Sources: FBI, IRS investigating Donnan
ATHENS, Ga. -- The FBI and IRS are investigating an alleged Ponzi scheme that may have involved former University of Georgia football coach and ex-ESPN college football analyst Jim Donnan, according to court documents obtained by Outside the Lines and sources with knowledge of the investigation.
According to court documents, federal agents with the FBI and IRS began making inquiries as far back as April into the business dealings of West Virginia-based GLC Enterprises.
Federal bankruptcy documents filed last month allege that Donnan "solicited investments from more than 50 individuals and entities to GLC Enterprises" and made commissions ranging from 15 percent to 20 percent for any investments he solicited.
Donnan and his family members made more than $14.5 million from GLC in the form of "approximately 293 transfers," according to the court documents.
Now, federal authorities are involved, according to documents and sources. An FBI spokesman declined to comment to Outside the Lines. Donnan and his attorney, Edward Tolley, also declined to comment.
Formed in March 2004, GLC Enterprises declared bankruptcy in February. Outside the Lines has learned that in the years prior to seeking Chapter 11 bankruptcy protection GLC, largely with the help of Donnan, attracted millions of dollars in investments from several high-profile figures from the world of sport. Former University of Oklahoma and Dallas Cowboys coach Barry Switzer, Virginia Tech football coach Frank Beamer, Texas State football coach Dennis Franchione and Texas Tech football coach Tommy Tuberville are among them.
Donnan served as the offensive coordinator for the Sooners from 1985 to '89, winning the 1985 national championship under Switzer. He coached Georgia from 1996 to 2000 after winning a national title as the coach of then-Division I-AA Marshall in 1992.
Donnan was the first major investor in GLC. He invested more than $5.4 million in the company, a figure not disputed by Tolley, his attorney.
GLC, according to several investors who spoke with Outside the Lines, was "pitched" by Donnan to investors as a retail liquidation company, with its principal business being the re-sale of consumer products -- everything from refrigerators and clothing to children's toys. Today the GLC warehouses in Huntington, W.V., and nearby Proctorville, Ohio, that once stored that merchandise sit empty as the company winds its way through bankruptcy proceedings.
According to court documents, investors sank nearly $82 million dollars into GLC Enterprises but less than $12 million was actually spent on inventory and at least $13 million in investor money remains unaccounted for. With dwindling revenues from the sale of consumer products, GLC eventually used money from new investors to pay old investors, which, according to the court documents, constituted a Ponzi scheme.
Last month, the current operators of GLC sued Donnan and his wife. The Donnan's children and their spouses were also named in a separate lawsuit filed by GLC's operators. According to the GLC lawsuits, "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."
Donnan's role in GLC Enterprises is disputed. In two the lawsuits filed by the current operators of GLC, Donnan is alleged to have been an officer in the company. According to the court documents, Donnan signed applications for GLC bank accounts and checks on behalf of the company. The lawsuit also says Donnan told potential investors he was an officer in the company -- identifying himself to investors at different times as the company's vice president and secretary, a notion Donnan's lawyer disputes.
"Jim was not an officer in GLC," Tolley said. "He was never an officer. That's absolutely not true."
GLC is being restructured under new management. The current operators have declined to comment, as did their attorneys.
Gregory and Linda Crabtree, the original officers of GLC Enterprises, and their attorney also have not responded to requests for comment.
GLC Enterprises filed for Chapter 11 bankruptcy in February in federal court in Ohio.
Jim Donnan and his wife Mary filed for Chapter 11 bankruptcy protection last month.
According to court documents, in the months leading up to their bankruptcy filing, the Donnans transferred significant assets to their children.
The GLC lawsuit that names Donnan's children and their spouses as defendants alleges that Jim Donnan and his wife purchased a home in March 2010 valued at $1,050,000 for their son Todd Donnan and his wife, one of many transactions the lawsuit describes as "fraudulent transfers."
The Donnans' bankruptcy filing, according to Tolley, came after Jim Donnan offered to pay back roughly $5 million to GLC's creditors. The creditors wanted $8.25 million from Donnan, Tolley said.
John Barr is a reporter in ESPN's Enterprise Unit and can be reached through email at firstname.lastname@example.org. Greg Amante is a producer in ESPN's Enterprise Unit.
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