Former NFL coach, player are victims in an alleged ponzi scheme

by Michael Tarsala

Former Dallas Cowboys Super Bowl-winning coach Barry Switzer is among the alleged victims of a ponzi scheme run by Hall of Fame football coach Jim Donnan.

Donnan and partner Gregory L. Crabtree are accused of cheating investors – many of them former players including linebacker Kendrell Bell who played for the Pittsburgh Steelers – collectively out of $80 million.

Football fans may remember that Donnan helped put Marshall University on the football map in the 1990s, winning the NCAA Division 1-AA National title in 1992. He also coached at Georgia from 1996 to 2000, compiling a career record of 104 wins, 40 losses. He was inducted into the College Football Hall of Fame in 2009, and in recent years worked as a college football analyst for ESPN.

Donnan and his partner Crabtree reportedly raised money from about 100 investors in a business that bought leftover merchandise from retailers and sold it at a profit to discount stores. Investors were allegedly promised returns of 50 to 380%.

Instead, regulators say Donnan pocketed $7.4 million for himself; only $12 million was used to buy merchandise. The rest was used to pay off earlier investors in the venture.

“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 director of the S.E.C.’s Atlanta office, said in a press statement. “But they were merely pulling an old page out of the ponzi scheme playbook, and the clock eventually ran out.”

Frauds of all sorts — not just ones targeting athletes — are preying on a growing number of investors, says Pat Huddleston, former SEC enforcer and author of The Vigilant Investor.

The FTC has reported more than 1.5 million fraud complaints, up 62% in three years. He says the upward trend will likely continue, and sees potential for another giant Bernie Madoff-like scam.

Huddleston says that if returns seem too good to be true, that is likely the case.

Also, you should know where your money is at all times.

To that latter point, Covestor runs separately managed, individual investment accounts for all of our clients.

Invest with us, and your money is held in a top-tier brokerage account bearing your name, separate from everyone else’s money. It’s not sloshing around in a big pool run by us or some third party, and there is no one earning interest on it.

It’s your own lockbox; you can see the balance change on a daily basis, make investment changes extremely quickly, and pull your money at your complete discretion.

Best of all, Covestor can set you up with your own individual account for as little as $10,000. Some private wealth management firms require $1.5 million for similar services.

If you would like to learn more or to give our investment service a try, call us at 866-825-3005 X 703, in our New York Office, at 1370 Broadway.

Photo by: Jory’z Shotz