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Sunday, July 21, 2019

HOME BY NEW YEAR'S EVE? Convicted Fraudster Steven Ingersoll In Michigan Halfway House; Could Be Released From Federal Custody By December

Steven J. Ingersoll, who reported to FCI Duluth on February 2, 2017 to serve a 41 month sentence for his federal tax evasion and conspiracy convictions, has left Minnesota and is now back in Michigan.

Federal Bureau of Prison records reveal Ingersoll recently transitioned to the supervision of Residential Reentry Management Detroit (RRM Detroit).

RRM Detroit, located 20 miles south of Ann Arbor in Milan, is a minimum security facility more commonly known as a halfway house.

Originally sentenced to 41 months, Ingersoll sentence has been whittled down by nearly 7 months, and he is now targeted to be released from federal custody by December 29, 2019.

For those new to this blog, here's a recap of Ingersoll's crime story:

If Michigan optometrist, and imprisoned charter school management honcho, Steven J. Ingersoll, lived in Mississippi, John Grisham would have already written a not-very-fictitious-sounding novel about him. 

And with Betsy DeVos heading the United States Department of Education, stunning revelations made during Steven Ingersoll’s 2015 federal tax evasion trial and subsequent sentencing hearing can be seen as a bellwether for the United States, making this a national story. 

However, those stunning revelations made by Ingersoll and his cronies had very little to do with what’s popularly known as “school choice”, and everything to do with stacks and stacks of Benjamins — money, baby! 

Although Ingersoll was convicted on three counts in federal court (tax evasion and conspiracy), his admitted misappropriation of nearly $6.5 million from two Michigan charter schools he managed — the Bay City Academy and the Grand Traverse Academy — have never been formally investigated, let alone prosecuted. 

Yes, that’s right. 

Even though Ingersoll admitted under oath his fraudulent conveyance of nearly $5.0 million from the Grand Traverse Academy over six years via an accounting scheme, there’s apparently no political will in Michigan to investigate and prosecute the alleged crime — from the politically ambitious former Attorney General Bill Schuette to Grand Traverse County’s former Prosecuting Attorney Robert Cooney. 

In its theory of the case, the federal government asserted Ingersoll’s federal tax evasion case demonstrated the truth of the sayings that “money gives power” and “unchecked power corrupts”. 

“Steven Ingersoll obtained control over millions of dollars by creating and running the public charter schools known as the Grand Traverse Academy. The power of that money enabled Steven Ingersoll to corrupt himself, his wife Deborah Ingersoll, his brother Gayle Ingersoll, Roy Bradley, Sr., and Tammy Bradley. As the person who controlled the accounting books and public funds intended for the operation of the Grand Traverse Academy, Steven Ingersoll ignored his obligation to separate his personal finances from the finances of the Grand Traverse Academy. Instead, Steven Ingersoll treated the tax dollars provided for public education as his personal piggy bank, ultimately diverting approximately $3.5 million from the Grand Traverse Academy to uses other than the operation of the Grand Traverse Academy. Steven Ingersoll also manipulated the books of entities he controlled, including Smart Schools Management and Smart Schools Incorporated, to hide his diversion of the public money that had been entrusted to him.” 

At the start of each fiscal year, (beginning July 1, 2007 and continuing for six years through the fiscal year ending June 30, 2013), Grand Traverse Academy (GTA) manager Steven Ingersoll withdrew his entire annual Smart Schools Management, Inc. fee from the Traverse City, Michigan charter school’s bank account before it had been earned — and before he was contractually entitled to receive it. 

Although ostensibly based on a percentage of the GTA board’s approved preliminary budget figures, Ingersoll’s management fee was necessarily “adjusted downward” after actual budgets were calculated at the end of each year. Ingersoll booked the overpayment on the GTA’s balance sheet as either “accounts receivable” or a “prepaid expense”, claiming them as “assets”, thereby concealing the school’s shaky financial condition to avoid triggering a bond covenant violation. 
The scheme was publicly supported by then board president Mark Noss, who described it in a September 17, 2014 Interlochen Public Radio interview: “There were times when the resources were just not there. So Smart Schools basically pledged or rebated that money back, saying ‘at some point in time we will repay what we’re calling a prepaid expense.’” However, Ingersoll never really repaid the difference between the amount he'd advanced himself (“what we’re calling a prepaid expense”) and the actual management fee he should have received. 

So how did the receivable grow from $538,864 on June 30, 2007 to $3,551,328 on June 30, 2012 if Ingersoll, as he’d claimed in multiple financial documents to the GTA board, booked each year’s fee overpayment as a receivable and paid it off at the beginning of the next fiscal year? 

