ATHENS, Ga. -- Former University of Georgia football coach Jim Donnan and his wife, Mary, have asked a federal court for bankruptcy protection
The Donnans filed their legal papers Friday, after investors in a bankrupt Ohio company demanded more than $8 million from the Donnans.
The Donnans also invested in the company, GLC Ltd., but got their money back and more before the company went belly-up earlier this year.
In February, GLC owners Linda and Greg Crabtree filed a bankruptcy petition in Ohio, saying the company owed $26 million to $29 million it could not pay to investors and other creditors.
Lawyers for the bankrupt company now say the Crabtrees defrauded investors in a Ponzi scheme that netted the couple millions of dollars. Early investors, like the Donnans, also made money -- at the expense of later investors.
Later investors thought they were investing in or lending money to buy inventory for resale and expand the company, but the money went to repay earlier investors, like the Donnans, according to the bankrupt court's lawyers.
Between 2007 and 2010, investors put nearly $82 million in the company, but only about $12 million was used to buy inventory, according to court documents.
Now the bankruptcy court has approved GLC's plan to seek repayment from the early investors, including Donnan.
Both the losing and gaining investors include people in the Athens area as well as well-known sports names such former Dallas Cowboys coach Barry Switzer, former Kentucky basketball coach Billy Gillispie and Texas Tech football coach Tommy Tuberville, a former Auburn coach.
The Donnans have not been accused of wrongdoing, but in March, the federal bankruptcy court in Ohio's Southern District ordered the Donnans to turn over financial records to the court.
The Donnans dispute the claims of their creditors, mainly people who lost money they invested in GLC, which has also filed for bankruptcy.
The Donnans also owe several hundred thousand dollars in other debts, mainly real estate loans on property that has declined in value during the recession, according to court papers filed in Georgia's Middle District federal bankruptcy court Friday.
Donnan's lawyers said the former coach told friends, family members and others of his early investment success, but never intended to mislead anyone.
In fact, Donnan alerted other investors after he realized things were going wrong for GLC in November, said his lawyers, Ed Tolley and Ernie Harris of Athens.
Donnan met last month with representatives of GLC's creditors, offering to pay back $5 million of what he had received from GLC, but the creditors turned down the offer and the Donnans don't have the assets to pay more, Harris said.
"As a result, the Donnans have decided to turn the matter of distribution of available assets over to the federal bankruptcy court in Athens, Georgia, as they have been unable to settle with GLC for a reasonable amount," according to a statement prepared by Harris and Tolley.