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Ex-UGA coach withdraws $5.5M settlement proposal

Photo by Joe Raymond

Photo by Joe Raymond

MACON -- Former University of Georgia football coach Jim Donnan abandoned a proposed settlement deal on Tuesday with the new operators of a bankrupt company who claim he improperly profited by luring fellow college coaches and others to invest in a Ponzi scheme involving the firm.

Donnan's attorney Ed Tolley announced the move after U.S. Bankruptcy Judge James Smith said he was unlikely to approve the $5.5 million settlement with West Virginia-based liquidation company GLC Ltd. The judge said he was concerned the deal gave short-shrift to other parties who filed claims against the ex-coach.

"It was probably not the best thing to do in this case," Smith said of the ill-fated proposal.

Donnan has not been charged with any criminal wrongdoing and his defense attorney said the ex-coach wasn't involved in any illegal scheme. But the new operators of GLC claim he was a part of a "far-reaching Ponzi scheme that produced incredible profits for the defendants and yet doomed GLC and its investors to severe financial losses."

The proposal, which was filed in August, aimed to end months of litigation between Donnan and GLC. The firm, a liquidation company that resold surplus retail items, is being restructured in an Ohio bankruptcy court. It's now being run by new operators who seek to recoup what they said were improper gains Donnan received after convincing fellow college coaches and others to invest $70 million in a Ponzi scheme.

The company claims in a court filing in September that the ex-coach invested at least $5.4 million and was paid out about $10 million in profit from the scheme. At first, the firm said, Donnan told others he was a "mere investor" in the company, but eventually he was telling clients and others he was a vice president.

He received a commission of up to 20 percent for each investment, and assured each potential investor the money would be used to buy products from major companies, the firm said. But only about $12 million of the $82 million was spent on inventory, the firm said, and the rest of the money was used to pay back initial investors like Donnan. When funding dried up, the debt-ridden company collapsed. It filed for bankruptcy protection in February.

Donnan's attorney has acknowledged 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 sought 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.

Donnan also helped attract other prominent coaches to invest in the company. 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.

Beamer told reporters Donnan pitched it to him as a "good deal." The other coaches named in the documents have declined to comment.

Donnan a College Football Hall of Fame inductee who coached at UGA from 1996 to 2000, filed for bankruptcy protection in July amid GLC's downward spiral. His attorney said Donnan, an ex-ESPN analyst who wasn't at Tuesday's hearing, has struggled to find steady work amid the legal troubles.

A judge said he won't hold another hearing on the case for three months. In the meantime, attorneys will hash out other arguments, including GLC's request to block Donnan from liquidating or transferring any of his assets until the litigation is settled -- including a $200,000 payout to his attorney, Tolley.