A federal prosecutor said Monday that Sen. Jerry Cooper, D-Smartt, helped arrange a fraudulent loan for the purchase of a lumber mill he owned.
Prosecutor Gary Humble said Sen. Cooper "had a lumber mill he was desperate to sell. He was facing extreme financial problems."
He said Sen. Cooper helped an Alabama man "get a loan and arranged for an appraisal that was false."
The prosecutor said the senator asked a McMinnville real estate appraiser to assert there was a rail spur to the lumber mill, though he knew that was false.
He said Sen. Cooper also helped the purchaser get a $485,000 state loan toward the purchase of the mill.
Sen. Cooper has not been charged in the case, and two other state senators this week cleared him of ethics violations in connection with the deal.
However, the man who applied for the loan, Tony Auyer, pleaded guilty Monday afternoon to 14 federal charges in connection with the deal. He faces up to 30 years in prison and a fine up to $1 million, prosecutor Humble said. A short time later, Auyer's wife, Teresa Auyer, also pleaded guilty. Sentencing is July 24 for the Auyers.
A trial is set to begin on Tuesday against McMinnville real estate appraiser James Passons at Federal Court in Chattanooga.
Sens. Joe Haynes and Steve Southerland, who looked into the matter, issued their findings in a letter to Senate Ethics Committee Chairman Ron Ramsey, R-Blountville.
It says, "The subcommittee finds no probable cause to believe that Senator Cooper violated the Code of Ethics of the Tennessee Senate."
Sen. Haynes is a Democrat from Nashville, and Sen. Southerland is a Republican from Morristown. They were named by Sen. Ramsey to act as a subcommittee.
The case involves a $292,255 state grant for a rail line leading to the lumber mill and a $485,000 state loan in 2000 to the purchasers of the lumber mill.
Sen. Cooper is declining to testify at the trial. His attorney, Jerry Summers, said if called he would take the Fifth Amendment.
Judge Allan Edgar will oversee the jury trial.
Prosecutor Humble said the Auyer couple wound up getting a $1.77 million loan and they have made only one payment on it. They applied to the Sierra West Bank that formerly was in Chattanooga, but they were turned down. They got the loan from Bank Tennessee at Collierville.
The $485,000 loan was through the Tennessee Department of Economic and Community Development.
Prosecutor Humble said the couple needed to draw down on the state loan and submitted false invoices. He said the state made payments that went to one of their employees, who turned around and wrote checks to the Auyers couple for the same amounts.
He said the Auyers couple "started dummying up invoices." He said some were for equipment that they did not actually purchase and others were for equipment but at inflated values. He said they told one person to put a $95,000 value on a $50,000 piece of equipment.
Auyers pleaded guilty to bank fraud, mail fraud, wire fraud and money laundering.