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Monday, November 28, 2016

“CONFERRING AN IMPERMISSIBLE PRIVATE BENEFIT”: MDN Development, LLC/Mark Noss Construction Deal With Grand Traverse Academy Conflicts Of Interest, Possible IRS Violations Revealed!

Nearly 18 months after signing an exclusive easement agreement, the Grand Traverse Academy board has apparently pulled the plug on a deal the Traverse City charter school struck with Mark Noss, former board president and current head of Full Spectrum Management, LLC, its current management company.

Under the terms of the deal, Noss (and his private property development entity, MDN Development, LLC) was to construct an expansion for a new math and science wing and lease it back to the school. That June 26, 2015 deal, which granted a private, for-profit company an easement on land financed by tax-exempt bonds, was illegal.

However, it appears the Academy board never sought an attorney's opinion regarding possible conflicts of interest, including the Noss arrangement's potential for jeopardizing the school's federal 
tax-exempt status.

So why should you care?

Because it's your money.

Just image this scenario: every night, you put your purse, or wallet, on a console table in your hallway. And every morning, there's money missing.

It's not much at the beginning, so you might ignore it thinking you've made a mistake.

But it continues to happen, and the daily amount grows.

A few months later, in the middle of the night, you wake up and catch the thief who's been stealing your money — red-handed. You see his face, and you know his name.

But he just laughs, telling you he cannot afford to pay you and his taxes all at the same time, and needs to have the debt characterized as a loan.

And, even worse, he keeps taking your money even after admitting he can't pay back what he already owes you: around $5 million. Eventually, he gets your neighbor to agree to waive recovery of that debt...and he does it.

But, wait a minute. It's your money, right?

In 2012, the IRS identified its primary issue of concern as the possibility of impermissible private benefit to a for-profit management company involved in a charter school’s operation (however, a nonprofit management company’s operation of a charter school can also trigger IRS scrutiny and possible denial of tax exempt status).

Cozy relationships between charter schools and their management companies — like that of Steven Ingersoll and the Grand Traverse Academy, followed by Mark Noss after the March 19, 2014 Fidel/Raúl-like handoff — subject federal funds to serious risks of fraud and abuse.

Apparently emboldened by filing false financial statements for nearly seven years with its bond trustee, the Grand Traverse Academy (its board and management company) cooked up a deal that would have required five-figure monthly lease payments made from taxpayer funds.

And it almost worked...almost.

Charter school/management company relationships have long confounded the IRS. 

The IRS’s principal concern is that a nonprofit entity controlled by a for-profit entity may operate to reduce costs and maximize revenue rather than to maximize the delivery of educational services. 

The perception of a conflict of interest is unavoidable. Although the IRS has acknowledged these relationships for many years, it has established no defined or consistent approach in analyzing what relationships are permissible for charter schools. 

Consequently, many management companies have become aggressive in creating and perpetuating relationships with charter schools. The IRS believes that in egregious instances, management companies have so profoundly taken control of charter schools as to vitiate the public benefit the schools are created to fulfill. 

In these egregious instances, “private benefit” or “private inurement” concerns arise. 

As described above, tax-exempt charter schools must operate exclusively for a public benefit – i.e., the benefit of their students. 

When a management company’s control of a school is pervasive, and where there is little transparency in regard to the management company’s expenditure of public funds, there exists the potential that the management company could operate the school for its own benefit rather than for the benefit of the school and its students.

So while the board has finally rejected its (misad)venture capitalist (“Relative to some big, fancy venture capitalist that wanted to invested in an educational building? No, that was not part of the thought process.”), and replaced him with a vulture fund specializing in short-term, high yield municipal bonds, questions about the deal still remain unanswered.

For example, why was there no legal review by the Grand Traverse Academy board of the deal before the easement was signed in 2015?

In addition to Mark Noss, just who are the MDN Development, LLC partners involved in this deal?

And will Noss compel the Grand Traverse Academy board to pay the “dead deal costs” he and his partners incurred?

Why should you care?

Because it is your money.

It's 10pm. 

Do you know where you wallet is?



  1. Wow! The fact that they continue to operate with relative impunity is mind-blowing! No oversight, no exposure of these dealings in the media, and continual fleecing of the taxpayers for the profit of Mark Noss. And Betsy DeVos poised to spread this fungus throughout the land. Can't wait..

  2. Betsy DeVos is a dirty word and she will destroy public education. The real crime is the Michigan Department of Education is being lead like sheep and are unwilling to do what needs to be done. They just keep turning an eye and passing the buck. No one is willing to do what is right.

  3. The behaviour of Noss, Ingersoll, Lynch and Bishop, and an additional handful of other Noss cronies over the decades has been one of vulturine power-grabbing shifty-financing fuzzy-facts entitlement. Noss came from nothing in Podunk'sville Michigan. Father was a teacher; mother was a housewife. So, how was he able to reach epic spending behaviour by the late 70s early 80's? He did not marry into money (his sister did). Where did all the money he spent on a monthly basis come from? His bills were endless, as were the checks written to cover them. His daily bank deposits as a new-kid-on-the-block optometrist back then never covered his expenditures. Also, his accounting systems back then were a tangled morass any novice could spot as “funky”. As his practice grew, his spending bloomed out of control. Bishop was a too-frequent visitor to Noss’ offices up until the mid 2000’s. Bishop and his NMC antics also reveal a pattern of “why-do-I-have-to-follow-the-rules?” Lynch is an unequivocal predator. Ingersoll is a “poor-me” Con man. They are a treacherous group of guys, whose Backroom TC-Mafia deceptions still skulk at the base of a vast iceberg.

    1. Hmmm? Looks like we may have two candidates per Brad Habermehl's assertion in his March 15, 2015 email ("There are currently five investors that are perusing the school project. I and Steve are 2 of the five."): Ingersoll, Habemehl, Harger... and now Noss and Bishop?