By Donald V. Watkins
©Copyrighted and Published on March 15, 2019
On March 8, 2019, a federal jury in Birmingham, Alabama convicted me on all ten counts of conspiracy, bank fraud, and wire fraud charges following a three-week trial. The jury also convicted my son, Donald, Jr., of conspiracy and one count of wire fraud. Our sentencing is scheduled for July 16, 2019.
In the aftermath of these convictions, my family, friends and supporters have asked me whether I will appeal the guilty verdicts in my case. The answer is “yes.” Here is why:
The wire fraud convictions arise out of a business scenario where seven high net worth individuals purchased an economic interest between 2007 and 2010 in a company I owned named Watkins Pencor, LLC. This company holds my equity interests in the Masada Resource Group, LLC, family of waste-to-energy companies. Under the applicable corporate governance agreements, I had an absolute right to sell a portion of my economic interest in Watkins Pencor to these purchasers.
In 2012, one of these individuals also purchased an economic interest in an oil and gas exploration company I co-own named Nabirm Global, LLC. Again, under the applicable corporate governance agreement, I had a right to sell a portion of my economic interest in Nabirm to this purchaser.
Six of the purchasers had lawyers and investment advisors representing them at the time of their transaction. The seventh purchaser was a lawyer. I interacted directly with some of these professionals prior to the execution of the purchase agreements in question.
The sale of my economic interest in Watkins Pencor and Nabirm was irrevocable in each case. I permanently diluted the economic interests I held in these two companies in favor of the purchasers. The money from the purchase transactions legally belonged to me, to be used as I saw fit. The money was wired to one of my bank accounts and was reported on my personal tax returns. Each purchaser still holds his/her economic interest in Watkins Pencor and Nabirm today. Each company is an ongoing business enterprise.
An eighth purchaser executed an identical purchase agreement in Watkins Pencor in 2009. He understood that the money from his purchase transaction legally belonged to me, to be use as I saw fit. This purchaser is also my business partner. His name is Ralph Malone. He is a Georgia Tech engineering graduate, a former NFL player, a member of the Georgia Tech Engineering Hall of Fame, and a member of the Alabama Judicial Inquiry Commission.
The Government’s theory in my case is that the seven purchasers who testified as prosecution witnesses were “victims” of wire fraud and that the written agreements did not embody the business interest these “victims” thought they were purchasing from me. The Government used a criminal prosecution to override the contractual rights and obligations between the seller and purchasers, even though the purchasers were represented by lawyers and financial advisors at the time of their transactions and one of them was a lawyer.
The theory of the defense is simple: Each purchaser received exactly what he/she negotiated in the purchase transaction. Additionally, I answered all questions about the nature and scope of the purchase transactions in a truthful manner before the agreements were executed.
There was no evidence that any of the seven “victims” lost any money in the purchase transactions. Likewise, not one of the seven “victims” produced a single document supporting his/her decade-old recollection of the “fraudulent” representations the Government claims I made to them prior to their purchases. In contrast, I produced all documents that were provided to the purchasers.
After the purchases were made, I complied with an express provision in my 2004 divorce decree when I sent a portion of the sales proceeds from these Watkins Pencor transactions to my ex-wife. In my opinion, it is legally impossible to commit fraud by complying with the express payment provisions in my divorce decree.
Interestingly, I was the first person to initiate litigation regarding the issue of who owns the money from the sale of my economic participations in Watkins Pencor when I initiated an AAA arbitration proceeding in June 2013 against one of the prosecution’s witnesses. Two months later, this purchaser filed a lawsuit against me on this issue. His lawsuit was dismissed four years later, with prejudice.
In 2015 and 2016, the same issue was investigated by a federal grand jury in New Jersey, which took no action against me. This issue was raised again in a "fraud" lawsuit filed by the U.S. Securities and Exchange Commission against me on September 1, 2016. In 2018, the SEC dropped all of the allegations regarding my sale of Watkins Pencor economic participations to the individuals who were later labeled as “victims” in this criminal case.
Against this backdrop, it is very important to all private business entities that I appeal my criminal conviction on the following threshold legal question: Whether an executed purchase contract that was negotiated at arms-length between sophisticated business parties who were represented by financial and legal professionals is subject to a prosecutorial override 10 to 12 years later solely because the purchaser’s refreshed recollection of the nature and scope of the transaction differs from the written purchase agreement?
Another issue that is ripe for appeal involves three loan transactions between Charles Barkley and me between 2010 and 2013. The issue is simple: Whether introductory emails between Barkley and me regarding loan transactions trump (a) the plain language of the promissory notes that were specifically approved by the lender’s financial advisor and (b) the authorized uses of proceeds that are specified in the applicable corporate governance agreements?
Finally, the bank fraud convictions give rise to this issue on appeal: Whether a bank fraud conviction can be sustained in a case where I, as a bank “insider,” complied with the plain language of a Federal Deposit Insurance Corporation regulatory provision (Reg. O) that expressly permits a loan transaction by a business partner (Dr. Richard Arrington, Jr.) in a "bona fide transaction" where the loan proceeds were used to acquire “goods”, “services,” and “property” from the insider?
The underlying facts relating to these three appellate issues are not in dispute. These are issues of first impression in the Eleventh Circuit Court of Appeals and they are important to the entire business community.
This is why I must fight.
PHOTO: The fair administration of justice requires an appeal in this case.
