Published August 16, 2012 - 11:30am
NEW: Discuss this topic in the Google+ community for SEC fans.
The US Securities and Exchange Commission has announced that Jim Donnan, a former University of Georgia head coach is being charged with conducting an $80 million Ponzi scheme which includes other coaches and former players among its victims.
Jim Donnan is a college football hall of fame inductee who coached at Marshall and Georgia and later became a television commentator.
Along with partner Gregory Crabtree, Donnan convinced investors to pour money into his West Virginia-based company known as GLC Limited. They promised investors rates of return in the range of 50 and 380 percent. Of the $80 million raised from investors, only about $12 million was used to in the alleged investment strategy. The rest was used to pay fake returns to earlier investors or stolen for other uses by Donnan and Crabtree.
Interestingly, Donnan who resides in Atlanta, GA, used his influence as coach to obtain funds from former players. From the SEC press release:
According to the SEC’s complaint filed in federal court in Atlanta, the scheme began in August 2007 and collapsed in October 2010. Donnan recruited the majority of investors by approaching contacts he made as a sports commentator and as a coach. For instance, 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.
The SEC’s complaint alleges that Donnan touted GLC’s success and profitability and told investors that the company could enter into even more merchandise deals with more capital. Donnan and Crabtree offered and sold investments that were short-term (2 to 12 months) and purportedly high-yield, with returns paid to investors in monthly or quarterly installments or in a one-time payment. Donnan told investors their money was being used to purchase specific items of merchandise that was often presold, so there was little to no risk to investing in any deal. However, much of the merchandise that GLC actually purchased was merely left unsold and abandoned in warehouses in West Virginia and Ohio.
Quite a strange story for Georgia Bulldogs fans. Donnan will now be remembered for greed and misuse of power, rather than coaching and leading young men at various Universities.