Two former University of Georgia football stars lost more than $2.5 million investing in a deals touted by Jim Donnan, they testified in the former UGA football coach’s criminal fraud trial in federal district court Thursday.
Kendrell Bell lost $2 million investing in GLC, shortly after his seven-year NFL career ended, he said.
Bell eventually got half of it back — $600,000 through arbitration with a financial advising firm that advised him to invest in GLC Ltd. of West Virginia, and $400,000 from bankruptcy court after GLC went into bankruptcy.
Jonas Jennings invested $800,000 in GLC deals and lost $537,500 of it, he told the jury.
Both said they put up the money because of their trust in Donnan, who coached them during their UGA playing days. Donnan was UGA’s head football coach from 1996 through 2000.
“He was more like a father to me,” Bell said of his relationship with Donnan while he was a player. Contact was more sporadic after Bell began a seven-year pro career, but he still trusted Donnan, he said.
“He said my principal was guaranteed, and I’d make whatever percent (return) at the time,” Jennings said. “I was thinking personally he could pay me back. I thought that was nickels to him.”
Donnan told Bell he couldn’t lose his money, and if Bell lost money, Donnan would pay him back, Bell testified under questioning by Assistant United States Attorney Pete Peterman.
The football players were just two in a long list of investors who lost money in the company, with more losing investors scheduled to testify today. The company went bankrupt in 2011 owing investors more than $20 million. GLC was never really profitable, according to witness Jim Burritt, whose profession is restructuring troubled companies.
Investors thought they were buying into deals wherein GLC bought unwanted goods, remainders and seconds, from reputable companies such as Sears or Costco, then resold the goods at a discount, but still at large profits for the investors.
But in reality, money put in by later investors was used for payments to people who bought in earlier, admitted Donnan co-defendant Greg Crabtree, who testified Thursday morning.
Donnan knew what was going on at GLC, Crabtree testified Thursday.
Crabtree, the founder of the West Virginia company, testified Thursday he developed GLC into a kind of salvage company by going to auctions first as a hobby, buying others’ unwanted merchandise and then reselling it at higher prices.
But when Donnan began investing himself, and pulling other investors in, the company quickly got much, much bigger, said Crabtree on the witness stand.
The jury will ultimately have to decide whether Crabtree is credible, though he is not the only witness.
Indicted at the same time as Donnan in 2013, Crabtree reached a plea agreement with federal prosecutors last month.
Part of his agreement was he would testify truthfully in Donnan’s trial. He faced up to 400 years in prison if convicted of all the charges in the original indictment; under the plea agreement, he admitted to a single count with a five-year sentence.
Crabtree’s testimony contradicted what was said when Burritt began investigating GLC’s condition. Crabtree said then Donnan did not know Crabtree was using investor money to pay off investors rather than real profits from the deals, Burritt testified Wednesday. Burritt described Crabtree in conversation as “a pathological liar,” he testified.
Burritt was brought in to run GLC after a group of investors became worried about their missed interest payments from their deals.
Federal prosecutors say Donnan and Crabtree conspired to deceive investors, and Donnan falsely told at least some investors the salvage or surplus goods GLC bought for resale were presold, meaning they couldn’t lose money on the deal.
Donnan’s lawyers say Donnan didn’t know about the illegal payments when he brought friends and acquaintances into the GLC circle of investors, and that the ex-football coach himself was a victim of Crabtree.
Assistant U.S. Attorney Paul McCommon, prosecuting the case with Peterman, said the government will likely finish its case Wednesday. Ed Tolley, one of Donnan’s lawyers, said the defense would likely conclude, Friday, a week from today, or the following Monday.
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