Simple: after Ingersoll had paid the previous year's receivable balance using Michigan state aid money provided to the Grand Traverse Academy, he then transferred that money back from the Academy’s bank account to one of his Smart Schools accounts, and created a new, and even larger, receivable balance. 

Ingersoll admitted the multi-year scheme on December 9, 2015 while testifying during his sentencing hearing. 

Representatives of the GTA board, including its then-president Noss, met with attorneys from the Thrun Law Firm and Steven Ingersoll on May 20, 2013. 

The meeting was initiated after federal investigators paid visits to the school’s superintendent, Kaye Mentley, and the president of its board of directors, Mark Noss. During the meeting, Ingersoll admitted owing the charter school at least $3.5 million but asked to have the debt classified as a “loan”. 

According to the May 30, 2013 Thrun Law Firm legal recommendation to Noss and the GTA board, the issue before the board related “to funds withdrawn from the Academy’s general fund by Steven Ingersoll and/or representatives of SSM, which exceed the amount appropriated or authorized by the Board to be paid to SSM for either management fees or the reimbursement of Academy expenses.” The letter estimated Ingersoll’s debt to the Traverse City charter school at $3,548,319 (based on information provided by Ingersoll’s handpicked CPA, Tony Henning). 

As Henning had relied solely on “financial reports and representations of Steve Ingersoll” to determine the amount, Thrun repeatedly urged the GTA board to “independently verify the full sum due” instead of merely accepting Henning’s number. Representing the interests of the GTA and its board, not Steven Ingersoll and Smart Schools Management, Thrun affirmed in its May 30, 2013 letter that “Steven Ingersoll openly admitted, when asked by us during the May 20th meeting, that a conflict exists between his personal interests and the interests of the Academy.” 

However, the GTA board ignored Thrun’s recommendation to verify Ingersoll’s numbers, instead using CPA Henning’s exact $3,548,319 amount in its June 13, 2013 “demand letter” to Steven Ingersoll. On June 30, 2013, the GTA board and Ingersoll agreed on a “repayment plan”, revealing the details in the Academy’s 2013 financial statement. 

The agreement allowed Ingersoll to “work off” his balance by foregoing management fee payments over the remaining three fiscal years of his management contract. 

However, a November 25, 2013 letter from Doug Bishop, the GTA board’s former attorney, to Michigan Department of Education auditor John Brooks revealed one stunning exception: although the board of directors, headed at that time by longtime Ingersoll business associate Mark Noss, publicly revealed in the Academy's 2013 financial statement its decision to credit Ingersoll's future management fees against his $2.38 million dollar “prepaid expense” balance until it was reduced to zero, the Board still authorized a cash payment of “approximately $332,000 in pre-obligated, annual debt service of SSM with regard to GTA has agreed to pay to SSM.” 

After publicly revealing in its 2013 financial statement that Ingersoll would be “working off” his prepaid balance by foregoing any future management fee payments, the Grand Traverse Academy board paid Ingersoll $332,000 so he could have the cash flow necessary to make payments on an unspecified Smart Schools Management debt. 

GTA board president Mark Noss later oversaw an early morning meeting on March 19, 2014 where the board voted unanimously to officially “withdraw from the management contract with Smart Schools Management, Inc.” 

Minutes later, the board accepted the resignation of “Mark Noss as the President of the Board.” Although Noss tendered his resignation during this meeting, the resignation was not effective immediately. 

GTA records revealed Noss continued to serve in a dual role as a board member until its May 2014 meeting, nearly two months after signing a multi-year, multi-million-dollar management contract. 

Steven Ingersoll was indicted on April 9, 2014. 

Ingersoll was charged with three counts of wire fraud, two counts of tax evasion, one count of conspiracy to defraud the government, and one count of attempted conspiracy. (Four co-defendants, including Ingersoll’s wife Deborah, were also charged on various fraud and conspiracy counts). 

An April 24, 2014 superseding indictment further charged Steven Ingersoll with tax evasion regarding his attempt to “disguise the money allegedly received from Grand Traverse Academy” — which was also named by the government as the motive for the bank fraud conspiracy and tax evasion conspiracy. 

Steven Ingersoll was convicted of three counts of fraud and tax evasion on March 10, 2015. 

Ingersoll’s sentencing hearing began on October 21, 2015 and he was formally sentenced to 41 months in federal prison on December 15, 2016. Ingersoll entered FCI Duluth on February 2, 2017. 


Brad Habermehl, a Michigan optometrist, served as a member of the Grand Traverse Academy board of directors from late 2012 to September 2016. 

