Official: Jim Donnan Under Federal Investigation

The United States Securities and Exchange Commission has officially announced it is investigating former Georgia head football coach Jim Donnan for “alleged violations of federal securities fraud.

In a recent court filing in objection to Donnan’s personal bankruptcy court plan to reorganize his family estate, attorney David W. Baddley filed the following statement on behalf of the United States of America:

… the SEC staff anticipates that the SEC will file a substantial claim in this case based on potential remedies for alleged violations of the federal securities laws.

Last year Donnan filed for bankruptcy to protect his personal assets after he was accused by an Ohio company of perpetrating a wide-ranging Ponzi scheme that allegedly bankrupted the company while costing several high profile college coaches and former players millions of dollars in the process.

Donnan’s alleged scam was to lure investors to “loan” money to the Ohio company - GLC Limited - at annual interest rates of up to 70%. GLC has since claimed in its own federal court filings that the ensuing pressure to honor such loans initiated by alleged GLC representative Donnan bankrupted the company.

Think of GLC as Donnan’s own (alleged) piggy bank, with that bank bearing outrageous interest rates - set by Donnan - for his family and friends.

The alleged Ponzi may have also involved Dennis Franchione, Tommy Tuberville and former ESPN announcer and college football coach Mike Gottfried, as Donnan noted in a Jan. 19, 2012, bankruptcy court filing that Franchione, Tuberville and Gottfried “invested and brought in friends whom Jim did not know and had never met.

Jim Donnan alleged Ponzi Scheme: Gillispie lost $1.9 million after alleged Franchione solicitations

(Donnan Handwritten Notes: Franchione “Commission” on Gillispie “Loan”)

One of those “friends” was Billy Gillispie, who “invested” millions in Donnan’s business venture allegedly via Franchione. After failing to recoup $1.9 million in “loans” attributed to Franchione’s alleged solicitations, Gillispie filed a claim for the same amount against Donnan’s family estate in the college football Hall of Famer’s current bankruptcy proceeding.

Donnan’s own handwritten notes, which can be seen in federal bankruptcy court documents, also indicate that Franchione received a substantial “commission” from Donnan - allegedly on behalf of GLC Limited - for luring Gillispie into business deals that may have never actually existed. GLC Limited, the Ohio company Gillispie allegedly “loaned” money to at annual interest rates up to 70%, is also now suing Franchione for $95,000 in “commissions” Franchione allegedly made from the transactions with the Texas Tech basketball coach.

Court Docs: Franchione made $95,000 on Gillispie Ponzi buy-ins

This week in federal bankruptcy court Donnan agreed to give the United States Securities and Exchange Commission more time to investigate his alleged Ponzi scheme. Donnan’s concession followed an ominous filing by an attorney for the Securities and Exchange Commission on March 13, 2012, that included the following:

The (Donnan) Disclosure Statement provides that in 2007 – prior to becoming involved with GLC – the Debtors had a net worth in excess of $3 million. (Disclosure Statement at p. 3). It appears that the Debtors’ investments in GLC resulted in net profits of at least $7,352,838 (See footnote 3).

These net returns would have increased the Debtors’ net worth to more than $10 million. The Plan, however, offers less than $5 million in assets for distribution to unsecured creditors, and there is very little information in the Disclosure Statement about what the Debtors did with the substantial profits they received from GLC, and why more money is not available to pay creditor claims.

Failure to Address Possible SEC Claim. The current deadline by which the SEC must file a proof of claim in this case is March 27, 2012 (Docket No. 186).

Although the SEC’s investigation is still ongoing, the SEC staff anticipates that the SEC will file a substantial claim in this case based on
potential remedies for alleged violations of the federal securities laws. The amount sought for disgorgement of ill-gotten gains may likely exceed $13 million, and the claim may also include amounts for civil penalties and prejudgment interest. The Disclosure Statement fails to acknowledge the upcoming bar date or any potential for an SEC claim, including how such a claim would be classified and treated under the Plan.

The U.S. Securities and Exchange Commission and Donnan agreed Thursday to a 60-day extension - which awaits court approval - beyond the aforementioned March 27, 2012 deadline for the Feds to “file a substantial claim” against Donnan.

In other words, the U.S.A.’s investigation and prosecution of Donnan’s alleged Ponzi may just be beginning.

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Gillispie to Donnan: Gimme Back My $1,913,167.00

Last August SbB reported that a West Virginia-based company, Global Liquidation Center Ltd. (GLC), had accused former Georgia and Marshall head football coach Jim Donnan of running a Ponzi scheme that eventually bankrupted the company.

