Former star linebacker Kendrell Bell -- a standout at Laney High in Augusta – claimed Donnan got him to invest $2 million in a West Virginia company that actually was a Ponzi scheme, using money from later investors, like Bell, to pay big returns to earlier investors, including Donnan.
But United States Bankruptcy Judge James P. Smith found no evidence Donnan deliberately deceived Bell in a ruling handed down earlier this month.
Donnan filed for bankruptcy protection in 2011 after the West Virginia company, GLC, filed for bankruptcy.
Bell and some other investors have objected to provisions in Donnan’s bankruptcy plan, saying Donnan talked them into investing in the company even though Donnan knew their chances of recovering their investments were slim to none.
Lawyers for Bell had asked Smith to allow the former player to claim part of Donnan’s assets ahead of other investors, even though Bell had missed a deadline to file such a claim.
Smith denied Bell permission to file the claim, however.
“The evidence establishes that, at some time, Donnan had guaranteed Bell that he would get his money back and had told Bell that he would be taken care of. However, simply making promises to take care of a creditor, and even guaranteeing payment, does not equate to deceptive conduct relating to the dischargeability objection deadline that would justify equitable tolling. In fact, the Court can find no deceptive conduct on Donnan’s part in connection with his postpetition communications with Bell,” Smith wrote. “The court finds that there has been no deception or actual fraud about the dischargeability objection deadline by Donnan in his communications with Bell.”
Donnan had helped recruit investors for GLC, according to court papers. According to Donnan, he told people about GLC because it seemed like a good investment opportunity before the company ran into trouble. Investors included well-known sports figures like Bell, North Carolina State University basketball coach Mike Gottfried, Texas Tech and former Kentucky basketball coach Billy Gillispie and Texas Tech football coach Tommy Tuberville.
The company’s owners, Greg and Linda Crabtree, claimed to be using investors’ money to buy discontinued appliances, furniture and other goods for resale. But according to court documents, the company collected some $82 million from investors and bought less than $12 million in inventory. The rest went to pay big returns to earlier investors, including the Crabtrees, Donnan and members of Donnan’s family.
Donnan and his family were among the first investors, putting about $5.4 million in GLC, then getting $14.6 million back, according to documents filed in the case.
GLC filed for bankruptcy about a year ago, owing about $27 million to investors and lenders.
Bell was the NFL’s defensive rookie of the year in 2001 after playing for Donnan at UGA, but injuries ended his career prematurely.