On my blog, I revealed loan solicitation emails sent between then board president Brad Habermehl, a self-described “friend and colleague” of Steven Ingersoll, and a source who was a former business associate of Habermehl's regarding a “private school” venture Ingersoll and Habermehl were purportedly launching — emails sent after Ingersoll's April 2014 federal fraud indictment and while Habermehl was the president (and public face) of the Grand Traverse Academy board of directors. 

The emails revealed Habermehl's six-figure solicitation effort continued even after Ingersoll's March 10, 2015 conviction, and confirmed board president Habermehl was acting on behalf of Ingersoll, even referring to him as his “friend and colleague”. 

Habermehl sent the initial November 24, 2014 email to Reigle. However, the funding effort was initiated by Ingersoll himself earlier that day, with an early morning email to Habermehl outlining the bare bones of his “loan” proposal. 

Testifying on December 8, 2015 during Ingersoll's sentencing hearing, Habermehl was confronted with the evidence and admitted that former Lake Superior State University Charter Office head Bruce Harger was one of the project's five investors. Harger headed the office that chartered and oversaw the Grand Traverse Academy, leaving the university in September 2015. 

At 12:24pm on November 24, 2014, Habermehl reported back to Ingersoll, telling him “I have made the initial contact. I told John that you would like to have the funds no later than 6 to 8 weeks. I will let you know when I know more. Brad” 

Later that afternoon, Ingersoll sweetened the collateral pot, telling Habermehl in an email sent at 2:06pm that he has “two other high value houses and three school buildings as possible collateral if necessary.” 

During his December 8, 2015 testimony, Habermehl revealed that Reigle passed on the proposed “investment”. 

However, on March 15, 2015, less than one week after Ingersoll was convicted in federal court, Reigle reached out to Habermehl, sending him an email. 

Raising the issue of the "deal" he'd previously passed on, Reigle stated: "I'm sure glad that I didn't loan money to Steve Ingersoll. Looks like his ass is going away to the Gray Bar Hotel and facing some pretty hefty fines! Did you know that he was in that much trouble when you asked to borrow $300,000 from me? I hope not." 

Less than 30 minutes later, Habermehl responded and made a shocking revelation about one of the proposed project's partners, which he later revealed in court was former Lake Superior State University's Charter Office head Bruce Harger: 

"There are currently five investors that are perusing the school project. I and Steve are 2 of the five. One of the investors just retired from Lake Superior State University. You are correct that we have been friends for over 40 years. I approached you as an investor with more than $300,000 in collateral. I have not and would not bring you an investment deal that was not secured with like collateral. This is still a very good investment with a good return. Steve's problem with the IRS is with his personal income taxes and not related to any of the schools. I did not know the extent of his problems, but it has no effect on this school project. Brad" 

On March 15, 2016, an accountant formerly employed by Mark Noss at Full Spectrum Management revealed to the GTA board and the charter school’s authorizer, Lake Superior State University, that Noss had been making $12,500 monthly payments (and in some months, much more) to Ingersoll since April 2014, shortly after Noss assumed control of the GTA. 

Using information provided by the whistleblowing accountant, (who resigned shortly after making his revelations public), federal prosecutors were able to substantiate that between April 8, 2014 and March 1, 2016, Steven Ingersoll received a total of $627, 624.14 from Full Spectrum Management, the educational services provider owned by Mark Noss and holder of the management contract for the Grand Traverse Academy or Grand Traverse Academy itself. 

All of that money went into accounts owned by Steven Ingersoll and his solely owned entities. 

An excerpt from the April 29, 2016 court document: “In assessing the credibility of Bradley Habermehl as a witness and Mark Noss as an affiant in this matter, the court must consider the relationships they have with Ingersoll and how their financial and personal relationships with Ingersoll have influenced the representations that Habermehl and Noss have made to the court. The evidence discussed above casts doubt on the credibility of Ingersoll, Noss and Habermehl.” 

The April 27, 2016 email, sent by Ingersoll to Harger less than three weeks after his quadruple bypass surgery, revealed Ingersoll instructed Harger to contact the Michigan Board of Optometry and “email a letter saying they should not revoke my license mentioning Duane’s death, messed up bookkeeping, GTA’s support and my application of the principles of Optometry in the field of education.” 

And Ingersoll, on who reported on February 2, 2017 to FCI Duluth to serve a 41 month sentence for his federal tax evasion and conspiracy convictions, filed a “pro se” motion to vacate on January 24, 2017, seeking “post-conviction relief” based on attorney Martin Crandall’s alleged “ineffective assistance of counsel” — an attorney who’d sued him for nonpayment of nearly $362,000 in outstanding legal fees. Ingersoll's motion was denied.

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