Trustee seeks return of gifts from dead scam artist

Monday, July 13, 2009 at 1:19am

 

Trustee Bob Waldschmidt last week filed four lawsuits in Nashville's U.S. Bankruptcy Court in an effort to recover a total of $1.9 million in funds for distribution to creditors of McLean. The litigation alleges that 19 individuals and one charity got gifts or other payments from McLean that rightfully belong in his bankruptcy estate.

Waldschmidt previously sued several people who had reaped returns on their investments with McLean, including an 88-year-old widow. He also reached legal settlements with the Country Music Hall of Fame and Middle Tennessee State University, which had each gotten major donations from McLean that the trustee deemed fraudulent conveyances.

Waldschmidt has previously explained that he considers himself legally bound to take such actions in the interest of all creditors in the case.

McLean, of Murfreesboro, committed suicide in September 2007, two months after his fraud came to light. Court filings indicate he misappropriated more than $40 million in investor funds during the last few years of his life.

One of the new legal actions seeks a total of $976,000 from 17 men who became acquainted with McLean "while students at MTSU, or through other non-business-related contacts." It states that McLean made gifts to the individuals "or paid college expenses or tuition" for them.

Efforts to reach the defendants in that case have been unsuccessful.

Another complaint targets Murfreesboro CPA Mark S. Riddle, who was McLean's accountant. Waldschmidt's lawsuit seeks the return of $480,000 that Riddle received from McLean.

"This is an old issue that I thought had been resolved long ago," Riddle said when contacted last week. "I furnished bank records which showed I had not accumulated any McLean funds over those years. Bob made, and I repaid to him, numerous working capital loans during those years.

"This trustee should take a lesson from the [Bernard] Madoff trustee and stick to suing people who ended up with a net profit from McLean, not those who have a net loss. But then how would he and his staff/contract subordinates get paid so handsomely?"

Other lawsuits filed last week seek $348,000 from Ronnie Martin, McLean's adopted son, and $94,000 from the Cystic Fibrosis Foundation. Waldschmidt says McLean gave that charity money in "a conscious effort... to improve his image in the Nashville and Murfreesboro communities, such that he could entice new lenders/investors to loan him money in furtherance of his Ponzi scheme."

Neither Martin nor a Cystic Fibrosis Foundation spokesman could be reached for comment.

United States Bankruptcy Court

SouthEast Waffles LLC. Chapter 11 reorganization plan and accompanying disclosure statement (filed July 6).

Waffle House Inc., based in Norcross, Ga., offers $21.4 million for its franchisee's 105 Waffle House diners. The money would be paid out over the course of 10 years, with unsecured creditors due to get back between 25 and 38 percent of their claims.

FirstBank, SouthEast Waffles’ largest creditor, and a committee of unsecured creditors have indicated some receptiveness to the deal. The disclosure statement states that they believe the plan "will result in a fair return to unsecured creditors." The transaction remains subject to court approval after other creditors have had a chance to object to it.

"WHI and another private equity entity have seriously pursued an acquisition of Debtor’s assets through a plan of reorganization," one of the filings reported. The other possible bidder is not identified, nor is it clear whether a rival bid for the assets could still transpire.

The plan anticipates that Harwell Howard Hyne Gabbert & Manner, as debtor's counsel, will ultimately bill some $750,000 in legal fees. It estimates total fees for MGLAW, as counsel to the unsecured creditors' committee, to be approximately $310,000.

United States District Court

Kaye Alcorn et al. v. Phillip Morris USA Inc. et al. (Filed July 7).

Going after big tobacco with familiar accusations, local plaintiffs are seeking class action status for their recently filed lawsuit in U.S. District Court. The complaint accuses cigarette producers Phillip Morris USA, Altria and R.J. Reynolds of deliberately misleading consumers with the marketing of light and ultra-light cigarettes as less dangerous.

The heart of the complaint centers on the use of small holes punched in the cigarette’s wrapper near the filter, which the lawsuit claims are designed to mislead the machine that measures levels of tar and nicotine delivered with each drag. The lawsuit alleges that the holes designed to decrease the air flow through the cigarettes lit end and thus decrease the level of harmful effects, are by virtue of their position on the cigarette often covered by the smoker’s fingers, negating their efficacy.

The case was filed by Charles Barrett of Barrett & Associates in Nashville. It seeks class action status for those who bought light or ultra-light cigarettes produced by the defendants since Jan. 1, 2005. No specific monetary damages are sought, but the lawsuit lists the amount in controversy as exceeding $5 million.