Hall of Fame coach Jim Donnan accused in Ponzi scheme
ATLANTA (CBS ATLANTA) -
College football Hall of Fame coach Jim Donnan is charged in an $80 million Ponzi scheme. The University of Georgia legend is accused of swindling millions from fellow coaches, sports commentators and even his own players.
Donnan pulled in the millions in so-called investments from his friends and colleagues. He allegedly paid himself $14 million. Those were profits the Securities and Exchange Commission said came straight from the pockets of the sports stars who trusted him.
CBS Atlanta News' Wendy Saltzman caught up with Donnan near his Athens home to ask him Tough Questions about the money.
"These people say you swindled them out of millions and millions of dollars. Do you feel any remorse for doing that?" Saltzman asked. "The players said that you told them that they could trust you."
Donnan's only response?
"I said I have no comment," he told Saltzman.
The Securities and Exchange Commission launched an investigation into allegations that Donnan orchestrated a Ponzi scheme for his own profit.
"He either knew it was a fraud or he ignored very obvious warning signs that it was a fraud," said Securities Exchange Commission Associate Regional Director Bill Hicks.
Hicks explained how the Ponzi scheme worked.
"What was represented to investors was that their money would be used to invest in loads, usually truck loads of unsold merchandise from various chains that would then be resold at a profit. Often investors were told that it was pre-sold and that there was little risk," Hicks said.
But the Securities Exchange Commission investigation found very little merchandise was ever purchased, making it impossible for the company to ever pay out the outrageous returns that Donnan promised.
"The promises ran up to 380-percent-a-year profit," Hicks said.
"Does that sound unrealistic?" Saltzman asked.
"I think those types of profit promises should raise red flags for people," Hicks said.
As Donnan continued to deposit millions into his own bank account, he managed to convince several football and basketball stars they too could reap the rewards. The investors included former Cowboys coach Barry Switzer, Texas Tech's Tommy Tuberville, Virginia Tech's Frank Beamer, former Pittsburgh Steeler linebacker Kendrell Bell, and former college football star and coach Mike Gottfried.
Gottfried, who has never spoken publicly about this scheme, agreed to speak with Saltzman to defend his friend Jim Donnan.
"I believe that he did not know this, why would you get your family and your friends involved if you knew something? He did not know it," Gottfried said.
Gottfried was part of the group who invested early, when things were looking good.
"I knew the risk and I felt like it was going great. We had two warehouses full of things," Gottfried explained.
Hicks explained why investors would initially feel as positive as Gottfried felt.
"A Ponzi scheme is a scheme where the promoters promise investors usually unusually large returns, and rather than having a real business that produces those profits, they just continually solicit new investors and use the new investors money to pay the profits to prior investors. And ultimately they always collapse in the end," Hicks said.
And collapse it did. The Securities Exchange Commission reported Donnan told players like Bell things like, "You're my son, I am going to take care of you."
Gottfried told Saltzman he felt bad about what happened.
"I feel bad about it and I think Jim feels bad about it. Everybody feels bad about it. I know a lot of these people," Gottfried said.
Donnan filed for bankruptcy and his belongings are being liquidated to try to pay back some of the money that the players and coaches lost. The Securities and Exchange Commission is also moving forward with their case to prohibit Donnan's involvement in another investment scheme ever again.
Gottfried will continue to defend Donnan.
"He didn't see. He didn't see at the end what was going to happen. He was trying to help them. I will believe that forever," Gottfried said.
Donnan has now responded to CBS Atlanta News, saying that he invested $6.3 million of his own money into GLC. He said that his net profit was $7.3 million, and much of that has been paid back as part of the ongoing investigation.
Copyright 2012 WGCL-TV (Meredith Corporation). All rights reserved
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