The late Bob McLean's investors are likely to get just pennies on the dollar, even if the trustee for his estate manages to wrangle $1.5 million out of the Country Music Hall of Fame and Museum, court filings revealed Tuesday.
McLean, a former stockbroker, committed suicide last September on the eve of a U.S. Bankruptcy Court hearing before creditors who lost $63 million from his Ponzi scheme. A full $1.5 million of that went to the museum as donations for the purchase of some of country music's most famous instruments — Maybelle Carter's guitar and Bill Monroe's mandolin, according to trustee Bob Waldschmidt, who is fighting the museum to recover the donations.
The museum says it isn't obligated to give back anything. An attorney for the museum declined to comment.
Waldschmidt, who laid out his case for the instruments in court documents Tuesday, said he had met with McLean for four or five hours on two separate occasions before his death, and that McLean admitted to the crime.
"During my first meeting with Mr. McLean on July 26, he discussed his enterprise over the previous years, and I asked him whether he was familiar with the term, 'pyramid scheme.' He said he was familiar with that term and that this was what had been going on, at least since he stopped day trading in 2001 or 2002," according to Waldschmidt's affidavit in support of a summary judgment in the case.
Waldschmidt said that at the time of McLean's confession, he knew his comments could be used against him and that he was facing criminal charges.
Trustee describes scamThe filing also says McLean, who took loans from investors, some of them prominent members of the Murfreesboro and Nashville business communities, owed investors and other creditors more than $63 million at the time of his death. He took loans from investors, saying he was putting their money in the stock market.
Instead, he was using the money to pay interest on loans from previous investors, commonly known as a pyramid or Ponzi scheme. Such crimes inevitably fail when new money coming in doesn't keep up with money going out.
"A review of the notes and interest rates in those notes indicates that the vast majority of all loans made to Mr. McLean, as part of this Ponzi scheme, were accruing interest at rates equal to or exceeding 10%," Waldschmidt said. "In the cases of 6-7 of the largest lenders, those interest rates exceeded 20%."
At the time of his death, McLean's assets were worth less than $7 million, the court filing said. That means creditors will get little of their money back. Not counting bank liens, Waldschmidt has estimated the value of McLean's wealth at $3.4 million. Middle Tennessee State University, which also got donations from McLean, previously settled with the bankruptcy trustee and agreed to pay back $570,000 to the estate. A trial date for the Country Music Hall of Fame lawsuit has been set for Feb. 12.
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