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UNITED STATES DISTRICT COURT

EASTERN DISTRICT OF MICHIGAN
NORTHERN DIVISION
UNITED STATES OF AMERICA,
Plaintiff,
v.
D-1
D-4

Criminal No. 14-CR-20216

Judge Thomas L. Ludington

STEVEN J. INGERSOLL,
ROY C. BRADLEY, SR.,

Defendants.
________________________________/
GOVERNMENTS REDACTED SENTENCING MEMORANDUM
REGARDING DEFENDANTS REQUESTS FOR A DOWNWARD
DEPARTURE AND FOR A DOWNWARD VARIANCE.
With the courts permission, the government filed a sentencing
memorandum under seal on December 12, 2016. (R. 347). With the intent of
affording the public the beneficial effects of open criminal proceedings, 1 while
avoiding disclosing inappropriate details of Steven Ingersolls tax information and
medical status, the government files this redacted version of that previously filed
document. No new information has been added to the governments December 12,
2016 pleading, so the court will not be burdened with additional reading material
in this already voluminous case file.

See Richmond Newspapers, Inc v. Virginia, 448 U.S. 555 (1980). Cf., Gannett
Co. v. DePasquale, 443 U.S. 368 (1979).
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On October 18, 2016, the government filed a brief regarding Steven

Ingersolls Amended Criminal Tax Calculations (R. 339). On November 16, 2016,
Defendant Ingersoll filed objects to the governments calculations. (R. 340).
Defendant has also recently filed a sentencing memorandum (R. 344) in which he
requests a downward departure or downward variance at sentencing. For the
reasons stated in this brief, the government asserts that the correct tax-loss range
under 2T4.1 is $550,000 to $1,500,000, resulting in a base offense level of 20. The
government opposes defendants requests for a below-guideline sentence. Based
on the seriousness of the offense and defendants continued failure to file any
income tax returns for 2012, 2013, 2014, and 2015, the government recommends
that the Court impose a sentence within the guideline range of 41 to 51 months.
Ingersolls Criminal Tax Calculations
[redaction]
Defendant raises two other objections, but concedes that even if he prevailed
on both, they would not affect his offense level. Defendant notes, however, that
any possible changes to the criminal tax-loss calculation may affect the restitution
amount that the court should impose. The government agrees. Defendant was
convicted in Count 2 of conspiracy to defraud the government, and restitution is
mandatory for such a conviction pursuant to 18 U.S.C. 3663A. See e.g., United
States v. Turner, 718 F.3d 226, 235-36 (3d Cir. 2013) (holding that conspiracy to
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defraud the IRS was an offense against property which triggers the mandatory
restitution requirements of 3663Awhich are not means-tested).
Ingersoll objects that the government, in computing the amount of
unreported income for the year 2009, should have reduced his income by the
amount of the shareholder loans reflected on SSI and SSMs 2009 tax returns.2
Ingersoll claims that this would wipe out his tax liability for 2009 and give him a
loss carry-forward for 2010.
Ingersolls argument cannot be squared with the jury verdict in this case.
The jury unanimously found that income tax was due and owing from Steven J.
Ingersoll in addition to that declared on his income tax return . . . (R.176: Jury
Instructions, PgID 1382). At trial, Ingersoll argued that the unreported income was
in fact a shareholder loan. The jury was instructed on this argument and rejected
itfinding him guilty of tax evasion for 2009.
Just as important, Ingersoll has not offered any documents or records as
evidence to support the shareholder loan amounts reflected on SSI and SSMs
2009 returns. The only underlying records were QuickBooks entries that
designated certain payments to Ingersoll as shareholder loans. The government
used the QuickBooks to reduce the amount of unreported income before it

