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Donnan co-defendant says ex-coach knew about fraud

May 8, 2014
Associated Press

ATHENS, Ga. (AP) — A man accused along with former University of Georgia football coach Jim Donnan of operating a fraudulent investment scheme testified Thursday that Donnan asked him to sign a document saying Donnan wasn't aware that investor money was being used to pay other investors.

Gregory Crabtree's testimony came during Donnan's trial on federal charges including conspiracy, mail fraud and wire fraud. Crabtree pleaded guilty last month to a single count of conspiracy.

A federal indictment against Donnan, of Athens, and Crabtree, of Proctorville, Ohio, says the pair ran a fraudulent investment scheme from September 2007 to December 2010 through GLC, a West Virginia-based company that dealt in wholesale and closeout merchandise. Prosecutors have said Crabtree ran the day-to-day operations and Donnan used relationships of trust within his extensive network of personal and professional contacts to lure investors into the fraud scheme.

Crabtree testified that Donnan presented a document to him in late 2010, after the scheme had unraveled, in which Crabtree was to certify that the ex-coach did not know that investor money was being used to pay other investors. Crabtree said Donnan said to him, "Would you care to sign this letter to help me save face with my friends?"

When Crabtree pointed out that Donnan had been aware of the way the payments worked, Donnan acknowledged that but said he needed Crabtree to sign the document so he could save face and try to salvage some of the business, Crabtree testified.

Donnan's attorney, Jerry Froelich, didn't address that document during his cross examination of Crabtree.

Crabtree and Donnan began working together after a mutual friend put them in touch. Crabtree had some opportunities to buy wholesale or closeout merchandise but didn't have the money to buy it. After Donnan provided the capital for several deals and got a good return, he asked Crabtree if there were more opportunities because he knew other people who would be interested in investing, Crabtree testified.

They began working together, talking every day, Crabtree said.

Jurors saw handwritten lists of deals with a price and a profit for each that Donnan drew up and sent to Crabtree. Under prosecution questioning, Crabtree said those were proposals along with the profit that he thought he could get. But under questioning by the defense, he said they could be attempts by Donnan to confirm the deals they had.

The prosecution has argued that Donnan falsely told investors that they were putting their money in "presold deals" — merchandise they would purchase for which Crabtree already had a committed buyer — when in fact they were buying merchandise and then looking to sell it.

In late 2009, problems surfaced as Crabtree was having trouble moving merchandise and started stocking it in warehouses because investor money was coming in faster than he could sell it. He spoke to Donnan about the troubles, and Donnan said he'd look into ways to help, Crabtree said. They ended up using investor money to pay other investors because they didn't have profits from sales to pay the high returns Donnan had promised investors, Crabtree said.

"Do you realize what that is, what that's called?" prosecutor G.F. "Pete" Peterman III asked Crabtree.

"I do now," Crabtree said.

"What's that?" Peterman asked.

"A Ponzi scheme," Crabtree said.

Under defense questioning, Crabtree said that in late 2009, at the time when he had said he was having trouble moving merchandise, he had been sending Donnan proposals to spend millions on deals

When Froelich, the defense attorney, asked him about a list of transactions between different bank accounts, Crabtree seemed confused about which accounts were GLC's and those used for his other personal businesses.

Froelich also asked Crabtree about visits to the company's West Virginia warehouses by several of the donors Donnan had recruited and Crabtree acknowledged that he had shown the visitors around and told them the inventory was very valuable. Froelich also asked Crabtree about other instances where Crabtree had met investors and had given them a very positive impression of the business.

 
 

 

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