Thursday, August 18, 2011

NOTHING is "settled" yet
in the case of Jim Donnan...

This was the first paragraph of an Associated Press article published in newspapers across the country last week:

"A former University of Georgia head football coach has settled a legal dispute with a bankrupt liquidation company that accused him of recruiting other high-profile coaches to invest in a Ponzi scheme, according to federal court documents filed this week.
It sure sounds like Donnan has done the right thing and his troubles are now all behind him, doesn't it?

Unfortunately -- and not just for him -- they're only getting started.

Nothing has been "settled."

I repeat:

Nothing.

Contrary to reports in virtually every media outlet, there has been absolutely no “settlement” and no “compromise” for what has been described as $5.5 million.

What there has been is a proposed settlement which, if approved, would leave most of the victims in this apparent Ponzi scheme -- like my client, the widow of a doctor who invested $450,000 with Donnan -- out in the cold.  

At the same time, Donnan and his wife, Mary, would retain their house in Athens and many other valuable assets.  They've declared bankruptcy in Georgia and their assets are currently frozen. 

All that's happened -- so far -- is that high-priced lawyers for the Donnans (whose large retainers are being challenged by creditors and may well have been paid with ill-gotten gains) reached an agreement in GLC Limited's bankruptcy case in Ohio.  

In court documents and testimony, Donnan and GCL have accused one another of masterminding the  Ponzi scheme which defrauded supposed investors of an estimated $27,752,159 -- and perhaps more.  Further discovery is required , but it could turn out they were partners who acted in concert.  Now, all is forgiven, and they want to hold hands and be friends again.

Valerie Fennell, who I represent, is not ok with that.

If the settlement proposed by Donnan is approved, individual Georgia investors are likely to receive no more than 10 to 20 percent of the proceeds.  

Fortunately, Mrs. Fennell and other creditors will have an opportunity to comment on that. 

For there to be any "settlement" with GCL and its Unsecured Creditors Committe, a bankruptcy judge in Georgia will have to approve the terms of the agreement.  A hearing on that matter will take place in Macon on Monday, Aug. 29. 

Needless to say, I have very grave doubts about the wisdom of this or any settlement at this very early stage in the bankruptcy case -- before we even know the full scope of the assets and liabilities of Jim and Mary Donnan. 

For all we know, the former coach has a Swiss Bank Account.  (I'm certainly not saying he does, mind you.  I'm saying we don't know.  We need time to investigate before anybody settles anything.)

Those hundreds of published reports that the Donnnan case has been "settled" overlook one other very important fact.

Even if the bankruptcy judge in Macon does approve the proposed agreement between the Donnans and GCL's Unsecured Creditors Committee on Aug. 29, that does not bar creditors in Georgia from pursuing their own claims.

Mrs. Fennell and other investors who, like her late husband, trusted "The Coach" and handed over large amounts of money to him, can go after any and all assets that are exempt from the "settlement" agreement.

Interestingly, court papers filed in support of the settlement by the Donnans themselves list substantial assets would remain in their possession -- and be available to satisfy the claims of individual investors.

We will see Mr. and Mrs. Donnan in Macon on Aug. 29.

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