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Published On: Wed, Jul 17th, 2019

Father and Son Sentenced for Multi Million 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.

Assistant Attorney General Brian A. Benczkowski of the Justice Department’s Criminal Division, U.S. Attorney Jay E. Town of the Northern District of Alabama and Special Agent in Charge Johnnie Sharp Jr. of the FBI Birmingham Field Office made the announcement.

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.

photo/ Nick Youngson

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.

“These defendants sought to enrich themselves through wire and bank fraud,” Town said.  “The sentences give notice to the public that the Department of Justice stands ready with the resources to investigate and prosecute similar offenders.”

“Today’s sentence should send a message to those who would engage in financial fraud,” Sharp said.  “We are pleased that the Watkins are being held accountable for their crimes and that they were ordered to pay restitution to the victims.   The FBI will continue to work with our law enforcement partners to investigate and prosecute those who commit complex financial crimes.”

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.

The investigation was conducted by the FBI’s Birmingham Field Office.  Trial Attorney Kyle C. Hankey of the Criminal Division’s Fraud Section and First Assistant U.S. Attorney Lloyd C. Peeples III, Special Assistant U.S. Attorney Beau Brown (on detail from the Alabama Securities Commission) and Special Assistant U.S. Attorney Xavier O. Carter Sr. of the Northern District of Alabama prosecuted the case.

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