McLean victims may owe millions, trustee claims

Those who invested in massive Murfreesboro Ponzi scheme may be on the hook for millions improperly paid back to them by the late Bob McLean

Email | Print By E. Thomas Wood, Geert De Lombaerde, and Walker Duncan

After being duped in a multi-million-dollar Ponzi scheme, victims of the late Robert McLean now have to contend with lawsuits meant to dun them for much of the return they ever got on their investments.

Trustee Bob Waldschmidt, administering McLean's bankruptcy case, yesterday filed suit against more than 50 people who sank money into the high-yield promissory notes McLean was marketing prior to the involuntary Chapter 7 filing against him last July and his suicide two months later. Waldschmidt is seeking a total of some $11.4 million in interest payments he says were improperly paid to the investors.

The lawsuits assert that interest payments made by McLean, which served to keep up the legitimate appearance of his endeavor, must now be repaid as they were technically “fraudulent conveyances," subject to being voided and recovered by the trustee under bankruptcy law. Waldschmidt is going after payments dating back four years from July 2007.

Most of the defendants live in Murfreesboro and are facing claims for less than $200,000. The most notable of them, however, is longtime Nashville venture veteran Fred Goad, from whom Waldschmidt is seeking about $1.19 million. The largest claim is against Murfreesboro business owner James Haynes, in the amount of $2.9 million.

McLean, a descendant of the Davidsons for whom Davidson County is named, founded McLean & Company Investments to market various investments after a career as a stockbroker. He shot himself in Shelbyville late last September — the day before a scheduled bankruptcy hearing that would have given his former investors the chance to question him for the first time since their money disappeared.

A bankruptcy auction of some of McLean’s personal assets a month later netted just $96,000. The proceeds of his homes and cars went primarily to secured lenders, leaving his former investors without more than $40 million.

Among McLean’s philanthropic beneficiaries deeds was Middle Tennessee State University, which used his $1.5 million gift in 2002 to buy 54 Steinway pianos for its School of Music, which was later renamed in McLean’s honor. (His name has since been dropped, though the school still markets itself as “An All Steinway School!”)

Another prominent institution on the receiving end of McLean’s money was the Country Music Hall of Fame and Museum, which received "Mother" Maybelle Carter's 1928 Gibson guitar and Bill Monroe's 1923 Gibson mandolin, which had been on the market for a combined $1.7 million.

Last year, Waldschmidt was reported to be in negotiations with the Hall of Fame and MTSU over the donations. In those instances, as in the current litigation, the trustee asserted that the money had changed hands in fraudulent conveyances.

In a statement released to NashvillePost.com last night, Waldschmidt explained his reason for suing the investors:

In a Ponzi scheme, all payments to lenders/investors are deemed to have been made with “actual intent to defraud” because a Debtor (McLean) never really had the monetary means to repay those obligations, and those payments were funded by other investors. Such pyramid schemes always collapse (eventually), leaving the unpaid later investors, whose money was used to pay the earlier investors. Therefore, under fraudulent conveyance law, all payments (4 years back) are avoidable and recoverable by the bankruptcy estate.

From an equitable point of view (“This isn’t fair”), there really is nothing fair about the losses sustained in a Ponzi scheme. Everyone who was involved has suffered financial losses as a result of Mr. McLean — almost everyone, that is, since some people were paid in full, with interest — but far more were only paid in part, and others received nothing. Is it fair for one person to receive $100,000 on their loan last year, while another lender (who loaned money at the same time as the first) received no payment? And what about the investor who loaned the $100,000 to McLean in order to pay the prior investor?

There are massive inequities between the amount of repayments received by some vs. the lack of repayments received by others. Equitably, all payments should be returned to “one pot” and distributed “fairly,” on a pro-rata basis, to all those who lost money. The lawsuits which have been commenced in this case against the investors are actions to recover these payments made by Mr. McLean within the last 4 years. The Trustee has maintained an open dialogue with all attorneys and Investors over the past few months, and a few investors have already settled these claims with the Trustee. It is possible that additional settlements can be reached before this litigation proceeds much further.

On behalf of James Haynes and his family, Waller Lansden attorney Bobby Guy commented: "We are saddened that so many members of the community, including people of the Haynes' age and standing, are going to have to go through the trauma of defending a lawsuit seeking to disgorge money, when they were the true victims here."

Bill Norton of Boult Cummings, who represents Goad as well as several other high-dollar defendants, including former University of Tennessee trustee Charles Coffey (on the hook for $1.74 million), told NashvillePost.com via e-mail on Wednesday that he will be "asserting the defense under the avoidance statute that the Defendants have setoff claims for investments made in good faith."

He continued, “Since in all of these cases, the amounts invested exceeded any amounts paid by McLean, there should be no liability.”

The defendants are named in four separate lawsuits available at this link, this link, this link and this link. At the end of each filing is a list detailing the amount the trustee wants each person to pay back.

Sam Crocker of Crocker & Niarhos joined Waldschmidt, of Howell & Fisher, in filing the complaints.