ATLANTA (CN) – Former college football player and coach James Donnan III and his business partner swindled nearly 100 investors in an $80 million Ponzi scheme, the SEC claims in Federal Court.
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The agency says Donnan and Gregory Crabtree promised 97 investors annual returns of 50 to 380 percent for putting their money in Crabtree’s company, GLC Limited, a purported wholesale liquidation business that would buy leftover, damaged or returned items from major retailers and resell them to discount dealers.
“Donnan recruited the majority of the investors,” the SEC claims. “Many of the individuals Donnan approached were contacts he made as a sports commentator and former college football coach. These included former players and other coaches.”
Donnan is a recent ESPN commentator who previously coached football at Marshall University and the University of Georgia. He has also been inducted into the College Football Hall of Fame.
“Your Daddy is going to take care of you,” he allegedly told a former player who later invested $800,000. “[I]f you weren’t my son, I wouldn’t be doing this for you.”
Donnan told investors that if GLC had more capital, it could buy and resell more merchandise through special low-risk “deals,” the SEC claims.
He typically assured potential investors “that he was investing along with them in any deal that he offered, and he touted that he and other prominent college football coaches had successfully and profitably invested in GLC,” the lawsuit states.
From August 2007 to mid-October 2010, Donnan and Crabtree allegedly sold high-yield, short-term investments in GLC.
“In fact, the investment program was a Ponzi scheme,” the agency says. “Of the roughly $80 million raised from investors, only about $12 million was used to purchase merchandise, and much of this merchandise was left unsold and abandoned in warehouses in West Virginia and Ohio.”
The rest of the money was used to pay fake returns to earlier investors, and to line Donnan and Crabtree’s pockets, the SEC claims.
The former coach also gave his two adult children and son-in-law $1.38 million to invest, which the SEC now wants to recover.
“Donnan profited by approximately $7.4 million from GLC during the course of the fraud,” according to the lawsuit.
The agency accuses Donnan and Crabtree of fraud and the unregistered offering of securities. It seeks disgorgement of all ill-gotten gains, including the money paid to Donnan’s children, Tammy and Jeffery “Todd” Donnan, and to Donnan’s son-in-law, Gregory Johnson.