Ex-UGA, Marshall football coach Donnan's co-defendant set to tes - WOWK 13 Charleston, Huntington WV News, Weather, Sports

Ex-UGA, Marshall football coach Donnan's co-defendant set to testify; investor said he trusted Donnan

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ATHENS, Ga. (AP) -

A man accused along with former University of Georgia and Marshall University football coach Jim Donnan of operating a fraudulent investment scheme testified May 8 that Donnan asked him to sign a document saying Donnan wasn't aware that investor money was being used to pay other investors.

Gregory Crabtree's testimony came during Donnan's trial on federal charges including conspiracy, mail fraud and wire fraud. Crabtree pleaded guilty last month to a single count of conspiracy

A federal indictment against Donnan, of Athens, and Gregory L. Crabtree, of Proctorville, Ohio, says the pair ran a fraudulent investment scheme from 2007 to 2010 through GLC, a West Virginia-based company that dealt in closeout merchandise. Prosecutors have said Crabtree ran the day-to-day operations and Donnan used relationships of trust to lure investors into the fraud scheme.

Donnan presented a document to Crabtree in late 2010, after the scheme had unraveled, in which Crabtree was to certify that the ex-coach did not know that investor money was being used to pay other investors. Crabtree said Donnan said to him, "Would you care to sign this letter to help me save face with my friends?"

When Crabtree pointed out that Donnan had been aware of the way the payments worked, Donnan acknowledged that but said he needed Crabtree to sign the document so he could save face and try to salvage some of the business, Crabtree testified.

Crabtree and Donnan began working together after a mutual friend put them in touch. Crabtree had some opportunities to buy wholesale or closeout merchandise but didn't have the money to buy it. After Donnan provided the capital for several deals and got a good return, he asked Crabtree if there were more opportunities because he knew other people who would be interested, Crabtree testified.

They began working together, talking every day, Crabtree said.

In late 2009, problems started as Crabtree was having trouble moving merchandise and started stocking it in warehouses because investor money was coming in faster than he could sell it. He spoke to Donnan about the troubles, and Donnan said he'd look into ways to help, Crabtree said. They ended up using investor money to pay other investors because they didn't have profits from sales to pay the high returns Donnan had promised investors, Crabtree said.

"Do you realize what that is, what that's called?" prosecutor G.F. "Pete" Peterman III asked Crabtree.

"I do now," Crabtree said.

"What's that?" Peterman asked.

"A Ponzi scheme," Crabtree said.

Copyright 2014 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

* * *

Friend says trust in former UGA coach Jim Donnan was a factor in decision to invest in company

ATHENS, Ga. (AP) — A friend of Jim Donnan testified Wednesday that his trust in the former University of Georgia football coach and an assurance that he wouldn't lose his principal were important factors in his decision to invest in a company that dealt in closeout merchandise.

The testimony of Nelson E. Bowers III came during Donnan's trial in federal court in Athens on charges including conspiracy, mail fraud and wire fraud. Bowers ultimately lost about $1 million when GLC Limited, Inc., crumbled, according to bank records submitted to the court by prosecutors.

A federal indictment against Donnan and Gregory L. Crabtree of Proctorville, says the pair ran a fraudulent investment scheme through GLC, a West Virginia-based company. Prosecutors have said Crabtree ran the day-to-day operations of the business and Donnan used relationships of trust to lure investors into a fraudulent scheme.

Crabtree pleaded guilty last month to a single conspiracy charge and is expected to testify in Donnan's trial.

Bowers said Donnan telling him about the potential investment carried great weight because he trusted the ex-coach.

"I would say that perked my interest," Bowers said under questioning by prosecutor Paul McCommon.

But Bowers, who owns nine car dealerships as well as several other businesses, said retail salvage seemed like a good bet to him and he'd spoken to others who got high returns on investments in GLC.

Jurors also heard on Wednesday from Daniel Shoemaker, a retired ESPN executive from Huntington, West Virginia, who initially put Donnan and Crabtree in touch with each other. Crabtree had done construction work and odd jobs for him, and he'd known Donnan from the former coach's days at Marshall University.

Shoemaker knew Crabtree had an auction business and that Donnan was always looking for projects in his retirement, he testified. He knew Crabtree to be careless in his business transactions and thought Donnan had good business sense, so he thought they might be a good match, Shoemaker testified.

Shoemaker said he told Donnan several times that he was concerned about Crabtree's ability to manage the business. During summer 2010, Crabtree approached Shoemaker about investing in a shipment of Christmas toys he said he planned to turn around. When he called Donnan to ask about the deal, Donnan said he didn't know much about it but that he thought Crabtree had been successful with similar deals in the past, Shoemaker said.

Shoemaker ended up losing the $50,000 he invested and said he later found out Crabtree had never bought the shipment of toys.

Prosecutors also called Jim Burritt who was brought on by GLC as a chief restructuring officer in December 2010. As he began digging into the company's files, he found that it had no budget, no financial plan and was producing meaningless financial statements, he testified. While some of the retail stores operated by Crabtree might have a short burst of profitability, none turned a profit on a yearlong basis, he said.

Crabtree said he ran the day-to-day operations of GLC while Donnan raised money from investors, and Donnan corroborated that, Burritt said.

GLC had little income, so money from new investors was used to cover expenses, to pay Crabtree and Donnan and to send investors payouts that were falsely represented as returns on their investments, prosecutors have said. The company raised more than $80 million from 94 investors between September 2007 and December 2010, and nearly $23 million of that was lost, according to the indictment.

According to filings in a separate federal case, among those lured by Donnan to invest were Texas State football coach Dennis Franchione; Virginia Tech football coach Frank Beamer; ex-Dallas Cowboys coach Barry Switzer; Cincinnati football coach Tommy Tuberville; and North Carolina State basketball coach Mark Gottfried.

Copyright 2014 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.