NEW INFO: Federal Grand Jury Indicts Donnan, Crabtree in Alleged Ponzi Scheme

By: The Associated Press Email
By: The Associated Press Email

UPDATE 4/17/13
ATLANTA (AP) -- Former University of Marshall and Georgia football coach Jim Donnan and a business partner face charges that they operated a Ponzi scheme, according to federal indictment unsealed Tuesday.

A U.S. District Court grand jury in Macon last week returned the 85-count indictment against Donnan and Gregory L. Crabtree of Proctorville, Ohio. The charges include conspiracy, mail fraud and wire fraud, among others.

Both men pleaded not guilty to the charges at their arraignments’ in Macon on Tuesday.

"The not guilty plea he entered today was the first step in his defense of these charges," said Crabtree’s lawyer Charles Cox in an email.

A lawyer for Donnan did not immediately respond to calls and an email seeking comment..

The indictment says the pair ran the scheme through GLC Limited, Inc., a West Virginia-based company that dealt in closeout merchandise. Crabtree was president of the company and was responsible for its day-to-day operation, while Donnan's main role was to recruit investors, the indictment says

The pair offered and sold short-term investments, and promised investors rates of return ranging from 50 percent to 200 percent.

Investors generally weren't given much information about the deals but threw their money in because they trusted Donnan.

He and Crabtree routinely lied to investors about the nature of the business, the indictment says.

GLC had little income other than the investments, so money from new investors was continually needed to pay expenses, to pay Crabtree and Donnan and "to perpetuate the scheme by paying what was falsely represented to investors as being a return on their investment from sales," the indictment says. Between September 2007 and October 2010, the pair raised more than $81 million from 94 investors.

The indictment identifies investors only by their initials. But the U.S. Securities and Exchange Commission last year filed a complaint against Donnan and others, saying the ex-coach used his influence to get high-profile college coaches and former players to invest $80 million into a Ponzi scheme. That case is still pending in federal court in Atlanta.

The individual losses ranged from a few thousand dollars to about $4 million, an SEC official said last year.

Donnan's attorney has previously acknowledged the former coach was paid lucrative commissions, but he said Donnan believed he was being paid from legitimate profits.

Donnan was head football coach at Marshall University from 1990 through 1995 and at the University of Georgia from 1996 through 2000 and later became an ESPN analyst.

Among the coaches Donnan helped attract were Texas State football coach Dennis Franchione; Virginia Tech football coach Frank Beamer; ex-Dallas Cowboys coach Barry Switzer and University of Cincinnati football coach Tommy Tuberville.

Donnan used his influence with former players who looked up to him, federal regulators said. According to the SEC court filing last year, he told one player, "Your Daddy is going to take care of you," and, "if you weren't my son, I wouldn't be doing this for you," the SEC complaint said. That former player, who was not named, ended up investing $800,000.

In late 2009 or early 2010, Crabtree told Donnan that GLC could no longer pay the rates of return Donnan was promising investors. The company began missing interest payments due to investors in August 2010.

Neither Donnan nor Crabtree disclosed GLC's financial problems to new investors. And Donnan, with Crabtree's knowledge, continued raising funds for deals while promising future returns, the SEC said.

Ultimately, a group of investors forced the appointment of a restructuring officer to run GLC. As the officer began to uncover the fraud, Crabtree resigned. In February 2011, the restructuring officer had GLC file a voluntary bankruptcy petition.

Donnan and his wife also filed for bankruptcy, and creditors claimed the Donnans owed them more than $40 million. A federal judge in Georgia approved a settlement in the case last July and, a judge in Ohio, where GLC is being restructured in bankruptcy court, also signed off on the settlement.



UPDATE 8/16/12
ATLANTA (AP) -- The U.S. Securities and Exchange Commission is accusing former University of Georgia football coach Jim Donnan of conducting a Ponzi scheme.

The S.E.C. said in a statement Thursday that Donnan worked with an Ohio man to conduct an $80 million Ponzi scheme. The agency said other college coaches and former players lost millions of dollars in the scheme.

Federal regulators say Donnan orchestrated the fraud with his business partner through West Virginia-based GLC Limited.

Donnan led teams at Marshall University and the University of Georgia and later became a television commentator.

William P. Hicks, associate director of the SEC's Atlanta office, says Donnan and his partner convinced investors to pour millions of dollars into a business they said was unique and profitable with huge potential and little risk.



