersoll, his wife Deborah M. Ingersoll, his brother Gayle R. Ingersoll, Roy C. Bradley Sr. and his wife Tammy S. Bradley were each charged with conspiracy to commit bank fraud. Steve Ingersoll, Roy Bradley and Gayle Ingersoll were also charged with conspiracy to evade federal income tax laws. (The bank conspiracy charge alone carries a maximum penalty of 30 years in prison.)  

The indictment, unsealed April 11 in U. S. District Court in
Bay City, alleged that Ingersoll, and the four others named, diverted about $934,000 from a school construction project, converting it into personal income for Steven and Deborah Ingersoll. 

Steven Ingersoll allegedly used part of the construction loan proceeds, backed by the U. S. Department of Agriculture and diverted to his joint, personal Fifth-Third Bank account, to "reduce his indebtedness to his Traverse City charter school, the Grand Traverse Academy".

Those thirteen words were the impetus for my investigation, which revealed Ingersoll's fee overpayment and the Academy Board's complicity.


As this blog reported on April 17, the seat Traverse City optometrist Mark Noss used in his role as President of the Grand Traverse Academy's Board of Directors had barely cooled before he began heating up a new perch—head of the Academy's new education service provider, Full Spectrum Management, LLC (FSM). 

Full Spectrum came kicking and screaming into the world on March 19 at 4:31pm when Traverse City attorney David Rowe faxed the incorporation paperwork to Lansing. By awarding a multi-year contract to FSM on March 19, formed by recent Academy Board President Mark Noss expressly for the purpose of entering into this management agreement, it appears that the Academy has merely made a change in form and not substance.

Among the highlights, detailed extensively in an earlier post on this blog, are:

-annual compensation (termed "reasonable compensation" in the contract) ranges from $650,000 to $2,000,000 per year.

-prepaid fees: while the Michigan Revised School Code prohibits local school districts, including public school academies, from advancing monies to private entities, the Academy's contract with FSM includes a clause that enables the Board to continue that prohibited practice.

-arms-length negotiation.


As this blog reported on May 21, Michigan Attorney General Bill Schuette is conducting an "ongoing investigation" into the alleged misappropriation of federal and state money from the Grand Traverse Academy by Steven Ingersoll's Smart Schools Management, Inc. 

Confirmation of the investigation was delivered in an email from Michigan Department of Education spokesman, Bill DeSessa, who responded to my inquiry seeking to determine if the Academy filed a "report on finding of suspected fraud and/or embezzlement" relating to its June 2013 audit of financial statements. 

It appears the answer to my question may be "no".


A close examination by Miss Fortune of the Grand Traverse Academy’s financial report for the year ending June 30, 2013 (issued on November 7, 2013 by Traverse City certified public accounting firm Dennis, Gartland & Niergarth) revealed the Academy was “out of compliance” with the Michigan Uniform Accounting and Budget Act in several critical areas.  

The Traverse City certified public accounting firm Dennis, Gartland & Niergarth raised several troubling internal financial control and compliance issues in its 2013 audit report to the Academy.

Among its major concerns were the advance by the Academy of prepaid fees to SSM, the possible “abuse” of Smart Schools Management in their “access to public funds” and the negative unassigned balance in the Academy’s General Fund. 

The auditor’s report bluntly informed the Grand Traverse Academy that SSM’s ability to “prepay their fee and withhold payment of overpaid fees” enabled SSM to “abuse their access to public funds”.

By allowing Ingersoll to "advance monies" to his private entity, Smart Schools Management, Inc., the Grand Traverse Academy was “out of compliance” with Michigan’s Revised School code.

And the Board is still doing the same thing with Mark Noss.


A Traverse City Record-Eagle report, published nearly two weeks after this blog broke the $2.38 million dollar overpayment story, revealed that Academy officials claimed they severed ties with Ingersoll at his suggestion to prevent his pending case from casting a shadow over the school.

Mark Noss was quoted as saying he "knew nothing of the transactions that placed Ingersoll on federal prosecutors’ radar". And Kaye Mentley said she was "not concerned" about the $1.6 million owed by Ingersoll and Smart Schools.

“At this time the payment schedule that was arranged has been kept,” she said.

In an April 11 Record-Eagle story, Doug Bishop, the attorney for Grand Traverse Academy, said Ingersoll suggested the school switch management companies. "I don't know exactly, but I think he probably thought his situation might be a distraction," Bishop said.

But if you scan down a few graphs in the same article, you'll read that new Grand Traverse Academy Board President Brad Habermehl said he learned of the charges against Ingersoll on April 11. Habermehl claimed that "declining MEAP scores prompted board members' decision to leave Smart Schools, not because of anything related to Ingersoll's legal woes."

“The board felt the direction we were heading in was not the direction that brought success to the school. We just started seeing where Smart Schools were taking on other projects and some other schools,” the Record-Eagle quotes Habermehl. “We wanted a little bit more of an active role, active support in management of the school where we would see implementation of structure that brought that school its notoriety." 

Habermehl became President after serving as the Board's Secretary.

But in the same story, Academy Superintendent Kaye Mentley said Smart Schools handled the school's financial and human resources duties, and had little to do with the school’s curriculum. 

However, Mentley did not explain why the Academy paid Ingersoll's Smart Schools Management, Inc. a $300,000 fee for "curriculum materials" in 2013.

“Our audits indicate all our procedures and finances are appropriate and in order,” Mentley said.

In an April 23 post, Miss Fortune introduced Brian T. Lynch, recently named by Steven Ingersoll to serve as the Bay City Academy's new Superintendent and President of Instructional Services by its board of directors.

Lynch, a Traverse City resident, married Dr. Rebekah Noss in 2009. Rebekah is an optometrist at Full Spectrum Eyecare, sharing the practice with her father, Dr. Mark Noss.

While visiting Bay City, Lynch stays in a stately bed-and-breakfast, courtesy of its owner—Steven Ingersoll.


Embezzlement (call it misappropriation if you're squeamish) doesn’t happen by accident, particularly in a small group where many people have been working together for years.

It’s fostered by a culture of concentrated power, secrecy and financial negligence, sometimes dating back years.

It's stunning that none of the local Traverse City media picked up this story and ran with it, instead leaving the heavy lifting to an "anonymous blogger" who's been threatened with a defamation suit.

The entire situation may have been discovered much sooner, or perhaps even been prevented altogether, if anyone had lifted even one finger to investigate this culture of complicity.


As English satirist Jonathan Swift, author of 'Gulliver's Travels', famously said: "When a true genius appears, you can know him by this sign: that all the dunces are in a confederacy against him." Traverse City—a beautiful town with sophisticated big-city cultural and food scenes—has to have more geniuses than dunces.


Miss Fortune would like to hear from you—even if you use an anonymous email address. You can reach me at tcmissfortune@yahoo.com.

For more on this story, go "back to school" with a convenient study guidemy 30 day update.

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