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  • Writer's pictureDonald V. Watkins

SEC Plans To Drop $4 Million In Fraud Claims

Updated: Jul 25, 2018

By Donald V. Watkins ©Copyrighted and Published on July 12, 2018


On September 1, 2016, the Securities and Exchange Commission ("SEC") filed a lawsuit against several of my private companies and me alleging that the named defendants defrauded professional athletes and other investors out of $6.1 million dollars. The Commission claimed that much of this money was spent on personal expenses like alimony, past due taxes, payments to an ex-girlfriend, and credit card bills. The complaint also alleged that the defendants falsely claimed that Waste Management, Inc., a large, international waste treatment company, was seriously considering acquiring Masada Resource Group, LLC, and its affiliated companies in a multi-billion-dollar transaction.


This morning, an Atlanta-based SEC attorney handling the case sent the defendants’ attorneys the following email:


“After talking this over internally, we intend to seek permission from the [Commission] to drop the charges for which we did not seek summary judgment to save resources.  It will take 8 weeks or so for us to make the recommendation and have it acted upon by the Commission....".


Just like that, $4 million in baseless “fraud” claims regarding the Masada-Waste Management transaction went out the window. Ironically, Masada made thousands of pages of documents relating to the Waste Management transaction available to the SEC in June 2014. Yet, no one from the Commission took the time to review these corporate records at Masada's headquarters in Birmingham. Instead, the SEC decided to spend thousands of manhours and millions of dollars over the last four years dragging my name and reputation through the mud over these now-abandoned "fraud" allegations.


The SEC attorney’s email reference to the “summary judgment” relates to a June 28, 2018 court ruling that an Atlanta federal judge gave to the SEC regarding three loans from former NBA player /Hall of Famer Charles Barkley. It was a “gift” ruling that is based upon clearly erroneous factual findings and conclusions of law. The defendants have formally asked the judge to reconsider this ruling.


The Barkley loans totaled $2.1 million out of the original $6.1 million in alleged “fraud” claims. These loans were approved transactions between a company stakeholder and Masada. Barkley was represented in the loan transactions by investment banking giant Raymond James. His adviser approved of the terms and conditions in the promissory notes. Barkley has never initiated any litigation on his own in connection with these loans. He remains a stakeholder in the businesses at issue.


In ruling for the SEC on the Barkley loans, the Court completely disregarded my authority in the corporate governance documents to borrow money from Barkley and to expend these funds for the benefit of Masada and its affiliated entities/persons. Additionally, the Court ignored the undisputed fact that Charles Barkley’s financial adviser handled the due diligence, documentation, and subsequent communications with me for each one of the loan transactions in question.


Interestingly, neither the SEC, nor the Court, has ever claimed that Masada is not an ongoing international business enterprise, or that Barkley has lost any money in connection with this waste-to-energy venture. In fact, Barkley increased his economic interest in the company by making the loans.


To project a false appearance that the Barkley loan proceeds were used for personal expenses, the Court cited a couple of transactions involving payments to my ex-wife and ex-girlfriend from the Barkley loans. In these transactions, the Court completely ignored the undisputed facts that: (a) my ex-wife is a Masada creditor who is entitled to periodic repayments; (b) my ex-girlfriend was a Masada vendor whose residence was used to house Masada executives, strategic partners, and business associates from around the United States while they worked in Atlanta for the company; (c) the Masada Operating Agreement authorized me to make payments to creditors and vendors in the regular course of business, including those individuals with whom I had a personal relationship; and (d) Barkley received the increased economic participation that he requested in exchange for making the loans (which said increase he retains to this day).

Every transaction cited by the judge in the “gift” ruling was specifically authorized in the Masada Operating Agreement. In his 2007 economic participation agreement, Charles Barkley expressly agreed to honor all of the terms and conditions in the Masada Operating Agreement. For reasons that cannot be explained by the undisputed evidence in the case, the judge freed Barkley from this commitment.


Legal observers are stunned that the SEC has spent the kind of time, money, and resources it has devoted to this case. The lawsuit has now boiled down to $2.1 million in loan transactions between a private company and one of its longtime stakeholders. At this juncture, the Commission has turned itself into a loan collection agency for Charles Barkley. During the past four years, the SEC has spent more money in developing and pursuing this lawsuit than the face amount of the Barkley loans.


This case demonstrates the power of "runaway" federal officials. They can and do abuse their power when other agendas are in play.


PHOTO: The Securities and Exchange Commission's Emblem.



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ken.levesque
Nov 15, 2021

I'm not an attorney but the more I read about fraud cases the more I think that it is too easy for the Government to bring a case of fraud against someone.

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Koda Shepherd
Koda Shepherd
Jul 14, 2018

lisa6677

Most people don't realize that our monetary system is one big house of cards ... much like the rescues/Humane societies highlighted by Mr Watkins.


Why does it work? Because people BELIEVE what they are told without "looking under the hood"


Just look at the miraculous turnaround of the Trussville "puppy mill" dogs to wonderful "rescue" dogs with little more that a bath and a pedicure. ... and PUREBRED at that! Trust me if they were malnourished or sickly it would have been shouted from the rooftops! Hypocritical people who wouldnt lift a finger to rescue any of the 600+ mutts killed at GBHS in May alone have been waiting like vultures waiting to place their order and throw (purcha…


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lisa6677
Jul 14, 2018

Good point, Koda Shepherd. Having worked for one of these giants that came close to bringing down our financial system, it disgusts me that instead of going after the CEOs of these corporations who allowed this to occur, they waste our tax dollars furthering their personal vendettas against people like Donald Watkins. Not only did they not hold my former employer accountable, they loaned them $182 billion.

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Koda Shepherd
Koda Shepherd
Jul 14, 2018

Indeed ... The practice of packaging Tranche after Tranche of worthless debt and reselling it (CDO) to the same investment bankers that represented your friend (And should have know better) all the while Jamie Dimon was shorting the hell out of it was CRIMINAL ... Yet Jamie still sits on the throne. It's not what you know it's who you know which might explain why the Treasury Secretary at the time to "guide" us through their self inflicted attack on our monetary system came from SURPRISE Goldman Sachs. Thanks Hank!

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Donald V. Watkins
Donald V. Watkins
Jul 14, 2018

On July 13, 2018, the SEC filed a pleading in this case announcing that the Commission would be dropping all of its fraud claims against my companies and me, except for the ones involving the Charles Barkley loans. For the first time, the SEC publicly admitted that its fraud claims regarding my irrevocable assignment of economic participations in my block of equity to a hand full of professional athletes were outside the applicable statute of limitations. Yet, they dragged my name through the mud in making these claims. In fact, the SEC issued a dubious press release on July 12, 2018 (two weeks after the Court's June 28, 2018 "gift" Order) that focused on the $2.1 million in Barkley loan…


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