Accountant For Ponzi Scheme Suspect Who Shot Himself In Church Lot Indicted In Tennessee; Mark S. Riddle Charged With Defrauding Investors
EDITOR’S NOTE: The story of the Robert McLean Ponzi scheme is, indeed, a sad one. Litigation that has accompanied the Ponzi provides yet-another example of how fraud schemes can affect the lives of even innocent parties — charities on the receiving end of donations from Ponzi schemers and investors who receive payouts that can be considered “fraudulent conveyances” because they were dealing with a scammer who was taking money from some people and giving it to others to sustain the deception that “real” profits were being recorded.
McLean’s accountant, Mark S. Riddle, now has been arrested amid allegations that he defrauded investors by misleading them, prosecutors in Tennessee said.
On Sept. 25, 2007 — one day before he was scheduled to appear at a bankruptcy proceeding to explain how millions of dollars had disappeared from his investment company — Robert McLean’s body was found. He took his own life with a handgun.
McLean’s fraud scheme, which had operated for at least a dozen years, collapsed two months prior to his suicide, according to court filings.
The body was found behind the First Christian Church in the small, South Central Tennessee city of Shelbyville. The bankruptcy hearing had been scheduled for the nearby city of Murfreesboro, home of Middle Tennessee State University (MTSU).
McLean, 60, had given generously to MTSU, his alma mater. His reputation as a philanthropist further was boosted by gifts to the Country Music Hall of Fame, the Cystic Fibrosis Foundation and others, but McLean had a secret.
That secret, prosecutors said, was that he had been operating a Ponzi scheme that fleeced millions of dollars from investors through purportedly high-yield promissory notes while McLean spent lavishly on cars and homes. Federal agents raided McLean’s business two months prior to his suicide, and creditors and investors sought answers from McLean though the bankruptcy proceeding.
Bob Waldschmidt, the bankruptcy trustee, said in court filings that McLean had been operating a Ponzi scheme since “at least” 1995. After the Ponzi’s collapse, Waldschmidt went about the distressing business of reverse-engineering the scheme by identifying investors and charities unlucky enough to have received payments from McLean from suspected Ponzi proceeds.
The payments were treated as “fraudulent conveyances” because McLean was insolvent when making them and simply was relying on money received from later investors to pay earlier ones, according to court filings.
“From 2002, until the filing of the bankruptcy petition, the Debtor made gifts to various people and institutions . . . which were a conscious effort on the part of the Debtor 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,” Waldschmidt said in court filings.
Dozens of lawsuits were filed. Among the parties sued were McLean family members, investors and nonprofits that had received tainted donations.
The trustee also sued McLean’s CPA, Mark S. Riddle.
Riddle now has been charged criminally. He was arrested Wednesday after an investigation by the Rutherford County District Attorney’s office and the office of Tennessee Attorney General Robert E. Cooper Jr.
“Riddle was indicted on seven separate counts of allegedly defrauding four investors of approximately $668,000 in May of 2007,” prosecutors said. “Among the charges was selling securities without registering with the State.”