Former college football coach charged with Ponzi scheme

By Peter Schroeder - 08/16/12 12:14 PM ET

A former college football coaching great has been charged by the Securities and Exchange Commission (SEC) for orchestrating an $80 million Ponzi scheme.

The SEC charged Thursday that Jim Donnan, best known for his time coaching the University of Georgia and a member of the College Football Hall of Fame, targeted former players and coaches in building a wholesale liquidation business.

The regulator said Donnan and his business partner Gregory Crabtree promised "exorbitant rates of return," up to 380 percent, to investors.

The company was ostensibly going to buy up leftover merchandise from major retailers, which would then be resold to discount retailers for "substantial profits." But when the dust settled, just $12 million of the $80 million raised from investors ended up going into the business, with the remaining funds either used to pay false returns to earlier investors or stolen for other uses by the two.

“Donnan and Crabtree convinced investors to pour millions of dollars into a purportedly unique and profitable business with huge potential and little risk,” said William P. Hicks, Associate Director of the SEC’s Atlanta Regional Office. “But they were merely pulling an old page out of the Ponzi scheme playbook, and the clock eventually ran out."

The SEC stated in its complaint, filed in a federal court in Atlanta, that Donnan, who also worked as an ESPN sports commentator, used his influence as a former coach to win over investors, including former players.

One former player invested $800,000 in the company.

"Your daddy is going to take care of you," Donnan told the player, according to the SEC. "If you weren't my son, I wouldn't be doing this for you."

He also told potential investors that other high-profile football coaches had profited from the company. Texas State football coach Dennis Franchione; Virginia Tech football coach Frank Beamer; ex-Dallas Cowboys coach Barry Switzer and Texas Tech football coach Tommy Tuberville were among those investing in the company, according to The Associated Press.

A lawyer for Donnan did not immediately respond to a request for comment.