(Reuters) - Former coach and College Football Hall of Fame inductee Jim Donnan was charged by U.S. securities regulators on Thursday with running an $80 million Ponzi scheme whose victims included other college coaches and former players.
Donnan, who coached football at Marshall University and the University of Georgia before becoming a television commentator for ESPN, recruited contacts from his sports career as investors in the company he ran with business partner Gregory Crabtree, the U.S. Securities and Exchange Commission said.
"Your Daddy is going to take care of you," Donnan told one former player who later invested $800,000, according to the SEC's complaint, which did not name the victims.
The men told investors their company, GLC Limited, bought leftover or damaged merchandise from retailers and resold it to discount retailers.
They promised returns of 50 percent to 380 percent and raised $80 million from about 100 investors, the agency said. But only about $12 million went to buying merchandise, and the rest was used to pay fake returns to investors or stolen for other uses.
"Donnan and Crabtree convinced investors to pour millions of dollars into a purportedly unique and profitable business with huge potential and little risk," William P. Hicks, associate regional director in the SEC's Atlanta office, said in a statement.
"But they were merely pulling an old page out of the Ponzi scheme playbook, and the clock eventually ran out," Hicks said.
Emails and phone calls to attorneys for the two men were not immediately returned.
Donnan brought Marshall University to national attention as a major college football program and led the University of Georgia to four consecutive bowl game wins from 1997-2000, according to the College Football Hall of Fame website. He was inducted in 2009.
The SEC said Donnan recruited the majority of the investors. He told potential investors their money would be used to purchase specific items -- such as out-of-season toys or holiday decorations or leftover patio furniture -- that had already been pre-sold to other retailers, the complaint said.
"You can't lose your money; it's already pumping oil," he told one person, according to the SEC complaint.
Donnan also told investors that he would invest in the same deals and that other prominent college football coaches had successfully invested in GLC, the SEC said.
GLC filed for bankruptcy in February 2011, the SEC said. To date, 61 people who say they invested in GLC have filed claims against the company worth about $40 million.
The scheme ran from August 2007 to October 2010, the SEC said in its complaint, filed in federal court in Atlanta. Much of the merchandise GLC purchased was left unsold in warehouses in West Virginia and Ohio.
Donnan, who lives in Athens, Georgia, took more than $7 million from GLC, the SEC said. His children also received funds from the company. Crabtree, who lives in Proctorville, Ohio, took more than $1 million, the SEC said.
The men have been charged with violating antifraud and registration provisions of federal securities laws.
Hicks said the SEC seeks the return of ill-gotten gains and a financial penalty.
(Reporting by Emily Stephenson; Editing by Bernadette Baum, Gary Hill)