Donaldson, who was imprisoned in Long Kesh (HM Prison Maze) prison with his friend, famous IRA hunger striker and British MP Bobby Sands, trained in the early 1980s in Lebanon with members of the Palestine Liberation Organization and other terrorist groups. Donaldson maintained his contacts with Hezbollah and the Sh'ia Amal militia after he was recruited as a British agent.

Donaldson had made numerous enemies over the years, ranging from more militant Irish republicans, others within Sinn Fein and the IRA, and Israeli and, more recently, U.S. intelligence, which has been authorized to assassinate any current or former terrorist as part of a "Worldwide Attack Matrix" drawn up by former CIA Director George Tenet in the wake of 911. All are prime suspects in his assassination.

Donaldson was living in fear of his life in a small village in county Donegal in Ireland. He remained distraught throughout the remainder of his life over the death of Sands. However, with torture and two gunshot wounds to the head, suicide was not the cause of Donaldson's death. The Iranian revolutionary government changed the name of the Tehran street where the British embassy is located from Winston Churchill Street to Bobby Sands Street as a show of support for the Irish republican movement.