ATLANTA (AP) - A former University of Georgia head football coach has settled a legal dispute with a bankrupt liquidation company that accused him of recruiting other high-profile coaches to invest in a Ponzi scheme, according to federal court documents filed this week.
Jim Donnan and his wife agreed to transfer about $5.5 million in cash, stocks and other assets to West Virginia-based GLC Ltd. to settle claims he profited by convincing investors to pump money into the company. Donnan has not been charged with any criminal wrongdoing and defense attorney Ed Tolley said his client was “absolutely not involved in a Ponzi scheme.”
The settlement was filed Tuesday in U.S. District Bankruptcy Court and must be approved by a federal judge. It would end months of litigation between the Donnans and GLC, which claimed the ex-coach invested more than $5.4 million in the firm and that his family ultimately made more than $14.5 million.
GLC, a liquidation company that purchased and then resold surplus retail products, is being restructured in an Ohio bankruptcy court and is now being run by new operators who targeted Donnan in the court filings.
The firm said Donnan received a commission of up to 20 percent for each investment, and assured each potential investor the money would be used to buy retail items from major companies, according to court records. But only about $12 million of the $82 million was spent on inventory, the firm said.
Instead, much of the money was being used to pay back initial investors like Donnan, forcing the firm to seek out even more money from new backers, the filings said. When the “continuous influx” of funding dried up, the debt-ridden company collapsed, they said, forcing the company to file for bankruptcy protection in February.
Donnan’s attorney acknowledged in court documents that his client was paid lucrative commissions, but he said Donnan believed he was being paid from legitimate profits earned by the company. Donnan said in the settlement he had felt “obligated” to pay back some of the winnings since late 2010, when he discovered the money he was earning came from other investors he helped recruit.
He attracted about 50 investors, including several high-profile coaches, the documents say. Among the names listed in federal filings are Texas State football coach Dennis Franchione, Virginia Tech football coach Frank Beamer, ex-Dallas Cowboys coach Barry Switzer, Texas Tech football coach Tommy Tuberville, Texas Tech basketball coach Billy Gillispie and North Carolina State basketball coach Mark Gottfried.
“I put some money in. The money I put in, I got back out. That was it,” Beamer told reporters at a preseason Atlantic Coast Conference event. “I don’t know that Jim knew what it was when he was encouraging me to put some money in. He’s a good friend … He told me he had a good deal for me, and that’s what I took it as.”
Former football coach Mike Gottfried, Mark’s uncle, was also sued in May by GLC, which claimed he made about $41,000 in “fictitious profits” from the firm. Defense attorney Jason Stitt urged a judge to dismiss the complaint in a June filing because the firm “comes before the court with unclean hands.” His client, he said, took the money in good faith.
Donnan coached at UGA from 1996 to 2000, when he led the team to four bowl victories, and was inducted into the College Football Hall of Fame in 2009. He filed for bankruptcy in July. He said in the settlement there’s no doubt he and his family were the “largest net winners” in the firm because they received $9.1 million more than they invested.
But he said he decided to pay back some of the winnings when he learned last year that many of the payments he got from the company since 2008 came from investors who pumped in money after him.
Gillispie, Tuberville and Franchione declined to comment about the case, and N.C. State spokeswoman Annabelle Myers said Mark Gottfried had no comment. Switzer’s attorney, Armando Rosell, also declined to comment.
Bluestein can be reached at http://www.twitter.com/bluestein. Sports writers Aaron Beard in Raleigh, N.C., Betsy Blaney in Lubbock, Texas, and John Zenor in Montgomery, Ala., contributed to this report.