ATHENS, Ga. -- The Securities and Exchange Commission has intervened in the bankruptcy case of former University of Georgia football coach Jim Donnan.
The federal agency has asked a bankruptcy judge to deny Donnan’s plan to pay back creditors some of the money they claim he owes them, many saying Donnan convinced them to invest in a West Virginia company that turned out to be a Ponzi scheme.
In court papers filed this month, lawyers for the SEC say they plan to file a claim of as much as $13 million against Donnan, who coached the UGA football team from 1996 through 2000.
The company, GLC Limited, filed for bankruptcy last year, owing about $27 million to investors and lenders.
Donnan also filed for bankruptcy when lawyers for the bankrupt company sought millions of dollars from him and his wife, Mary.
“The SEC staff anticipates that the SEC will file a substantial claim in this case based on potential remedies for alleged violations of the federal securities laws,” attorneys said in a motion filed earlier this month in the Middle District of Georgia bankruptcy court. “The amount sought for disgorgement of ill-gotten gains may likely exceed $13 million, and the claim may also include amounts for civil penalties and prejudgment interest.”
The SEC enforces federal laws relating to securities such as stocks and bonds.
Donnan will be able to answer SEC investigators’ questions sufficiently so that the SEC ultimately will decide not to file a claim against Donnan, said Ernie Harris, a lawyer for Donnan.
Donnan has maintained that he did not intend to deceive anyone by encouraging them to invest in GLC, but was trying to share his own good fortune with others after investing profitably in the company. Unlike many GLC investors, Donnan and his wife profited handsomely from their investments in the company, according to a legal document that SEC lawyers filed.
Lawyers for the bankrupt company, GLC, also have filed a large claim against the Donnans, the SEC court filing notes.
“GLC’s claims against the (Donnans) seek recovery of more than $13 million that was paid by GLC to the (Donnans) as returns on investments and as commissions for Mr. Donnan soliciting investments by others in GLC,” according to the SEC objection, filed March 13.
The agency also claimed Donnan had not revealed enough about what happened to the profits he and his wife made off of GLC Limited.
The Donnans had a net worth of about $3 million in 2007, before Jim Donnan got involved with GLC, according to the SEC document. The Donnans’ investments in GLC earned them a profit of about $7.3 million, enough to raise their net worth to more than $10 million, according to SEC lawyers.
“(Donnan’s) plan to pay creditors, however, offers less than $5 million in assets for distribution to unsecured creditors, and there is very little information in the Disclosure Statement about what the (Donnans) did with the substantial profits they received from GLC, and why more money is not available to pay creditor claims,” the lawyers claim.