Jim Donnan encouraged friends and associates to invest hundreds of thousands of dollars into a company that had warehouses in West Virginia stacked to the ceiling with boxes of cheap and sometimes worthless merchandise. Whether Donnan — who also invested money into GLC Limited — was aware of that reality is a matter of considerable debate in U.S. District Court.
Testimony began Wednesday in the fraud trial of the former Georgia football coach as the prosecution called five witnesses to the stand in day two of what promises to be a long proceeding. On Thursday, jurors are expected to hear from Gregory L. Crabtree, Donnan’s alleged co-conspirator who has already pleaded guilty to one count of conspiracy to commit fraud and is expected to testify on the prosecution’s behalf.
In painstaking detail, U.S. assistant attorney Paul McCommon on Wednesday introduced documents, emails and bank records that showed that Donnan not only solicited investments from wealthy associates but guaranteed huge returns, usually in writing. The prosecution entered into evidence numerous hand-written contracts and repayment agreements written in Donnan’s own hand and signed by both parties.
The prosecution also introduced Jim Burditt, then a partner in Mainstream Management, who was brought in by investors to assess the business after they started missing scheduled repayments. Burditt became GLC’s chief restructuring officer and told the jury of disorganized mess he found when he traveled to Huntington, W.Va. to size up the operation in December of 2010.
Burditt testified GLC Limited’s owner and operator’s small office in the back of sporting goods store in downtown Huntington, W.Va., had pnly three employees, two four-drawer filing cabinets and one computer used by a bookkeeper who had been there for just six months. Not far away in another location was a 70,000-square foot warehouse that was filled floor to ceiling with merchandise such as t-shirts, sweat shirts and sweat pants and 3,000 bags of out-of-date potato chips.
“’I sell everything from donuts to Cadillacs,’” Burditt said Crabtree told him in an intial interview. “I never found a Cadillac.”
Burditt said he found that GLC had no budget, no financial plan and no accounting system.
“It didn’t take long to understand that the business didn’t make any money,” Burditt said. “The business wasn’t a viable operating entity. My opinion is it was never a real business.”
Lead defense attorney Ed Tolley countered that Donnan was just as shocked as other investors when GLC no longer delivered the profits it did early in its inception. He detailed Donnan’s personal losses in the enterprise, including a $1 million loan he and Mike Cheek of Athens took out to invest in June of 2010. He pointed out several close personal friends Donnan brought in who lost huge sums of money shortly before GLC collapsed late in 2010.
Nelson E. Bowers III of Lookout Mountain, Tenn. – a 1967 UGA graduate and football letterman — lost his entire $1 million investment in 2010 after being guaranteed by Donnan he would not lose even his principal amount. But he added that Donnan “remains a good friend” and someone he trusts.
The jury also heard from Daniel Shoemaker, a former ESPN executive who introduced Crabtree and Donnan shortly before they went into business together. Though Shoemaker was the prosecution’s witness, his testimony may have done more to help Donnan’s case than hurt it.
Shoemaker’s descriptions of Crabtree supported the defense’s claims that Crabtree was overseeing the enterprise. He said Crabtree talked him into investing $50,000 in a deal in which he would be buying surplus Christmas toys from China in the summer of 2010 for quick resale that fall. Crabtree said he was lost the money and found out later “nothing was ever purchased” by Crabtree.
That and numerous other deals gone bad are sure to come up on Thursday as the prosecution told judge C. Ashley Royal that Crabtree would be the next witness called. But that will come only after Burditt’s testimony is completed. Court was adjourned late Wednesday afternoon with him still on the stand under cross-examination of Tolley.