Ingersoll does not claim that the Court should use the amounts reflected on SSI
and SSMs 2010 returns, which are less generous than the governments
calculations.
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determined that there were other sets of QuickBooks and before realizing that no
set of QuickBooks was reliable. Therefore, the government has already given
Ingersoll more credit for purported shareholder loans than he should have been
given.
Defendant also objects to the governments calculation of his 2011 income.
Ingersoll notes that on February 15, 2011 he transferred $190,000 from his
personal bank account to SSMs bank account, and that on June 30, 2011, he
transferred $700,000 from his personal account to SSIs account. In accordance
with the Courts order, the governments amended tax calculations do not include
this amount as income, because the transfers originated from the proceeds of a
Chemical Bank loan. In addition to not including the transfers to Ingersoll as
income, defendant claims that the government should reduce his unpaid income for
2011 by $890,000, because the transfers were repayments of shareholder loans.
Specifically, Ingersoll claims that the transfers to SSI and SSMI should offset the
amount of money transferred from SSI and SSM to Ingersoll in that year.
Both of the transfers were part of larger transactions involving money going
from Chemical Bank to Roy and Tammy Bradley, to Gayle Ingersoll, then to
Steven Ingersoll, then to SSI or SSM. Notably, the June 30, 2011 transferof
$700,000 continued on to Grand Traverse Academy (GTA). This transfer
from Steven Ingersoll and ending at GTA was not the repayment of a shareholder
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loan, but rather a convenient way for Ingersoll to return funds to Grand Traverse
Academy before the close of the fiscal year. The government maintains that
Ingersoll had previously taken funds from Grand Traverse Academy without board
authorization, and that he used those funds to finance the Bay City Academy
project. The transaction on June 30, 2011in which Ingersoll returned money to
GTAwas a way for Ingersoll to avoid detection of his unauthorized use of GTA
funds.
Though SSMs management fee for 2011 was not explicitly set at a fixed
amount or percent, Ingersoll and members of the GTA board testified at sentencing
that they intended for SSM to earn a management fee of 12% of GTAs gross
revenues. For the fiscal year ending on June 30, 2011, GTAs revenues were
$9,411,066.00, and SSM was paid a management fee of $1,098,537, representing a
management fee of 11.67%. (R. 234-7, GTA audit report for 2011, PgID 2921; R.
274-4, Proposed GTA Resolution Regarding SSM, PgId 3959). If Ingersoll had
not returned the $700,000 prior to the close of the fiscal year, the amount received
by SSM and Ingersoll would have been over 19% greatly exceeding the 12%
that SSM was purportedly authorized to take. Ingersoll transferred $700,000 to
GTA so that GTA would not have a large amount of missing funds at the end of
the fiscal year. Ingersoll knew that a budget deficit would trigger additional state
oversight.
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The GTA funds that flowed through SSM and SSI to Ingersoll were not
shareholder loans, and there are no reliable records documenting them as such.
There is no evidence that GTA intended to loan money to Ingersoll or his entities,
and state law prohibited GTA from doing so. Accordingly, the $700,000 that
Ingersoll transferred from himself through SSM and SSI and then to GTA was not
the repayment of a shareholder loan. Ingersolls taxable income, therefore, should
not be further reduced by that amount. See James v. United States, 366 U.S. 213,
220-21 (1961) (embezzled income is taxable in the year it is received); Solomon v.
Commr of Internal Revenue, 732 F.2d 1459, 1461 (6th Cir. 1984)
(misappropriated funds are taxable where there is no evidence of mutual parties
intending to enter into a loan agreement).
The government recommends that the Court should overrule the two
objections which would lower Ingersolls criminal tax-loss amount.
Defendants Request for a Downward Departure
Defendant Ingersoll claims that he should receive a downward departure
under U.S.S.G. 5H1.4 based on his physical health. Defendants health situation
is not extraordinary and the Court should not grant a downward departure.
Under the sentencing guidelines, age and health are disfavored factors that
the district court may use as bases for granting a downward departure only in
exceptional circumstances. United States v. Bostic, 371 F.3d 865, 875 (6th Cir.
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2004). Section 5H1.4 provides that, . . . an extraordinary physical impairment

may be a reason to depart downward: e.g., in the case of a seriously infirm
defendant, home detention may be as efficient as, and less costly than,
imprisonment. While defendant has a history of cardiovascular problems, they do
not result in a significant impairment or infirmary. It appears that the defendant
maintains a normal lifestyle and his medical problems can be addressed by the
Bureau of Prisons (BOP). (Govt Sent. Ex 630, Letter from Paul T. Harvey,
M.D., dated November 21, 2016, [sealed]).
In anticipation of defendant raising this issue, the government obtained a
letter from Doctor Paul T. Harvey, the Regional Medical Director for the BOPs
North Central Region. In his letter, Doctor Harvey states: When designating an
offender to an institution, the BOP carefully considers the offender's health status
to determine his CARE Level under the BOPs medical classification system,
which in turn affects his institution designation. [redaction].
Defendant recently filed some of his medical records, which the government
provided to a representative of the BOP. The BOP representative reviewed the
records and opined that defendant likely would be classified [redaction] and
designated to an appropriate facility. 3

The BOP representative did not examine defendant and cannot definitely state
defendants CARE Level classification.
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There is also no reason to believe that the care provided by the BOP would
be any less effective or efficient than the care he would otherwise receive,
particularly in light of the fact that on April 21, 2016, defense counsel represented
to the government that Ingersoll did not have health insurance.4
The Court should not grant defendants request for a downward departure of
variance for health reasons.
Application of Section 3553(a) Factors
In general, the four purposes of sentencing are retribution, deterrence,
incapacitation, and rehabilitation. Tapia v. United States, 131 S.Ct. 2382, 2387
(2011); 18 U.S.C. 3553(a)(2). In a tax case such as this, the sentencing purposes
of retribution and deterrence are especially important. A sentence within the
guideline range of 41 to 51 months is necessary to accomplish those purposes.
Retribution
When looking first at the need for retribution, Ingersoll has committed a
serious offense, and his sentence should reflect it. His offense was not a one-time
lapse in judgement, or a record-keeping mistake with purely civil tax
consequences. His criminal tax-loss amount exceeds a million dollars. And he

