The Securities and Exchange Commission announced fraud charges against a former University of Georgia football coach who teamed with an Ohio man to conduct an $80 million Ponzi scheme.
The SEC said Jim Donnan, of Athens, conducted the fraud with his business partner Gregory Crabtree, of Proctorville, OH, through a West Virginia-based company called GLC Limited.
"Overall it's a mid-sized Ponzi scheme but anybody who loses their savings in any of these schemes, is the biggest scheme," said Bill Hicks, associate director of the SEC's Atlanta Regional Office.
The SEC alleges Donnan and Crabtree told investors that GLC was in the wholesale liquidation business and earning substantial profits by buying leftover merchandise from major retailers and reselling those discontinued, damaged, or returned products to discount retailers.
"They promised investors exorbitant returns of 50 to 380 percent a year," said Hicks.
Only about $12 million of the $80 million raised from nearly 100 investors was actually used to purchase leftover merchandise, according to the SEC.
The remaining funds were used to pay fake returns to earlier investors or stolen for other uses by Donnan and Crabtree.
Other college coaches and former players are some of the victims of the scheme.
Court documents claim just how much certain coaches and players invested, based on Donnan's own accounting. Here's that list:
Tommy Tuberville: $800,000
Frank Beamer: $175,000
Billy Gillispie: $3,000,000+ (one of two loan agreements unsigned)
Dennis Franchione: $650,000
Mark Gottfried: $250,000
Kendrell Bell (Former NFL player): $2,075,000 (two of four loan agreements unsigned)
Jonas Jennings (Former NFL player): $500,000 (loan agreement unsigned)
Mike Gottfried (Former ESPN analyst, CFB coach): $250,000
Tom Luginbill (ESPN recruiting analyst): $30,000
Barry Switzer: $50,000
"Donnan and Crabtree convinced investors to pour millions of dollars into a purportedly unique and profitable business with huge potential and little risk," said Hicks. "But they were merely pulling an old page out of the Ponzi scheme playbook, and the clock eventually ran out."
Donnan is a College Football Hall of Fame inductee who guided teams at Marshall University and the University of Georgia. He later became a television commentator.
According to the SEC's complaint, Donnan recruited the majority of investors by approaching contacts he made at those jobs.
The complaint stated he capitalized on his influence over one former player by telling him, "Your daddy is going to take care of you" … if you weren't my son, I wouldn't be doing this for you." The player later invested $800,000.
By the time the scheme collapsed, the SEC said Donnan had actually siphoned more than $7 million away from GLC, and Crabtree misappropriated approximately $1.08 million in investor funds.
The SEC's complaint charges Donnan and Crabtree with violations of the antifraud and registration provisions of the federal securities laws.
The complaint also names two of Donnan's children and his son-in-law as relief defendants for the purpose of recovering illicit funds that Donnan steered to them.
"The number one lesson I think investors should take is that if someone offers you an investment that pays 50 percent to 400 percent a year, you should be real careful. As the saying goes, 'if it sounds too good to be true it probably is,'" said Hicks.
Donnan's attorney Edward Tolley at Cook Noell & Bates in Athens issued this statement:
"The SEC participated in Jim's bankruptcy hearing. They know he does not have anything left. They are beating a dead horse. Jim denies that he knew or realized it was a Ponzi scheme."
Copyright 2012 WGCL-TV (Meredith Corporation). All rights reserved.
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