Topic: H-D: Witnesses recount Donnan’s strategy

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ATHENS, Ga. — Federal prosecutors paraded a line of alleged victims into an Athens, Ga., courtroom Friday, each testifying to their story of how former Marshall University football coach Jim Donnan urged them to invest in Huntington-based GLC Limited.

Prosecutors contend Donnan’s efforts attracted more than $81 million from 94 investors, money those testifying believed would support the purchase of presold merchandise for resale at a significant profit.

weenie Bestwick, whose career includes a very brief stint as Marshall’s football coach immediately after a Nov. 14, 1970, plane crash killed 75 coaches, players, supporters and crew, quickly noticed the returns Donnan promised were extreme.
“It was so huge, that I said ‘No way,’ ” he testified.

Bestwick and his wife, despite his initial feeling, still invested $100,000. They lost $40,000.

Other prosecution witnesses have testified the operation amounted to a Ponzi scheme, as GLC Limited only purchased an estimated $11 million in merchandise and instead used later investments to pay earlier investors. The indictment states such activity left investors with a combined loss of nearly $23 million.

Donnan, 69, of Athens, maintains he is innocent of multiple counts of conspiracy, mail fraud, wire fraud, money laundering and securities fraud. He compiled a 64-21 record at Marshall between 1990 and 1995 before moving onto the University of Georgia and eventually sports commentary at ESPN.

Convicted business partner Greg Crabtree, of Proctorville, Ohio, and others have testified Donnan recruited investors and directed their payouts. Defense attorneys claim their client was simply a victimized investor who shared his success with friends and family without any knowledge of Crabtree’s mismanagement.

Georgia investor Edd Price believed GLC was a “simple, clean model.” He was attracted by Donnan’s confidence and his description of its investors as a small, elite crowd. He further testified the former coach promised him that merchandise purchased with any investment was presold and that his principle was guaranteed.

“This is already pumping oil,” Price recalled Donnan’s sales pitch. “You can’t lose money.”

Crabtree pleaded guilty to a single count of conspiracy last month, an admission which capped his potential punishment at five years in prison as opposed to a potential life sentence had he gone to trial.

Donnan’s trial will resume Monday in Athens before U.S. District Judge C. Ashley Royal. Both sides indicated Thursday they could complete their cases by the end of next week.

Bestwick and Price were among 10 witnesses testifying Friday. Most were investors in the company and most lost money. One recalled Donnan soliciting his investment at a local restaurant, another on a golf course and a third over a haircut as that would-be investor trimmed Donnan’s hair.

Bestwick and others testified Donnan approached them by saying he wanted to offer each a chance to make money in return for their prior generosity. Some mentioned having been attracted by Donnan’s representation that GLC dealt with major companies, such as Sears, Mattel and Rite-Aid.

Michael Cheek, a former executive for Coca-Cola and Jack Daniel’s, was among the net losers. He heavily invested in GLC with few worries because of his trust in Donnan, but that didn’t stop the established businessman from urging the former coach to take certain precautions.

Cheek recalled asking numerous times for financial reports. He testified Donnan replied Crabtree didn’t have a staff for such reporting because he was too busy making money buying and selling.

The promise of an accountant in January 2010 gave Cheek confidence his ideas, as well as those of other investors, were being adopted until GLC missed his first payment Aug. 1, 2010. He eventually lost in excess of $660,000 in personal investments and a joint venture with Donnan called J&M Brands.

Donnan initially provided a reasonable explanation, but excuses mounted and by October 2010 the former coach informed Cheek that serious problems existed at GLC. That included a revelation that GLC had at least two warehouses full of merchandise, a complete shock to Cheek who had been told the company carried no inventory.

Cheek further testified Donnan’s optimistic tone drastically changed with suggestions he had been lied to and misled.
“It went from ‘I’m totally in control’ … to ‘I need your help,’ ” Cheek testified.

Cheek, then very positive about GLC, agreed to meet with two fellow investors at Donnan’s request in February 2010. Their purpose was to make the company operate more professionally, believing the economic downturn combined with the emergence of discount stores made fertile ground for GLC.

Cheek described the meeting as “very bullish,” although the three investors realized taking GLC to another level required investments from beyond family and friends and such growth required professionalism.

They recommended a certified public accountant conduct a financial review of the company, the appointment of a board of advisers, the hiring of administrative support personnel and implementation of strict checks and balances.

The investors presented Donnan with a written record of their recommendations. Cheek felt Donnan’s newfound role as co-secretary on GLC’s account at First Sentry Bank in Huntington, along with assurances an accountant was to have been hired in early 2010, indicated compliance with their requests.

But that’s as far as implementation proceeded.

Cheek testified the accountant was never hired and nothing else was implemented except for Donnan’s name on the First Sentry account.
GLC’s outlook grew increasingly dire as Thanksgiving and the holiday season approached in 2010.

Cheek joined investors in visiting GLC’s Huntington warehouse. He later recalled seeing financial statements indicating GLC was on the hook for more than $5 million in payments in early December with less than $400,000 in the bank.

The investors proceeded to hire an Atlanta attorney to advise their next steps and convened a broader meeting of investors in Athens in early December. During that meeting, Crabtree admitted to having used money from new investments to pay earlier investors, Cheek testified.
It also was then when Crabtree told investors he never hired an accountant because the leading candidate became ill.

Cheek, under-cross examination, testified that Crabtree, whether right or wrong, was always quick with an answer. He also acknowledged a line in the February 2010 recommendation, which indicated the advisory committee had the time and experience to take a greater leadership role in developing a new business model for GLC.


Cheek recalled conversations with Donnan and Crabtree regarding such leadership, but testified nothing further developed.

The defense also questioned Cheek as to tax records he requested in an email to Crabtree. He could not recall receiving a response, but on redirect by prosecutors testified the email was also copied to Donnan and that he likely received the information from someone.

http://www.herald-dispatch.com/news/x359113517/Witnesses-recount-Donnan-s-strategy