In the unlikely event that Ingersolls health worsens and he becomes permanently
incapacitated, the BOP can medically parole him. See 28 C.F.R. 2.77.
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was convicted of tax evasion and fraud with respect to three years of false income
tax returns.
Ingersoll has done nothing to repay the money that he owes. To the contrary,
he has continued to violate the tax laws to this day by failing to file any personal
income tax return since 2012. The profit and loss statement that Ingersoll
previously filed with the court shows that from 2012 to 2015, he earned over two
million dollars in gross income. (R. 318-2: Ingersoll Profit and Loss for 20122015, PgID 4852). The only income tax payment he has made for those tax
periods, however, was a $10,000 payment submitted when he applied for an
extension to file his 2012 return. Defendants repeated and significant criminal
conduct warrants a lengthy sentence.
Deterrence
Defendant has been indicted and convicted of federal tax charges. He notes
that his professional life has been ruined (though he still has income related to his
intellectual property) and his name has been dragged through the mud. Yet, none
of that has deterred him from continuing to violate the tax laws. A substantial
sentence within the guidelines is necessary to deter Ingersoll from continued
criminal conduct.
Additionally, as the Sentencing Commission has recognized, there is a
heightened need for general deterrence in tax cases. The introductory commentary
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to the Sentencing Guidelines Manual section for tax-related offenses states,

Because of the limited number of criminal tax prosecutions relative to the
estimated incidence of such violations, deterring others from violating the tax laws
is a primary consideration underlying these guidelines. U.S.S.G. 2T1.1,
introductory cmt. (2015). Because of its limited resources, the IRS cannot
investigate many of the schemes involving false returns, and many tax-related
crimes go unprosecuted. The government seeks a guideline sentence in order to
deter other potential tax-cheats, including those like the defendant who believe that
tax laws have purely civilas opposed to criminal sanctions. (R 344: Def. Br.
Regarding 18 U.S.C. 3553(a) Factors, p. 8). A sentence of probation or a
custodial sentence below his guidelines (as requested by Ingersoll) would send the
wrong message to the public.
Defendants Request for a Variance
Defendant makes several non-health related arguments related to his request
for a variance under the factors of 18 U.S.C. 3553(a). None of his arguments
support a variance.
Ingersoll argues that he merely failed to document shareholder loans, and
that the evidence in this case is consistent with the proposition that defendant
believed that his intercompany transfers were shareholder loans. (R 344: Def. Br.,
p. 6 n. 5). This argument is inconsistent with the jurys verdict finding that the
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defendant acted willfully. If defendant truly believed that the transfers were
shareholder loans, he would not have repeatedly argued to this Court that he was a
mere conduit for his businesses and that the transfers to him should have no
taxable effect.
Defendant also claims that his unreported income would have been lower
to the tune of $840,000 if his historical tax credits had been approved and if the
federal government had not blocked them. (R 344: Def. Br., p. 6). It appears that
Ingersoll is trying to blame the federal governments denial of historical tax credits
for his own income tax violations. The Department of Interior denied Ingersolls
request for historical tax credits after it determined that the Bay City Academy
renovations did not comply with Department of Interior requirements. Even if the
credits had been approved, a significant portion of them would be paid to Tim
Hunnicutt, the project manager for the renovations at Bay City Academy. Nobody
knows what Ingersoll would have done with the remaining credits.
Ingersoll also argues that the grand jury would not have indicted this case,
had it not been for the allegations of bank fraud and the allegations that defendant
took money from GTA. (R 344: Def. Br., p. 7). Again, Ingersoll appears to be
trying to shift the blame for his situation to the government, but with baseless
speculation. A grand jurys job is to determine whether there is probable cause for
a criminal charge. In this case, the petit jury convicted Ingersoll of tax violations
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even after the Court dismissed Count 1, and despite the Courts evidentiary rulings
regarding GTA. It seems highly unlikely that the grand jury would not have
indicted when the standard of proof is so much lower for an indictment than what
is required for a conviction.
Lastly, defendant has presented the court with numerous sentencing tables to
argue that probation or a below-guideline custodial sentence would avoid
unwarranted sentencing disparities. (R 344: Def. Br., p. 17-18). The sentencing
tables, however, provide very limited information. They do not reflect offensespecific characteristics, such as acceptance of responsibility, role in the offense, or
substantial assistance to the government. The best way to avoid unwarranted
sentencing disparities in this case is to impose a sentence within the guidelines.
CONCLUSION
The government recommends that the Court sentence defendant within the
guideline range of 41 to 51 months. Defendant does not qualify for a downward
departure or variance. His criminal tax-loss amount is substantialin the range of

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$550,000 to $1,500,000. Ingersoll played a leadership role in the conspiracy to

defraud the government, and he continues to violate the tax laws by not filing
income tax returns.
Respectfully submitted,
Dated: December 15, 2016

Barbara L. McQuade
United States Attorney

s/Jules M. DePorre
Jules M. DePorre (P73999)
Assistant U. S. Attorney
600 Church Street
Flint, Michigan 48502-1280
(810) 766-5026
jules.deporre@usdoj.gov

s/Janet L. Parker
Janet L. Parker (P34931)
Assistant U.S. Attorney
101 First Street, Suite 200
Bay City, MI 48708
(989) 895-5712
janet.parker2@usdoj.gov
Certificate

On December 15, 2016, I filed the pleading above using the courts ECF
system, which will automatically serve counsel of record.
s/Jules M. DePorre

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