posted April 4, 2006
A federal prosecutor told a jury on Tuesday that Lt. Gov. John Wilder and former state Commissioner Bill Baxter helped Sen. Jerry Cooper get loans that were later defaulted.
Prosecutor Gary Humble said Sen. Cooper, D-Smartt, was in financial straits and needed the loans so he could sell a lumber mill he owned that was failing.
He said the loan was turned down by a Chattanooga bank and recommended to be turned down by Bank Tennessee at Collierville, but Lt. Gov. Wilder got the latter bank to approve it. The loan was for $1.77 million, and the prosecutor said only a single payment was ever made.
Prosecutor Humble said Sen. Cooper also needed a state loan to help push the deal through, and he got one secured through the Tennessee Department of Economic and Community Development. He said TDECD staff did not want to approve the $485,000 loan, but Sen. Cooper went to Commissioner Baxter and got it through. Mr. Baxter is now on the TVA Board.
Jerry B. Passons, an appraiser from McMinnville, is on trial at Federal Court in Chattanooga for bank fraud, mail fraud and conspiracy.
Prosecutor Humble said, at the request of Sen. Cooper, he appraised the lumber mill at $1,567,000 and averred that it had a rail spur to it. He said the mill actually has never had a rail spur.
Defense attorney Mike Galligan of McMinnville said Passons included the rail spur on the appraisal because Sen. Cooper assured him that a state grant would be secured to build it.
The attorney said the bank when it made the loan was aware there was not actually a rail spur.
Tony and Teresa Auyer, a couple from near Huntsville, Ala., were also set to go to trial, but they pleaded guilty on Monday afternoon. They were the purchasers of the lumber mill.
Prosecutor Humble said at the time the appraisal was made the lumber mill was having to lay people off and having cash flow problems. He said, "Every month was a struggle. It was a desperate situation."
He said Sen. Cooper was approached by the Auyers about acquiring the mill and he told them he would help them get the loan and the rail spur.
He said the Collierville Bank did not want to do the loan, which was originally requested at over $2 million. He said Lt. Gov. Wilder stepped in and the loan was approved for $1.77 million.
He said $800,000 of that amount went to Union Planters Bank to pay off a Cooper obligation there.
The prosecutor said the Auyers put up 20 lots in Alabama as collateral. He said the value was put at $435,000. He said it was later found the lots were worth only about $35,000.
He said when the loan was sought from the state, TDECD officials said it was "a bad deal." But he said Sen. Cooper went to Commissioner Baxter and got it approved.
He said an investigation was started, including the TBI, after TDECD personnel went to the mill to examine the collateral and found very little equipment there.
Linda Hillis said she was the bookkeeper at the Cooper Industries lumber mill from 1986-1996. She said the mill was going well at first and increased employment.
But she said it encountered problems, including two large accounts that bankrupted.
"In the last 4-5 years, it was going downhill. He was running in the red when I left," she told the jury.
No charges have been brought against Sen. Cooper.
He was cleared of ethics charges in the state Senate by two fellow senators.
An official from Bank Tennessee in Collierville denied that bank officials knew there was no spur railroad line to the lumber mill. He said the bank relied on that representation.
He said one letter from appraiser Passons about the loan was faxed from the office of Sen. Cooper in Nashville.
He read one bank file that said, "Gov. Wilder wants us to look at this loan. The seller is Sen. Cooper, a friend of the governor's."
The bank official said the bank board declined to issue the loan on Jan. 22, 1999, but did so later after additional collateral was put up.
Prosecutor Humble said that was the lots in Alabama initially valued at $450,000.
The bank official said the bank sought to have the same appraiser make a new appraisal, but he declined. The bank hired Ken Roberts, and he said the lots were only worth $33,500.
Mr. Roberts said the property was on top of a mountain and completely undeveloped - with no water or electricity. He said four of the "lots" had not yet been platted. He said there was a gravel road instead of an asphalt road as listed.
The government finished its case Tuesday afternoon, and the defense asked for a dismissal. Judge Allan Edgar declined.
The defense will start its case on Wednesday morning.
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