UPDATE 7/20/12
ATHENS, Ga. (AP/WSAZ) -- A federal bankruptcy judge in Athens Georgia has approved a settlement plan in the case of former Marshall and University of Georgia football coach Jim Donnan.

The Athens Banner-Herald reports that a judge on Thursday approved the plan after Donnan's creditors unanimously agreed to it.

The creditors claimed Donnan and his wife owe them more than $40 million. The exact amount they'll receive won't be known until a court-appointed trustee liquidates most of Donnan's assets.

Donnan was a major investor in GLC Ltd. and promised investors payouts of 50 to70 percent annually, but that didn't happen. The company says Donnan profited from his investments and charged commissions for recruiting other investors.

The paper reports that investors are likely to get much less than that under the plan. Donnan’s Athens bankruptcy lawyer Ernie Harris told the paper the amount might be closer to $5.5 million.

The ruling is expected to put an end to months of court proceedings, according to Donnan’s co-counsel Harris and Ed Tolley.

“It is the hope of the Donnan family that their efforts to resolve this case will put an end to most, if not all, of the contentious litigation that has surrounded it,” said the lawyers in a news release. “This is a significant step in that process.”

A judge in an Ohio federal court, where GLC’s separate bankruptcy case is being heard, has already approved the plan.

The paper also reports that creditors will be allowed to file claims against Donnan for 80 percent of the money they invested in GLC and lost, but will likely recover just a fraction of their claims.



UPDATE 6/23/12
ATHENS, Ga. (AP) -- Former Marshall and Georgia football coach Jim Donnan has agreed to a proposed bankruptcy settlement with a West Virginia company and investors who say the coach owes them $40 million lost in a failed Ponzi scheme.

Court records show a federal bankruptcy judge in Ohio approved the settlement Wednesday. Donnan filed for bankruptcy protection last July in Georgia. A judge there must also approve it. A hearing is scheduled July 19.

Retail liquidation company GLC Limited says payouts to investors in a Ponzi scheme drove it into bankruptcy. Donnan was an early investor in GLC and recruited others to invest, but he denies being part of a scheme. The settlement calls for Donnan to pay more than $7 million to GLC, plus 80 percent of claims by investors he recruited.



UPDATE 10/4/11 @ 11:40 a.m.
MACON, Ga. (AP) -- Former Marshall University and University of Georgia football coach Jim Donnan is abandoning a proposed settlement with the new operators of a bankrupt company that claims he improperly profited from a Ponzi scheme involving the firm.

Donnan attorney Ed Tolley said at a Tuesday court hearing he was withdrawing the $5.5 million settlement the ex-coach brokered with the West Virginia-based liquidation company GLC Ltd.

The move came after U.S. Bankruptcy Judge James Smith said the deal likely wasn't fair to other parties who filed claims against Donnan, who wasn't at Tuesday's court hearing.

GLC is seeking to recoup what they said were improper gains Donnan received after convincing fellow college coaches and others to invest $70 million in what the firm says was a Ponzi scheme.



UPDATE 10/4/11 @ 8 a.m.
MACON, Ga. (AP) -- Former Marshall and University of Georgia football coach Jim Donnan is scheduled to appear before a federal judge to settle claims by the new operators of a bankrupt company that he improperly profited from a Ponzi scheme involving the firm.

U.S. Bankruptcy Judge James Smith set the Tuesday hearing for Donnan after listening to arguments on the case in August.

He said then that he was unlikely to approve the $5.5 million settlement the ex-coach brokered with the West Virginia-based liquidation company GLC Ltd. because it gave short shrift to other parties who filed claims against Donnan.

GLC is seeking to recoup what they said were improper gains Donnan received after convincing fellow college coaches and others to invest $70 million in what the firm says was a Ponzi scheme.



ORIGINAL STORY 8/29/11
MACON, Ga. (AP) -- A federal bankruptcy judge is raising doubts about a settlement agreement that Jim Donnan brokered with a company that accused him of recruiting fellow college coaches to invest in a Ponzi scheme.

U.S. Bankruptcy Judge James Smith said he was unlikely to accept the settlement Donnan brokered with West Virginia-based liquidation company GLC Ltd. at a hearing Monday.

Donnan has not been charged with anything and his attorney says he was not involved in a Ponzi scheme.

The company claims Donnan solicited investors and received a commission of up to 20 percent for each investment. GLC said it had to secure more investments to repay the growing number of investors before the scheme collapsed in March.

Donnan was the former head football coach at both Marshall University and the University of Georgia. Most recently he was a college football analyst t for ESPN.


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