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Monday, September 28, 2015

STEVEN INGERSOLL WANTS ANOTHER BITE: Government Mocks Ingersoll's “Rather Tortured Argument”, Knocking Down His “It’s A Loan…Really, It Is!” Contention

“Steven Ingersoll erroneously contends during the sentencing phase of this case that he may continue to pursue his claim that the transactions at issue were loans.”  

“Ingersoll does not get yet another bite of that apple.”

In a brief filed late Friday afternoon (September 25), the government responded to Steven Ingersoll's tired-ass defense contention that the millions Ingersoll sucked out of the Grand Traverse Academy were loans, and not subject to income tax.

The government stated that while "Ingersoll engages in a rather tortured argument to support his position, the fundamental fact is that the jury instruction given by the court regarding Ingersoll’s desire to have the transactions at issue characterized as loans precludes Ingersoll from asserting for sentencing purposes that the transactions underlying counts 6 and 7 were non-taxable loans."

Judge Ludington's instruction to the jury included the following:

(1) As I have explained, the Government charges in Counts 6 and 7 that Steven Ingersoll failed to report payments he received from Smart Schools Management and Smart Schools Incorporated in 2009 and 2010 as income on his personal income tax returns. If, however, you find that those payments were in fact intended to be loans they would not be taxable income and that would be a complete defense to the charges in Counts 6 and 7.

(2) Whether advances are treated for tax purposes as loans turns on the intention of the parties at the time the withdrawals are made. Some factors are listed below to help you in evaluating whether the repayment was intended. No one factor is controlling.

(A) The names given to the payments, if any, in the accounting records.

(B) The presence or absence of an agreed repayment date. The absence of an agreed repayment date and a fixed obligation to repay indicates that the advances were not loans.

(C) The presence or absence of an agreed rate of interest and interest payments. The absence of an agreed rate of interest and interest payments is an indication that the advances were not loans.

(D) The source of Steven Ingersoll’s repayments of the payments. If the expectation of repayment depends solely on the success of the borrower’s business or other contingencies, it suggests that the payments were not loans.

(E) The security, if any, for the payments. The absence of security or other reasonable assurances of Steven Ingersoll’s obligation of repayment for the payments is an indication that the payments were not loans.

(F) Steven Ingersoll’s economic purpose in seeking the advances and Smart Schools Management’s and Smart School Incorporated’s economic purpose for making the advances.

(G) Smart Schools Management’s and Smart Schools Incorporated’s right, if any, to enforce repayment from Steven Ingersoll.

(H) Steven Ingersoll’s actual repayment within a reasonable time.

(3) The burden of proving that the advances were loans does not rest with Steven Ingersoll. It is the government’s burden to prove to you, beyond a reasonable doubt, that the payments to Steven Ingersoll were taxable income (because there were not loans) that he was willingly attempting to evade or defeat the payment of income taxes.

(4) If the evidence in this case leaves you with a reasonable doubt as to whether the advances were loans, you must acquit Steven Ingersoll of that count. 

Based on the court’s loan instruction, the jury undeniably found that the government had proved beyond a reasonable doubt that the transactions conducted by Ingersoll in 2009 and 2010 were not loans. This case presents a situation where the government proved a negative set of facts beyond a reasonable doubt to twelve jurors. 

Thus, there is “a direct link” between the jury’s finding that the transactions were not loans and the jury’s finding that Ingersoll was guilty of the tax charges in the indictment.

Ingersoll cannot escape the implications of the jury’s verdicts by claiming now that the loan status of the transactions was not an element of the offense.

Ingersoll, the government asserted, does not get yet another bite of that apple. 

In addition, the government stated that Steven Ingersoll and his co-defendant Roy Bradley have not met their burden of producing information regarding allowable credits, deductions, or exemptions that should be used to compute their guidelines, in addition to those credits, deductions, or exemptions already applied by the government in its tax loss computations and the probation officers in their computations in the presentence reports.

“Steven Ingersoll erroneously contends during the sentencing phase of this case that he may continue to pursue his claim that the transactions at issue were loans.” 

After deftly laying out its response, the government included excerpts from the jury instructions that hammered home the financial fuck frenzy Steven Ingersoll inflicted on the Grand Traverse Academy:

The primary revenue source for Smart Schools Management (SSM) during the relevant timeframe (2009-2011) was SSM’s contract with the Grand Traverse Academy (GTA). The bulk of the money in the SSM financial accounts belonged to GTA. GTA derived it revenue almost exclusively from the per-pupil funding provided by the State of Michigan to GTA, SSM, via Steven Ingersoll as the sole proprietor of SSM, was obligated to use the money provided to SSM by GTA to operate the school. SSM was entitled to retain only its management/contractual consulting fee. 

As a matter of fact, SSM did not have sufficient funds of its own available to meet its contractual obligations to GTA and loan money to Steven Ingersoll without obtaining additional funds from another source. The evidence available to the government shows that the source of the money obtained by Steven Ingersoll was the public funds belonging to GTA but entrusted to SSM for operating that school. For example, the GTA audit for fiscal year 2009, which ended on June 30 of that year, reported that GTA had an accounts receivable total of $1,625, 725 from sources other than governmental units, while the books for GTA for 2009 identified $1.6 million of that sum as attributable to SSM. 

It is worth noting that the sums owed to GTA by SSM/Steve Ingersoll should not have been classified as accounts receivable on the GTA audit reports. GTA apparently provided no goods or services to SSM which would have caused SSM to owe payment to GTA. Steven Ingersoll’s decision to use the accounting code “accounts receivable” avoided the problems that would have arisen if he had properly classified the transactions creating that indebtedness as attributable to loans: the school board for GTA could not and did not agree to loan money to SSM.

Significantly, the books for SSM do not contain corresponding account payable entries for SSM’s indebtedness to GTA. However, bank records reveal that Steven Ingersoll transferred a significant part of that money into his personal financial accounts, either directly from SSM financial accounts or from SSM accounts via SSI financial accounts, all of which he controlled. 

The Grand Traverse Academy audit for fiscal year 2011 reported that the charter school had an accounts receivable total of $2.5 million from a “related party” — while the books for the GTA identified $2.5 million of that sum (the entire amount, in case you haven’t been paying attention) as attributable to Steven Ingersoll’s Smart Schools Management, Inc.

So which one of you nuts still wants to call Ingersoll a philanthropist?

Since MLive, the Traverse City Record-Eagle and Interlochen Public Radio appear to be asleep at the switch, Miss Fortune will continue to bring you all breaking developments in this case.

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