by Brian Mahany
Fraud is so prevalent these days. We could write a dozen stories a day, half just from press releases coming from the SEC. The cases that are particularly depressing involve affinity fraud – investment schemes that prey upon members of close knit groups or communities. We have seen many such cases involving churches and sports figures. Today’s post involves a former football coach from Marshall University and the University of Georgia, James “Jim” Donnan. For those that don’t know Jim, he is an inductee to the College Football Hall of Fame. Like Joe Paterno, he is a household name to many.
Yesterday the SEC charged Donnan with running a $80 million Ponzi scheme. His victims? Former football players, other coaches and people who he met through football and his subsequent sports broadcasting career at ESPN. In other words, people who trusted him. According to the complaint, Donnan told one of his former players, “Your daddy is going to take care of you… if you weren’t my son I wouldn’t be doing this for you.” That player invested $800,000.
Donnan allegedly told investors that they could earn returns of 50 to 380%. He claimed that he used investors money to purchase leftover goods from retailers and then resell them for a profit. Investors were assured that their monies were safe because he had already lined up buyers for the merchandise.
The Securities and Exchange Commission says that only $12 million of the $80 million was used to purchase merchandise and much of that was left abandoned in warehouses. They say that Donnan directed much of the profits to his children – the SEC’s complaint names Donnan’s son Jeffrey “Todd,” his daughter Tammy, and her husband Gregory Johnson. Although not charged with fraud, they are named because the government says they were unjustly enriched by the scheme.
The charges against Donnan are civil. Since the complaint was issued less than 24 hours ago, there has yet to be any comment from him or his lawyers.
Affinity fraudsters take advantage of their unique position within a church, organization or tightly knit group. In this case, former teammates and fellow coaches trusted Donnan in large part because of his reputation in the sports world, not because of his business acumen.
How much money victims will recover remains to be seen. Unfortunately, most Ponzi schemers are not arrested nor are they sued civilly by the SEC. Government regulators focus on the larger dollar and high profile cases. Donnan fits that profile perfectly. For many victims, however, there is no prosecution or recovery unless the victims file their own civil suit. In those cases, the first victims to the courthouse are often the only ones who get repaid.
If you are the victim of a Ponzi scheme, affinity fraud or any type of wrongful conduct, don’t wait for the government to intervene. Even if you are not sure that a fraud has occurred, start asking questions and seek assistance. In this economy, returns of even 5% per year are rare. Investments that promise “safe” or guaranteed” returns and offer 20, 50 or 100% profits are red flags.
The asset recovery lawyers at Mahany Law have helped many people get back their hard earned money. If you are the victim of affinity fraud, bank fraud, a Ponzi scheme, were misled by a stockbroker or otherwise lost your hard earned cash, give us a call. For more information, contact the author, attorney Brian Mahany online, by email or by phone . All inquiries are kept in strict confidence.
Mahany Law- America’s Fraud Lawyers. Offices in Milwaukee, Wisconsin; Detroit, Michigan; Portland, Maine & Minneapolis, Minnesota. Services available in many states.