International Financial Law Prof Blog

Editor: William Byrnes
Texas A&M University
School of Law

Friday, July 26, 2019

Father and Son Sentenced to Prison in Multimillion-Dollar Investment Fraud Scheme

A father and son who ran a complex investment fraud scheme by which they stole more than $10 million over the course of seven years were sentenced today to 60 months and 27 months in prison, respectively.

Donald Watkins Sr., 70, of Atlanta, Georgia, and Donald Watkins Jr., 47, of Birmingham, Alabama, were sentenced by U.S. District Judge Karon O. Bowdre of the Northern District of Alabama.  Judge Bowdre also ordered Donald Watkins Sr. to serve five years of supervised release and to pay restitution in the amount of $14,000,100.00 and ordered Donald Watkins Jr. to serve three years of supervised release and to pay restitution jointly with his father in the amount of $13,850,000.

The father and son co-defendants were convicted on March 8, 2019, following a jury trial that lasted over two weeks.  Donald Watkins Sr. was convicted of seven counts of wire fraud, two counts of bank fraud and one count of conspiracy.  Donald Watkins Jr. was convicted of one count of wire fraud and one count of conspiracy. 

According to evidence presented at trial, between approximately 2007 and 2013, Donald Watkins Sr. sold “economic participations” and promissory notes connected with Masada Resource Group, a company that he ran as manager and CEO.  Investors paid more than $10 million dollars after Donald Watkins Sr. and Donald Watkins Jr. falsely represented that the money would be used to grow Masada, which Donald Watkins Sr. described as a “pre-revenue” company that supposedly had technology that could convert garbage into ethanol.  Instead of investing the money into Masada, however, Donald Watkins Sr. and Donald Watkins Jr. diverted funds to pay personal bills and the debts of their other business ventures, the evidence showed.  Victim money was used to pay for Donald Watkins Sr.’s alimony, hundreds of thousands of dollars in back taxes, personal loan payments, a private jet and clothing purchased by Donald Watkins Jr. and his wife.  Emails introduced at trial also showed that Donald Watkins Sr. and Donald Watkins Jr. planned to obtain millions of dollars for these purposes from one victim on multiple occasions, when they knew that this victim and other victims trusted them to put their money to use in growing Masada. 

Donald Watkins Sr. also was convicted of defrauding Alamerica Bank, an entity in which Donald Watkins Sr. held a controlling interest through his ownership of Alamerica Bank Corp stock, the evidence showed.  In order to pay hundreds of thousands of dollars in litigation expenses associated with another one of Donald Watkins Sr.’s business ventures, Donald Watkins Sr. executed a plan to use a straw borrower to take out money from Alamerica Bank and use those funds to pay the defendant’s litigation expenses.  This straw borrower—Donald Watkins Sr.’s long-time mentor and a prominent figure in the Birmingham community—took over $900,000 in loans from Alamerica Bank and then immediately permitted Donald Watkins Sr. to use those funds for his personal benefit, the evidence showed. 

https://lawprofessors.typepad.com/intfinlaw/2019/07/father-and-son-sentenced-to-prison-in-multimillion-dollar-investment-fraud-scheme.html

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