Jim Donnan has more problems with the SEC, but this time it is the Securities and Exchange Commission and not the other football teams in the Southeastern Conference. Donnan, the football coach for the Georgia Bulldogs from 1996-2000 was sued by the SEC on August 16, 2012 and accused of actively participating in and promoting a multi-million dollar Ponzi Scheme. The case is Securities and Exchange Commission v. James M. Donnan, III and Gregory L. Crabtree, Civil Action No. 1:12-cv-08231-ODE (click here for a copy of the Complaint and click here for the press release release of the SEC). Donnan’s son, Jeffery Todd Donnan, his daughter, Tammy Donnan, and son-in-law, Gregory Johnson were also named as "relief defendants," for purposes of recovering funds from them as it is alleged they received significant ill-gotten returns for their investments.
There are no criminal charges against Donnan at this time, but if the allegations are correct that is certainly a possibility, if not a probability. Several individuals accused of running large Ponzi Schemes have come through Bankruptcy Court in the Northern District of Georgia in recent years, and most or all have ended up with federal criminal charges.
The Complaint alleges that the scheme was conducted through a West Virginia-based entity, GLC Limited, by its president and owner, Crabtree and his business partner, Donnan. GLC was supposed to be in the business of liquidating leftover, discontinued, damaged or returned merchandise. Although Donnan was initially just an investor, he is alleged to have subsequently become a participant in and promoter of the scheme by recruiting other investors with promises of huge returns of 50-380%. Many of his recruits were football coaches and players, including Frank Beamer, Barry Switzer and Tommy Tuberville, and Donnan allegedly used his influence to convince them to collectively invest millions of dollars.
The Complaint alleges that only $12 million of the $80 million raised was used for merchandise, much of it left abandoned, and the rest was used to pay "fake returns" to investors or went to Donnan and Crabtree. GLC filed a Chapter 11 case in the Southern District of Ohio (Case No. 11-11090), and through a restructuring officer subsequently filed suit against Donnan for the return of his ill-gotten gains. Donnan and his wife filed a voluntary Chapter 11 petition in the Middle District of Georgia on July 1, 2011 (Case No. 11-31083), and subsequently settled the GLC proceeding by agreeing to pay to the GLC estate the sum of $5.5 million.
The civil charges against Donnan and Crabtree include fraud and violations of Section 17(a)(1)-(3) of the Securities Act (15 U.S.C. §§ 77q(a)), violations of Section 10(b) of the Exchange Act (15 U.S.C. § 78j(b)), and violations of Sections 5(a) and 5(c) of the Securities Act (15 U.S.C. §§ 77e). The SEC requests that all defendants return the ill-gotten gains.
Scott Riddle’s practice focuses on bankruptcy and litigation. Scott has represented Chapter 7 and 11 debtors, creditors, creditor committees, trustees, court-appointed receivers and other interested parties in bankruptcy cases and bankruptcy litigation. For more information, click here.