Ex-UGA coach Jim Donnan charged in Ponzi scheme

Former University of Georgia football coach Jim Donnan and a

business partner face charges that they operated a Ponzi scheme,

according to federal indictment unsealed Tuesday.

The grand jury 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.

Charles Cox, a lawyer for Crabtree, said his client entered a

not guilty plea at his arraignment Tuesday in Macon and was

released on bond.

”We have no other comment, as neither Mr. Crabtree nor I had

seen the indictment before this afternoon,” Cox wrote in an email.

”The not guilty plea he entered today was the first step in his

defense of these charges.”

A lawyer for Donnan did not immediately respond to calls and an

email seeking comment. Donnan was also set to make his initial

court appearance Tuesday, but it wasn’t immediately known if he

appeared.

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.