Judge will weigh accusations of financial abuse at Traverse City charter school
The founder of a charter school in Traverse City is back in federal court next week. A judge will sentence Steven Ingersoll for up to five years for his recent convictions of tax evasion and conspiracy to defraud the federal government. Those crimes had to do with his financial dealings in Bay City.
The hearing is also raising questions about whether Ingersoll abused his power when he was running Grand Traverse Academy. When he cut ties with the school, he owed the public academy $1.6 million dollars.
Ingersoll was never charged with embezzling money. He has been accused of that, however, by federal attorneys in court documents.
His prison sentence for tax evasion and conspiracy to defraud the government will mainly depend on the amount of tax liability involved. But the judge may also consider Ingersoll’s conduct at Grand Traverse Academy.
Jan Geht is Ingersoll’s attorney and says this is true in any tax fraud case.
“The judge can take into account a host of factors not necessarily tied to the conviction,” Geht says.
One of those factors is whether he abused a position of public trust, in this case as the manager of a charter school.
Philanthropist or thief?
This story goes back years. At one point, Ingersoll owed Grand Traverse Academy $3.5 million. He claims the money was a rebate he was offering the school, a discount on fees for management services he provided. But the school never collected it all and $1.6 million was left outstanding.
Lawyers hired by the school in 2013 disputed that explanation. Attorneys at Thrun Law Firm wrote a letter to the academy board in May that year, saying the money owed to the school was taken by Steven Ingersoll in excess of his management fees and was not a promised gift.
They described difficulties getting a clear understanding of the school’s finances as they tried to understand why Ingersoll owed any money at all and exactly how much. A Michigan school cannot loan money to an individual. It was possible, their letter said, that state and federal laws were broken.
The state of Michigan reviewed the matter and took no action against Ingersoll or the school, but the Thrun letter has been offered by federal attorneys as evidence of abuse in the sentencing hearing.
Theft or bad accounting?
Attorneys at Thrun did say their findings were preliminary and suggested a full audit. One was done within four months by the Traverse City firm Dennis, Gartland & Niergarth.
And Jan Geht says it shows Ingersoll took no money.
“There is no money missing,” Geht says. "There’s been an accountant dispute about what is the appropriate level of disclosure.”
The audit criticizes some of the academy’s accounting practices as improper and lacking "economic substance;" it even uses the word “fictitious” to describe some revenue on the books. It points out that the school rented a “small office” space to Ingersoll’s management company and the rent ranged from zero to 1.1 million dollars in various years.
Auditors warned these accounting practices could be abused and suggested they were used to conceal financial problems from state and financial regulators.
The current manager of the school, Mark Noss - an associate of Steven Ingersoll and the chair of the board at the time the audit was conducted - declined to comment for this story.
The audit seems to agree that the missing money was a rebate, or a series of rebates, offers for a discount on Ingersoll’s management fees after he had already received full payment. Auditors referred to it as a “cumulative downward adjustment.”
And so far, it appears Judge Thomas Ludington also sees it that way. After three days of testimony on this issue, the federal judge described the missing money as a concession; an amount Ingersoll conceded back to the school, money that was otherwise his to keep rightfully.
The judge said he plans to focus the rest of the hearing on what obligation Ingersoll had to pay that concession once he offered it.
The sentencing hearing resumes next Tuesday in Bay City.
Disclosure: Jan Geht's law firm Bowerman, Bowden, Ford, Clulo & Luyt is an underwriter of Interlochen Public Radio.