Former Marshall University football coach Jim Donnan was one of several people named in a complaint filed in U.S. District Court in Atlanta on Thursday accusing them of fraud in running a Ponzi scheme that took advantage of coaches and players Donnan had coached.
Listed as defendants were Donnan, who coached football at Marshall from 1990 to 1995 before leaving to take over the program at the University of Georgia and later becoming an ESPN commentator, and Gregory L. Crabtree. The complaint also names as relief defendants two of Donnan's children and a son-in-law for the purpose of recovering funds that, according to the complaint, Donnan steered to them.
The complaint lists three counts of fraud and one count of unregistered offering of securities against Crabtree and Donnan. It seeks an order "requiring the disgorgement by Defendants and Relief Defendants of all ill-gotten gains or unjust enrichment with prejudgment interest." It also seeks civil penalties against Donnan and Crabtree, and it seeks other action the court would find appropriate in connection with the enforcement of federal securities laws.
The complaint is a civil action, not a criminal one.
Donnan's attorney could not be reached for comment. Michael Schmidt, Crabtree's attorney, said he had no comment.
The complaint says Crabtree was president and owner of GLC Limited, and Donnan was his business partner.
According to the complaint, between at least August 2007 and mid-October 2010, Donnan and Crabtree sold high-yielding, short-term (two to 12 months) investments in GLC that promised annualized effective rates of return ranging from 50 percent to 380 percent. The two men raised about $80 million from 97 investors.
The two represented GLC as being in the wholesale liquidation business, buying lots of leftover, discontinued, damaged or returned merchandise from major retailers and reselling them to discount retailers or other liquidators.
GLC itself was a West Virginia limited liability company that had its principal place of business in Proctorville, Ohio. It also under the name of Global Liquidation Center.
Donnan recruited the majority of investors, many of whom were contacts he had made as a coach and commentator. Some investors were other coaches or former players. Donnan persuaded one player to invest $800,000 in the company, according to the complaint.
Of the $80 million raised from investors, only about $12 million was used to purchase merchandise, according to the complaint. Much of the merchandise that was purchased was left unsold and abandoned in warehouses in West Virginia and Ohio, according to the complaint.
The remaining $68 million was used to pay fake returns to earlier investors or was misappropriated by Crabtree or Donnan, according to the complaint.
With Crabtree's knowledge, Donnan continued to raise new investor money even after both men knew GLC could not make the return payments that had been promised, according to the complaint.
"Donnan also directed large sums of investor proceeds to two of his adult children and a son-in-law, namely daughter Tammy Donnan, son Todd Donnan, and son-in-law (Gregory K.) Johnson. Each of the Donnan Children invested relatively modest amounts in the scheme and then received regular streams of payments for a substantial duration of the fraud, resulting in unjust enrichment," the complaint says.
According to the complaint, Todd Donnan, who played quarterback at Marshall in the 1990s, invested $232,000 in GLC with a business colleague and received payments totaling $620,333. Tammy Donnan invested $16,000 and received $140,000. Johnson invested $131,000 and received $617,875.
In late 2009 or early 2010, Crabtree told Donnan that GLC could no longer pay the rates of return that Donnan was promising to investors, according to the complaint. Donnan told at least one investor that he would get his money back, but at the same time he was telling Todd Donnan's in-laws to not invest further. A group of investors ultimately forced the appointment of a restructuring office to run the operations of GLC.
On Feb. 28, 2011, after Crabtree resigned from the company, GLC filed for Chapter 11 bankruptcy in Cincinnati. To date, 61 creditors have filed claims totaling about $40 million against GLC, according to the complaint.
Donnan and his wife also filed for bankruptcy last year. According to The Associated Press, creditors claimed the Donnans owed them more than $40 million. A federal judge in Georgia approved a settlement in the case last month and, a judge in Ohio, where GLC is being restructured in bankruptcy court, also signed off on the settlement.
All content © Copyright 2000 - 2013 WorldNow and WOWK. All Rights Reserved.
