Country Music Hall of Fame asked to pay $1.5M to McLean investors on The Murfreesboro Post

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Country Music Hall of Fame asked to pay $1.5M to McLean investors

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By: Lisa Marchesoni

Posted: Tuesday, August 12, 2008 4:04 pm

More than $1.5 million is sought from the Country Music Hall of Fame to recoup investors’ funds spent by the late Robert W. McLean.

McLean, 59, of Charleston Court operated an illegal Ponzi scheme, a phony investment plan in which monies paid by later investors are used to pay artificially high returns to initial investigators. As part of the scheme, McLean made large charitable donations to the Country Music Hall of Fame.

When he took his life last September, McLean owed investors more than $63 million.

A motion filed Tuesday in U.S. Bankruptcy Court seeks a judgment ordering the Country Music Hall of Fame to pay $1.5 million and/or return two Johnny Cash guitars, Mother Maybelle’s guitar and Bill Monroe’s mandolin.

Trustee Robert Waldschmidt has asked U.S. Bankruptcy Judge Keith M. Lundin to order the museum to pay the $1.5 million.

The museum opposes the payment. Museum attorney Gene L. Humphreys argued, “permitting the trustee to recover the charitable contributions is contrary to the interests of the people of Tennessee.”

U.S. Bankruptcy Judge George C. Paine II suggested Lundin to address the following issues:

• Was McLean was engaged in a Ponzi scheme during the four years before the bankruptcy proceeding?

• What legitimate income did McLean have during the four years before the bankruptcy?

• Was McLean insolvent in the four years before the bankruptcy?

Attorney Samuel K. Crocker, who represents the trustee, filed a motion stating McLean operated the Ponzi scheme, using invested funds to make charitable donations to the museum.

“These charitable donations were an integral part of the Ponzi scheme, designed to demonstrate the debtor’s (McLean’s) financial success, attract further investments and perpetuate the Ponzi scheme operation,” Crocker’s motion stated.

Waldschmidt’s affidavit stated McLean admitted before his death he was involved in a pyramid scheme. His charitable donations to the museum and MTSU came from money he borrowed from lenders.

Certified Public Accountant Garry N. Lewis filed an affidavit after reviewing McLean’s records and speaking with his employees and bookkeeper.

Lewis concluded McLean earned less than $15,000 from January 2002 through July 2007 from a rental house and interest from bank accounts. He was insolvent from July 1, 2003 when he owed lenders $12 million.

“As in every Ponzi scheme enterprise, this debtor’s operation was a house of cards awaiting its eventual collapse,” Crocker’s motion stated. … “When the debt eventually grew to the point that the debtor could not successfully generate enough new loans to continue paying outstanding balances on the old loans, the pyramid came crashing down.”

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Member Opinions:

By: Bunny on 8/13/08
It seems a little nuts to me to have the Country Music Hall of Fame be financially responsible. This was a gift and received as a gift in good faith. Will MTSU also have to return their received donations? Why make this terrible tradgy spread more than it has? Aren't enough people hurt by this, without adding salt to the wound??? Its just nuts!

By: RaiderXpress on 8/13/08
MTSU has already agreed to a settlement with the Trustee in the amount of $570,000. In a manner of speaking, MTSU set a precedent by giving some of the monies back. The CMHF is most likely to settle on an amount that is much less than what the trustee is asking for. McClean had some great intentions in his life, but his manner of execution was AWFUL.

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