Billy Gillispie asks for $1.9 million back from Jim Donnan

(Donnan on BCG’s $1.9MM claim: Pound Sand)

The civil action filed by GLC in a federal bankruptcy court last year was the first in what’s turned out to be a race by dozens of claimants to obtain what’s left of Donnan’s dwindling personal estate. After GLC filed for Chapter 11, Donnan quickly filed for bankruptcy himelf to protect around $5 million in assets from GLC and innumerable alleged Ponzi victims - including many sports celebrities.

From federal court exhibits posted by SbB seven months ago - which included fairly indecipherable and oft-incoherent handwritten notes from the former football coach -  here’s how Donnan’s Ponzi (allegedly) worked:

(Barry Switzer was sports acquaintance prey for (alleged) Donnan Ponzi)

1) Allegedly presenting himself as representative of GLC, Donnan would solicit “loans” from friends and sports celebs like Tommy Tuberville, Frank Beamer, Mark Gottfried and recruiting analyst Tom Luginbill with the promise of annualized returns of up to 70%. Donnan’s pitch was to tell alleged victims that their money was going to purchase surplus retail items that would eventually be resold. (Funding GLC’s business model/operation.)

2) Donnan allegedly enlisted Dennis Franchione to solicit multiple alleged Ponzi investors, including Billy Gillispie. In a separate legal action, GLC is now pursuing $95,000 in alleged commissions the current Texas State head football coach was allegedly paid by Donnan for luring Gillispie into the alleged scheme.

Court Docs: Franchione made $95,000 on Gillispie Ponzi buy-ins

3) After receiving the money allegedly solicited by Donnan and Franchione, GLC would pay out exorbitant fees to Donnan and Franchione for their “services” - along with sky-high loan interest rate payments to Donnan’s investors. Donnan and Franchione themselves also “invested” in the company with the expectation they’d recoup as much as 70% of their loan principal in 12 months.

More pertinent details:

  • Federal court docs submitted by GLC in its initial BK filing indicated that Donnan helped secure $81,916,000 from investors.
  • During the same period, GLC alleged that Donnan billed the company $14,557,228.50 in personal loan interest and commissions.
  • Of the $82 million in investor funds solicited by Donnan, GLC reported that $11,793,000 was invested in company operations.
  • Who exactly helped Donnan perpetrate his alleged Ponzi from within the company is subject to an ongoing investigation that could eventually see GLC executives and/or Donnan and/or Franchione charged in criminal court.

The highest-profile loser in Donnan’s alleged scheme, according to multiple court document filings, was/is Billy Gillispie.

On Oct. 24, 2011, Gillispie filed a claim against Donnan in federal bankruptcy court over $1,913,167.00 the Texas Tech basketball coach “loaned” to Donnan to invest in GLC company operations. In one loan document signed by the two parties and filed in federal bankruptcy court last year, Gillispie was to receive an annual 60% interest rate on a principal of $1,000,000 paid to GLC via Donnan.

In Donnan’s own handwritten notes - appearing in court docs - the ex-coach also noted that Franchione was to be paid a five percent commission for allegedly luring Gillispie into that particular deal. (Which GLC represenatives are now pursuing from the Texas State coach.)

In another federal court document, it appeared that Donnan and a GLC official drew up a $2,000,000 “loan” from Gillispie to GLC at “65 percent interest per year.

Gillispie though did not sign that agreement.

Gillispie’s initial claim was completely rebuffed by Donnan in a November 18, 2011, legal response. Two months later, Gillispie’s lawyer specifically alleged to the judge that Donnan misrepresented a Ponzi scheme as a legit business endeavor to his client, punctuating a lengthy court filing rife with legal citations by asking that …

the Court set a discovery deadline in this matter and a final hearing if deemed appropriate, and that it grant Claimants such other and further relief deemed to be just and proper.

A Jan. 25, 2012, hearing was subsequently set for possible disposition of Gillispie’s $1.9 million claim. Though that was just one of  36(!) other claims against Donnan scheduled for the same day. Because so many remain steadfast in their uncompromisig pursuit of the ex-Georgia football coach, the backed-up Athens, Georgia, federal court continued all civil proceedings until March 20, 2012.

And with remarkably few settlements in sight for the remaining claimants against Donnan, federal criminal investigators attempting to crack the case best pack a retard sandwich too.

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