He betrayed the fans and the league by betting on NBA games, including some he was officiating. Donaghy won about 75 percent of his bets, an incredible percentage confirmed by the FBI.
Now Donaghy speaks out publicly for the first time, telling 60 Minutes correspondent Bob Simon why he bet on NBA games, how he won so often, and how his world collapsed. And what a world it was.
Donaghy says being a referee was his dream job. "I had the opportunity to run up and down the court with the greatest athletes in the world. I just loved the game of basketball growing up and my goal was to somehow be a part of it."
"It was a dream situation all around," he added.
"And then you committed the cardinal sin. You started betting on NBA games including games that you were reffing yourself," Simon remarked. "What were you thinking?"
"Obviously, I wasn't thinking to cross that line," Donaghy said.
He told Simon he thought he did it because he fell into an addiction of gambling.
Asked how that addiction began, Donaghy told Simon, "Playing golf at country clubs and card games at country clubs and people's houses. And it just evolved from those type of situations to betting on athletic contests."
Donaghy was betraying everything he and his family stood for. His father had been a respected ref in college basketball; Tim followed in his footsteps and went even further, making it to the NBA.
But Donaghy said betting was more powerful than all of that, and winning was ecstasy.
Asked if betting on the NBA gave him a higher high than betting on other sports, Donaghy said, "I think it gave me a higher high because I was able to predict the outcome of the games. And I think when you talk about gambling and the euphoria that comes with it, making winning picks is what excites you."
"And as far as you know, you were the only ref who was placing bets?" Simon asked.
"As far as I understand, yes," Donaghy said.
He told Simon he bet on "probably over 100 games," reffing a lot of those himself.
And here's what you may find difficult to believe: Donaghy says that while his betting may have been illegal, his reffing was always honest.
"You're insisting that your betting did not influence the way you called a game. Why should we believe you?" Simon asked.
"Because the FBI did a thorough investigation, and even the NBA concluded that I did not fix games in the NBA," Donaghy replied.
That's right. A 29-year FBI veteran, Special Agent Philip Scala, led the investigation of Donaghy. He told us that Donaghy convinced him.
"He said, 'Knowing the information that I had, I didn't have to do anything on the court to pick a winner. I could pick a winner 80 percent of the time just knowing what I knew an hour before the game,'" Scala said. "And watching the tapes we could see that there was never something outlandish where you could see he called a foul or he omitted a foul because he wanted to see a certain team win. We never saw that."
The NBA's investigation came to the same surprising conclusion: "It seems plausible to us that Donaghy may not have manipulated games... We are unable to contradict the government's conclusion."
"When you were reffing a game, didn't it come to your mind that you'd bet on one team and not on the other?" Simon asked.
"I tried to put it out of my mind. And I think that that I was able to do that," Donaghy said.
"In one game you were betting on San Antonio, but you threw their coach Greg Popovich out of the game," Simon pointed out.
"I didn't think about the bet during the game. And in my mind, he needed to be ejected," Donaghy said.
Losing their coach cost San Antonio the game and cost Donaghy his bet. But that didn't happen very often: Donaghy claims - and the FBI concurs - that he won 70 to 80 percent of his NBA bets.