Did Franchione Lure Gillispie Into Donnan Ponzi?

Last month a West Virginia-based company, Global Liquidation Center Ltd. (GLC), accused former Georgia football coach Jim Donnan of running a Ponzi scheme that it claimed eventually bankrupted the company.

Jim Donnan lured Tommy Tuberville, Frank Beamer, Billy Gillispie and Dennis Franchione into his alleged Ponzi scheme

In a civil action filed in a federal bankruptcy court last month in Athens, Georgia, GLC alleged Donnan had committed fiduciary fraud, embezzlement and larceny in the company’s bid to obtain the $5 million remaining in Donnan’s personal estate. (Donnan filed for bankruptcy himelf after GLC declared Chapter 11.)

GLC alleges that Donnan, who was a major investor in the retail outlet liquidation company, used his formal role with the company to lure investors into loaning money to GLC at exorbitant interest rates. (Some documented agreements touted a 70 percent annual rate of return.) When GLC was unable to service its obligations to the Donnan investors who had loaned it money - and Donnan himself was unable to obtain fresh investment capital to help GLC service those loans - the company was forced into declaring bankruptcy.

In federal court documents the company reported that from 2007 to 2010 Donnan helped secure $81,916,000 from investors. During the same period, GLC alleges that Donnan billed the company $14,557,228.50 in his own personal loan interest and commissions - with much of that money transferred from Donnan to his immediate family members and wife.

Of the over $81M in investment funds, GLC reported in court documents that $11,793,000 was invested in company operations.

As part of its legal argument to obtain what’s left of Donnan’s personal estate, GLC noted in its filing last month:

James Donnan is substantially, if not principally, responsible for the initiation and operation of a far-reaching ponzi scheme that defrauded GLC and its investors of approximately $27,752,159.

A week after GLC filed its claim against Donnan, a federal bankruptcy court judge effectively froze his personal assets to allow for a formal, legal examination of the hundreds of pages of evidence and exhibits submitted to the federal court.

As for GLC’s Donnan-solicited investors, nowhere in those legal documents is an itemized accounting of who lost what. And from Donnan’s personal accounting practices, it isn’t unreasonable to think that he doesn’t know either.

From evidence presented by GLC to the court, it’s now been confirmed that the former football coach kept virtually all of his financial accounting in handwritten notes. Those notes give the only clues, for now, of how much individuals may have invested - and potentially lost - with Donnan.

Documents in Donnan’s handwriting submitted by GLC to the federal bankruptcy court indicate Texas Tech basketball coach Billy Gillispie gave Donnan at least $3 million - in separate payments - to “loan” to GLC at exorbitant annual interest rates.

Dennis Franchione made commission on Gillispie $1,000,000 payment to Donnan

In one of the payments to Donnan, Gillispie signed off on a GLC company document indicating a $1 million loan to GLC at a 60 percent annual interest rate. Donnan later noted in one of his handwritten accounting documents that current Texas State football coach Dennis Franchione was to be paid five percent of Gillispie’s seven-figure buy-in. ($12,500.)

Donnan, Franchione and Gillispie part of alleged Ponzi scheme

(Franchione’s $300,000 ‘loan’ to Donnan at 60% annual rate)

In another GLC loan agreement document, Gillispie was given a 65 percent annual interest rate in exchange for a $2 million loan - solicited by Donnan - to the company. (Though that document was not signed by Gillispie.)

In another federal court document submitted by GLC last month, Donnan’s handwriting shows Franchione as credited with a 10% commission on what appears to be a May 1 six figure payment from Gillispie to GLC via Donnan.

Donnan, Franchione and Gillispie part of alleged Ponzi scheme

Franchione is prominently featured throughout Donnan’s handwritten bookkeeping of “investor” information. Here’s a handwritten contract for a Franchione “loan” signed off on by Donnan and his wife Mary.

Jim Donnan Contract With Dennis Franchione

In a March 10, 2009, email to Donnan, Franchione directed the former Georgia coach to send him the payments for five other individuals who had also apparently “loaned” Donnan - and GLC - money.

Dennis Franchione received checks for several Donnan clients

Franchione wrote Donnan at the time:

The others can be done in checks mailed to me in their names and I’ll see that they get there.

Franchione and Gillispie were far from the only coaches and sports figures who, according to Donnan’s handwritten notes, loaned him large sums of money at staggering interest rates.

Interest rates that GLC, a small retail merchandise liquidation firm, was obligated to pay.

Here’s some of the sports figures listed in Donnan’s somewhat indecipherable handwritten notes - and what they may have paid the former coach. (At least based on Donnan’s primitive accounting practices.):

1) Tommy Tuberville: $800,000
2) Frank Beamer: $175,000
3) Billy Gillispie: $3,000,000+ (one of two loan agreements unsigned)
4) Dennis Franchione: $650,000
5) Mark Gottfried: $250,000
6) Kendrell Bell (Former NFL player): $2,075,000 (two of four loan agreements unsigned)
7) Jonas Jennings (Former NFL player): $500,000 (loan agreement unsigned)
8) Mike Gottfried (Former ESPN analyst, CFB coach): $250,000
9) Tom Luginbill (ESPN recrutiing analyst): $30,000
10) Barry Switzer: $50,000

Barry Switzer Gave Jim Donnan $50,000 In Ponzi Scheme

Here are some of the executed and non-executed “loan” agreements and more handwritten notes - this time from a Donnan associate:

Jim Donnan Loan Agreements

Not everyone was convinced of the veracity of Donnan’s business. GLC included in its federal court document dump one email exchange between Donnan, a potential Donnan investor and his investment advisor:

When dismissing one of Donnan’s claims to his client, the advisor wrote in an email, “someone’s been eating retard sandwiches.”

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